Stewardship Norwegian-Style: Fragmented and State-Dominated (but not without potential?)

Abstract

An important part of the current corporate governance trend is shareholder ‘empowerment’, a policy shift making corporate managers accountable to the shareholders as perceived ‘owners’ of the company. According to this policy thinking, the corporate boards should focus on monitoring on behalf of the shareholders, rather than managing the company independently. Shareholders should ‘engage’ with companies on issues ranging from strategy to corporate responsibility, issues that company law assigns to the board.

This trend has been reflected not only in corporate governance codes, listing rules, company legislation, European Union directives and transnational regulatory standards but also as a ’stewardship trend’, which we have seen in the 2017 reform of the 2007 European Union Shareholders’ Rights Directive (SHRD II). A number of European jurisdictions have seen the emergence of specific ’stewardship codes’. According to the arguments behind the codes (and also in stewardship regulation such as SHRD II), encouraging shareholders to act as ‘stewards’ is a way forward not only towards better corporate governance in the mainstream, economics-focused sense, but also towards more sustainable and responsible companies in light of the environmental and social challenges we as a global community face. The stewardship concept is widely connected to institutional investors, referring to the actions that asset managers can take in order to enhance the value of the companies that they invest in on behalf of their own beneficiaries.

However, the nature of stewardship varies from jurisdiction to jurisdiction based on shareholder structures. In the Nordic region (similar to many Asian jurisdictions), the role of states, sovereign holding companies and wealth funds, other public market actors such as public pension funds, families, family-controlled investment companies and family-based foundations is significant compared to (other) national and international institutional investors. In this paper, we discuss the peculiarities of Nordic stewardship before concentrating on Norway and Norwegian stewardship, which is dominated by the state and the municipalities, but also to some extent by private investors.

The structure of the paper is the following. In Part II we discuss the Nordic stewardship in light of international stewardship discussion, before concentrating on Norway and the current regulatory framework of stewardship there in Part III. In Part III, we reflect on the Norwegian choices on stewardship against global trends and especially jurisdictions in Asia with similar shareholder structures, with strong state and family shareholders. Part IV concludes with some reflections on why a stewardship code is not needed in Norway. What Norway does need, is a clear and mandatory regulation to ensure that Norwegian business and finance contribute to the transition to sustainability. A stewardship code would not be a sufficiently strong measure. Conversely, it could hold Norwegian business and finance back in the face of the rapid developments on EU and international level.

Keywords: institutional investors, stewardship, sustainability, planetary boundaries, social foundation, company law, corporate governance, corporate boards, general meeting, stewardship codes, state as shareholder