Part 3
How state ownership is exercised

7 The exercise of ownership shall contribute to the attainment of the state’s goal as an owner

The state’s exercise of ownership shall contribute to the attainment of the state’s goal as an owner, either the highest possible return over time or the most efficient possible attainment of public policy goals. The state does this through clear expectations of the companies, electing competent boards, systematically following up the companies and being transparent about the exercise of ownership, see Figure 7.1 and Chapters 10–13.

Norway is considered to be far ahead internationally in the exercise of state ownership.1 This is due, among other things, to the fact that there over time has been a broad political consensus about the key elements of the framework and principles for the state’s exercise of ownership in line with generally recognised principles for corporate governance. This has contributed to predictability for the companies and the capital market.

The Government’s ambition is that the Norwegian state’s exercise of ownership shall be in accordance with best international practice. The Government will continue to develop and raise the level of professionalism in the state’s exercise of ownership in order to contribute to the best possible management of public assets. The state’s exercise of ownership should be as professional and consistent as possible across ministries, and be continuously developed. Good, uniform exercise of ownership strengthens trust in the state as owner and contributes to increased value creation.

The Government aims for the highest possible value creation in a sustainable manner and to provide good services for the population. In this white paper, value creation through state ownership means attaining the state’s goal as an owner, either the highest possible return over time or the most efficient possible attainment of public policy goals.

References to the ‘company/companies’ and the ‘state’ in Part III shall be read as the companies2 in which the state has a direct ownership interest and the state as an owner of these companies, respectively.

7.1 The state has clear goals as an owner

7.1.1 Highest possible return over time

In companies in Categories 1 and 2, the state’s goal as an owner is the highest possible return over time, within the provisions in the companies’ articles of association. The state’s rationale for ownership is fulfilled by the state owning a certain percentage of the company, and usually through provisions in the company’s articles of association.3 The companies in Categories 1 and 2 primarily operate in competition with others.4

Management based on the goal of achieving a profit is a precondition for good resource allocation in the individual companies and thereby in society at large. In principle, a company cannot create value and remain competitive over time if its ownership and operation are not based on the goal of the highest possible return over time.

The highest possible return over time requires the company to be sustainable. A sustainable company balances financial, social and environmental factors in a way that contributes to long-term value creation.

7.1.2 Most efficient possible attainment of public policy goals

The state has defined public policy goals for the companies in Category 3. They vary from one company to the next,5 but the state’s goal for all of them is the most efficient possible attainment of these goals.

The state endeavours to define clear goals as an owner of each company. For wholly owned companies, the state’s goal as owner shall be reflected in the objects clause of the company’s articles of association.6 For partly owned companies, the states collaborates with the other shareholders on the wording of each company’s articles of association. Clearly defined goals are a precondition for good resource allocation in the individual companies and thereby in society at large.

See also section 8.6 on special framework conditions for companies that perform assignments for the state.

The companies in Category 3 do not primarily operate in competition with others. Some of the companies may nonetheless engage in some activities in which they operate in competition with others. In such cases, the state’s goal is normally the highest possible return over time in this limited part of the company’s operations. The state aid regime also sets limitations for such activities.7

The companies must be sustainable in order to achieve the most efficient possible attainment of public policy goals over time.

7.1.3 The goals shall be achieved in a sustainable and responsible way

The state is a responsible owner with a long-term perspective. Public assets shall be managed in a way that fosters public trust.

The state’s exercise of ownership shall contribute to attaining the highest possible return over time or the most efficient possible attainment of public policy goals. In order to attain the highest possible return or the most efficient possible attainment of public policy goals over time, the company must be sustainable. A sustainable company balances financial, social and environmental factors in a way that contributes to long-term value creation, while ensuring that today’s needs are met without limiting the possibilities of future generations. The state also places emphasis on the company conducting its business in a responsible manner. This entails identifying and managing the risks the company poses to society, people and the environment. The consideration for sustainability and responsible business conduct are reflected in the state’s expectations of the companies.

7.2 Societal developments that affect the companies and the state’s exercise of ownership

The international flow of goods, services, investments, capital and knowledge has never been more extensive. Open markets give companies better access to capital and input factors, as well as bigger markets and tougher competition. The driving forces of globalisation are strong. It nonetheless seems that the trend towards a more interconnected world has slowed down in recent years. Protectionist arguments are currently winning broad support in several major trading nations. Several actors have highlighted the uneven distribution of the benefits from many years of growth and migration driven by technology and globalisation, resulting in increasing inequality in many countries. Furthermore, patterns of trade are changing, and the global economic centre of gravity is shifting to the south and east.

New technology means that machines can perform tasks more reliably and at a lower cost than humans. Sophisticated robots, artificial intelligence, 3D printing and other new technology can reduce the need for physical trading and investment, at the same time as the proximity to technology development and markets can become more important. Technological change provides opportunities for increased value creation, but also gives rise to new risks that companies should understand and address. Examples of such risks can be a shorter useful life for products and services, the increasing dominance of a small number of companies, cybercrime and rapidly changing business models.

Civil protection is affected by developments in our own society as well as global development trends. The digitalisation of society creates new solutions, but also gives rise to dependencies and vulnerabilities across sectors, areas of responsibility and national borders. Functions of critical importance to society, such as the energy supply, electronic communication and financial services, depend on long digital value chains, which makes them vulnerable.

The trust of customers and society at large has become a competitive advantage in most industries. This is especially pertinent in network economies, where companies depend on trust and customer feedback, but the trend is also relevant for other industries.

Demographic changes and urbanisation are other trends that may affect companies.

Climate change and scarcity of natural resources, such as clean water, are among the most pressing global challenges of our time, and may affect companies and industries in multiple ways. If action is not taken to limit greenhouse gas emissions, the average global temperature will, according to the UN Intergovernmental Panel on Climate Change, increase by approximately 2 °C by 2050 and by more than 4 °C by 2100, compared with preindustrial times. It is overwhelmingly likely that this will lead to melting of sea ice and glaciers, rising sea levels, more drought in already dry areas and more frequent extreme weather events. This may, in turn, lead to a higher level of conflict internationally, changes in migration patterns and a scarcity of input factors. The changes will entail increased risk for companies, both directly and indirectly. Climate policy and international efforts to combat global warming are the key to limiting a rise in temperature. The Paris Agreement was adopted in 2015. As of 2019, 186 countries have signed the agreement, which includes a common goal of keeping the increase in global average temperature to well below 2 °C, and endeavouring to limit the increase to 1.5 °C. More stringent climate policies must be expected in order to achieve this goal, which will affect companies’ framework conditions and competitiveness. The transition towards a more green and circular economy is one example of a trend that may influence whether a company succeeds in creating value over time.

To contribute to sustainable global development, the UN adopted new Sustainable Development Goals (SDGs) in 2015 to be achieved by 2030. The 17 goals and 169 targets concern most areas of society, and they see the environment, economy and social development in context with each other. All countries are obliged to follow up the SDGs. The goals have become globally recognised as a common frame of reference and framework for dialogue. Business and industry play an important role in the achievement of the SDGs. The Government has decided that the SDGs are the main political track for addressing the most pressing national and global challenges of our time. For companies, the SDGs can both bring new opportunities and change their framework conditions in that customers, employees, authorities and others change their behaviour.

The UN Guiding Principles on Business and Human Rights (UNGP) were issued in 2011. Norway’s national action plan to follow up the UNGPs specifies expectations of companies’ work on human rights and responsible business conduct and how the Norwegian authorities can contribute to this work.8 Since 2012, an increasing number of countries have introduced legislation in areas relating to responsible business conduct, which is relevant to companies with international operations or global supply chains. Examples include the UK’s Modern Slavery Act and the French due diligence law.9 A number of other countries are also in the process of considering enshrining such provisions in law. And in Norway, the Government is considering proposals for an anti-slavery act and an ethics information act.

Many companies operate globally, while tax rules are national and not necessarily harmonised between different countries. This provides possibilities of eroding the tax base of some countries and shifting profits to countries with a more favourable tax regime. Corporate tax behaviour and policy is an area that is attracting increasing attention. International cooperation between states is growing in an attempt to prevent further undermining of the tax base in different countries, and to ensure that revenues are taxed where the value creation takes place. Relevant work to achieve transparency and information sharing between tax authorities and measures to combat aggressive tax planning are being carried out under the auspices of G20 and OECD, through the BEPS10 Inclusive Framework and the Global Forum on Transparency and Exchange of Information.

How companies adapt to changes in their surroundings and stakeholder requirements affects the companies’ future value creation. This trend makes greater demands of the boards’ work. It also requires more of the owners, which set out guidelines for the company’s activities and adopt crucial decisions at the general meeting. Competent owners who understand the company’s situation, challenges and possibilities can influence the company’s chances of realising its potential for value creation.

There are increasing expectations in society that companies should create value for their owners in a sustainable way. Several self-designated ‘responsible investors’ incorporate considerations for people, society and the environment in their investments. Many investors, consumers, employees and other stakeholders increasingly expect companies to help to address social, financial and environmental challenges in society. Several international investors have called for companies to define their role more clearly beyond creating shareholder value, referring to how this is closely tied to the company’s possibility of delivering products that there is a demand for in society, recruiting dedicated employees and creating value over time.

It is decisive for the state that the companies remain competitive, efficient and relevant in the long term. To contribute to this, the companies must be profitable, sustainable and responsible, and they must be given sufficient freedom of action to enable them to adapt to changes in their circumstances. This is reflected in the state’s expectations of the companies, described in Chapter 10, and how the state follows up its ownership to contribute to value creation, described in Chapters 11 and 12.

8 Framework for the state’s exercise of ownership

The legal framework for the state’s exercise of ownership is first and foremost set out in the provisions of the Norwegian Constitution, and the division of roles between a company’s owner and management as set out in company law. This chapter provides an overview of the most important framework for the state’s exercise of ownership pursuant to the Constitution and company law.11 The EEA Agreement’s provisions on state aid are also referred to. Other legislation such as the Public Administration Act, the Freedom of Information Act, the Securities Trading Act and the Competition Act, among others, also contain legal requirements that apply to the state’s exercise of ownership.12 They are not mentioned here.

In addition to legislation, there are several other rules and regulations with a bearing on the state’s exercise of ownership. This chapter describes the rules on the eligibility of senior state officials, members of the Storting and members of the Government for directorships, and the Regulations on Financial Management in Central Government.

The chapter also gives an account of the OECD’s guidelines on corporate governance of companies with a state ownership interest13 and the Norwegian Code of Practice for Corporate Governance.

8.1 Constitutional framework – the Government administers the state’s ownership14

Pursuant to Article 19 of the Norwegian Constitution, the Government administers the state’s shares in private and public limited liability companies and ownership in other forms of incorporation such as state enterprises and special legislation companies. Pursuant to Article 12 second paragraph, the administration of the ownership is delegated to various ministries. The minister administers the ownership under constitutional and parliamentary responsibility.

Pursuant to Article 19, the minister must administer the state’s ownership in companies in accordance with parliamentary resolutions concerning the individual company, general statutory provisions and other parliamentary resolutions. The provision expressly authorises the Storting to instruct the Government in matters pertaining to state ownership.

The Storting has no direct relationship with the companies with a state ownership interest. Parliamentary resolutions concerning companies with a state ownership interest must be resolved by the company’s general meeting in order to be legally binding on the company, unless the resolutions are set out in law.

Article 19 of the Constitution does not grant the minister authority to change the size of the state’s ownership interest in a company, for example through the purchase or sale of shares, resolutions regarding or participation in capital increases or support for other transactions that change the state’s ownership interest. Such actions must be based on a parliamentary resolution whereby the minister is granted authorisation for them.

Several of the listed companies have what are known as share buy-back programmes, whereby the company is authorised to buy back own shares in the market with a plan to cancel the shares. A template agreement has been established for such cases so that the size of the state’s ownership interest in the company is unchanged through the share buy-back programme. In line with previous white papers on ownership policy and established practice, the minister may in such cases, without obtaining the consent of the Storting, endorse the state’s contribution to such share buy-back programmes and enter into agreements in line with the established template agreement on the condition that the size of the state’s ownership interest in the company remains unchanged.

The Storting’s appropriation authority under Article 75 (d) of the Constitution also entails that the Storting’s consent is required for changes in the state’s ownership interest in a company and for decisions on capital infusions that lead to government expenditure.

Companies with a state ownership interest will normally be able to buy and sell shares in other companies and buy or sell parts of a business when this is a natural part of the adaptation of the company’s objective as defined in its articles of association, without the consent of the Storting. In companies where the state is the sole shareholder, the Storting’s consent is required for decisions that would materially change the state’s commitment or the nature of the business. When it comes to companies where the state is a joint shareholder, the question of advance discussion by the Storting is relevant for matters of a scope that means that they must be brought before the general meeting (for example a merger or demerger). Depending on the size of the state’s ownership interest in the company, it may be necessary to present the matter to the Storting, but, as a clear main rule, matters concerning the purchase and sale of shares in other companies, including purchase and sale of subsidiaries, are the responsibility of the company’s management.15

It is established practice for the Government to present the rationale for state ownership and the state’s goal as an owner of each company with a direct state ownership interest to the Storting.

The Office of the Auditor General monitors the minister’s (ministry’s) administration of state ownership and reports to the Storting. The Office of the Auditor General’s monitoring of the administration of the state’s ownership is described in more detail in Chapter 3 (Corporate control) of the Instructions for the Activities of the Office of the Auditor General.16

8.2 Company forms used for state ownership

Different legal forms of incorporation are used for companies with a state ownership interest; see Figure 4.3. Common features of these company forms are, among other things, that they are based on a clear division of roles between the owner and the company management, consisting of the board and the general manager, and that management of the company is the board’s responsibility.17 Another common feature of these company forms is that the state’s liability as owner is limited to the equity invested in the companies, and that the companies may go into bankruptcy.18

The companies that primarily operate in competition with others are subject to the same legislation as privately owned companies.19 Relevant legislation include the Accounting Act, the Auditors Act, the Competition Act, the Securities Trading Act, tax laws and, if applicable, sector-specific legislation. The companies that do not primarily operate in competition with others are normally also subject to such legislation. Some of the companies also fall under the scope of the Freedom of Information Act and/or the Public Procurement Regulations.20

The following company forms are used for the state’s ownership:

Partly owned private and public limited liability companies

All the companies in which the state is a part-owner, except Innovasjon Norge, are organised as private or public limited liability companies. These companies are subject to the general provisions of the Limited Liability Companies Act and the Public Limited Liability Companies Act.

State-owned limited liability companies21

State-owned limited liability companies are limited liability companies in which the state owns all the shares, see Chapter 20 II of the Limited Liability Companies Act. The majority of the companies that are wholly owned by the state are organised as state-owned limited liability companies, regardless of the state’s rationale for ownership and the state’s goal as owner. These companies are subject to the general provisions of the Limited Liability Companies Act22 with some special provisions that are set out in Sections 20-4 to 20-7; see section 8.3.2 and 8.3.3.

State enterprises

State enterprises are organised in accordance with the Act relating to state enterprises.23 State enterprises cannot have other owners than the state. The state currently has several enterprises organised in accordance with this act. State enterprises are largely regulated in the same way as state-owned limited liability companies, with some exceptions; see sections 8.3.2 and 8.3.3.

Special legislation companies

The term special legislation companies covers a small, diverse group of companies. A common characteristic of these companies is that they are regulated by a special law adopted for the company in question.24 Except in the case of Innovasjon Norge, it has been set out in law that the state shall be the sole owner of these companies. The regional health authorities and the health trusts constitute a special form of special legislation companies. The specialist health service is organised as regional health authorities and health trusts. The former can only be established and owned by the state, while the latter, which provide health services and support functions, can only be established and owned by the regional health authorities. Rules that deviate from the provisions of the Limited Liability Companies Act may apply to the special legislation companies, including the authority assigned to the company’s board. It is a typical feature of several of these companies that specific matters shall be presented to the owner.

Choice of company form

Several forms of organisation for companies wholly owned by the state result in different and non-uniform frameworks for the state’s exercise of ownership. The OECD Guidelines on Corporate Governance of State-Owned Enterprises recommend that governments simplify and standardise the legal forms of organisation used for companies with a state ownership interest.25 Private limited liability companies are a well-known form of organisation, also outside Norway. This form of organisation is the most commonly used for companies with a state ownership interest. The framework set out in the Limited Liability Companies Act ensures predictability in the state’s exercise of ownership, for the companies, the state and other stakeholders alike. Other forms of organisation are only used where special reasons exist.

8.3 Company law framework

8.3.1 The minister’s authority in the company

The legal basis for the minister’s authority as owner in a limited liability company is Section 5-1 of the Limited Liability Companies Act, which reads as follows: ‘Through the general meeting, the shareholders exercise supreme authority in the company’. A corresponding provision applies to public limited liability companies, state enterprises and most special legislation companies.26 For state enterprises and some special legislation companies, the term ‘enterprise meeting’ is used instead of ‘general meeting’, but the facts behind the terms are the same. In the following, the term general meeting is used as a collective term for both.

Pursuant to the Limited Liability Companies Act and corresponding provisions in other company law, the general meeting shall, among other things, elect board members,27 decide the directors’ remuneration, approve the annual accounts and (if applicable) annual report, including the distribution of dividend, elect the auditor, approve the auditor’s fee, and resolve changes to the share capital and amendments of the articles of association.

The provision in Section 5-1 of the Limited Liability Companies Act means that the general meeting is superior to and may instruct the board. These instructions can be of a general nature or specific instructions on individual matters. In principle, the board is obliged to comply with such instructions. If the board disagrees with instructions and do not wish to comply with them, the alternative for the board members is to resign from their office. The general meeting’s authority to issue instructions is not unlimited, however. The board is not obliged to comply with instructions that are in conflict with the law or the company’s articles of association. In companies with multiple shareholders, the board cannot be instructed to make decisions that violate the principle of equality or the common interest of the shareholders.28

The state is cautious about instructing companies on individual matters.29 This is because it undermines the division of roles and responsibilities set out in company law. It must also be seen in conjunction with the fact that the form of organisation is chosen to give the management freedom of action. Company law is based on the prerequisite of a relationship of trust between the shareholders and the company’s board. If the shareholders instruct the board, it can be perceived as signalling a lack of trust in the board, and the consequence may be that board members resign from their office. Active use of instructions at the general meeting may also affect the minister’s parliamentary and constitutional responsibility if the minister, through resolutions by the general meeting, makes decisions that normally rest with the company’s board. This can potentially also give rise to liability in damages in relation to third parties.

Section 5-1 of the Limited Liability Companies Act also entails that the minister does not have authority in the company outside of the general meetings.30

8.3.2 The company’s management manages the company

Limited liability companies and the other forms of organisation used for companies with a state ownership interest are based on a clear division of roles between the company’s owners, on the one hand, and the company’s management, consisting of the board and the general manager, on the other.

Pursuant to Sections 6-12 and 6-14 of the Limited Liability/Public Limited Liability Companies Act, and corresponding provisions in other company law, management of the company falls within the authority of the board and the general manager. This means that responsibility for managing the company rests with the board and the general manager. The board and the general manager shall manage the company based on the interests of the company and the owners and in line with the company’s articles of association and other resolutions made by the general meeting. The board and the general manager are responsible for ensuring that the company is run in accordance with applicable laws and regulations. In their management of the company, the board members and the general manager are subject to personal liability in damages and criminal liability as described in company law.

The board appoints the general manager.31 The board has overall responsibility for managing the company and for supervising the day-to-day management and the company’s business in general. It is the board’s responsibility to ensure that the company’s business activities are soundly organised. The board shall, to the extent necessary, draw up plans and budgets for the company’s activities. The board shall also be informed about the company’s financial position and ensure that its activities, accounts and asset management are subject to adequate control. The general manager is responsible for the day-to-day management of the company and must follow up the board’s decisions.

Limitations in the management’s management of companies wholly owned by the state

For wholly state-owned companies, the law sets out certain special provisions that entail a limitation of the general rules described above, and thereby giving the state as owner extended control.32

In state-owned limited liability companies and state enterprises, the general meeting is not bound by the dividend proposal made by the board or corporate assembly and may adopt a higher dividend than proposed by the board or corporate assembly, see Section 20-4(4) of the Limited Liability Companies Act and Section 17 of the Act relating to state enterprises. See section 12.5.3 for more details.

For state enterprises, it has also been laid down in law that matters assumed to have a significant bearing on the object of the enterprise or which will significantly alter the enterprise’s nature shall be submitted to the owner in writing before the board makes its decision, see Section 23 second paragraph of the Act relating to state enterprises. It also follows from the act that minutes of board meetings shall be sent to the ministry that manages the state’s ownership of the state enterprise, see Section 24 third paragraph of the Act relating to state enterprises. Sending minutes of board meetings to the ministry is normally not considered sufficient to keep the owner informed about a specific matter.

Special restrictions on the board’s authority have been enshrined in law for the regional health authorities and health trusts; see Sections 30–34 of the Act relating to health authorities and health trusts.33 Legislation that places restrictions on the board’s authority also applies to the other special legislation companies and some other companies.34

8.3.3 Special rules for companies wholly owned by the state

The Limited Liability Companies Act contains some special provisions for state-owned limited liability companies, see Chapter 20 II. In addition to what is described in section 8.3.2 concerning restrictions in the management’s management of companies wholly owned by the state, one of the differences between state-owned limited liability companies and limited liability companies not wholly owned by the state is that the general meeting elects the shareholder-elected members to the board even if the company has a corporate assembly, see. Section 20-4(1) of the Limited Liability Companies Act.35

A requirement for both genders to be represented on the boards also applies to state-owned limited liability companies and their wholly owned subsidiaries, see Section 20-6 of the Limited Liability Companies Act. The same requirement applies to state enterprises, special legislation companies and public limited liability companies in general.36

Special rules also apply to the notice and holding of general meetings, see Section 20-5 of the Limited Liability Companies Act. This provision states, among other things, that if the general manager or a member of the board or corporate assembly disagrees with the resolution adopted, the person in question shall demand that his/her dissenting opinion be recorded in the minutes of the meeting. A similar provision applies to state enterprises.37

In addition, the Office of the Auditor General has an extended right to supervise the minster’s administration of the state’s ownership of wholly state-owned companies, including the right to be notified of and attend the general meeting, see Section 20-7 of the Limited Liability Companies Act and Section 45 of the Act relating to state enterprises.

8.3.4 The size of the ownership interest affects the minister’s authority as an owner

In principle, the basic company law principles and the relationship between the minister and the company’s management are independent of the state’s ownership interest. When the state owns a limited liability company together with others, however, the provisions of the Limited Liability Companies Act that safeguard the interests of individual shareholders will have a bearing on the minister’s relationship with and influence over the company. This means that, in these cases, the exercise of the state’s ownership can differ to some extent from cases where the state is the sole owner.

When the state is a part-owner in a company, the minister’s authority is limited by, among other things, the principle of equality set out in company law, see Section 4-1 of the Limited Liability/Public Limited Liability Companies Act, and the provision prohibiting abuse of the general meeting’s authority, see Section 5-21, which are also applicable to other shareholders.38 The latter provision prohibits the general meeting from adopting resolutions that are suited to give certain shareholders or others an unreasonable advantage at the expense of other shareholders or the company. This means that the state, even as a majority shareholder, is prohibited by law from favouring itself at the expense of the other shareholders in the company. This is particularly relevant if the state as an owner wishes to assign the company tasks that do not naturally fall within the company’s scope of activities. In addition to the above-mentioned principle of equality and abuse provision, there are also a number of other provisions in company law that safeguard individual shareholders.

An overview is provided below of the influence a part-owner has in a company under company law based on different ownership interests:

9/10

An ownership interest of nine-tenths or more of the share capital and a corresponding share of the votes in a limited liability company entitle the majority shareholder to a compulsory buy-out of the other shareholders in the company.39

2/3 – qualified majority

An ownership interest of two-thirds or more of the share capital and a corresponding share of the votes in a limited liability company gives the shareholder in question control over decisions that require a two-thirds majority under company law. This includes decisions to amend the company’s articles of associations, decisions on mergers or demergers, increases and reductions of the share capital, raising convertible loans, and conversion or dissolution of the company.

1/2 – simple majority

An ownership interest of more than half the share capital and a corresponding share of the votes in a limited liability company give the shareholder in question control over decisions that require a simple majority of the votes cast at the general meeting. This includes the approval of the annual accounts, including the distribution of dividend, the election of members to the board40 or the corporate assembly, the directors’ remuneration, election of the auditor and approval of the auditor’s remuneration.

1/3 – negative majority

An ownership interest of more than one-third of the share capital and a corresponding share of the votes in a limited liability company give the shareholder in question negative control over decisions that require a two-thirds majority. This allows the owner to oppose amendment of the articles of association, changes in the company’s capital and other material decisions; see the paragraph on two-thirds majority.

8.4 The EEA Agreement – prohibition on state aid

The EEA Agreement is neutral with regard to public and private ownership.41 The prohibition on state aid set out in Article 61(1) also applies to companies with a state ownership interest. This limits the state’s possibility of emphasising non-commercial interests in the exercise of ownership of companies that engage in economic activity in the sense of the EEA Agreement. The purpose of the provisions is to prevent member states from distorting competition through subsidies that strengthen the competitiveness of domestic companies at the expense of companies in other member states.

Six conditions must be fulfilled in order for a measure to be deemed to constitute state aid: the aid recipient must be an undertaking and the aid must be granted by the public authorities, favour certain undertakings or the production of certain goods or services, confer an economic advantage on the recipient, distort competition and have the potential to affect trade between the EEA states.

In order to decide whether public funds/capital infusion entails an advantage for the company and thereby constitute state aid, given that the other conditions are met, the European Court of Justice and the European Commission have developed a practice known as the Market Economy Investor Principle (MEIP)42. If the state contributes capital on other terms than what a comparable private investor is assumed to have required, it may indicate that the measure involves an economic advantage for the company that may violate the rules on state aid. This means that the state must demand a normal market return on capital invested in a company that operates in competition with others.

The EFTA Surveillance Authority (ESA) supervises compliance with the state aid regulations in Norway.

8.5 Other important frameworks for the state’s exercise of ownership

8.5.1 Restrictions on the right to hold directorships

Civil servants and senior officials employed in a ministry or in other central government administrative bodies that regularly considers matters of material importance to certain companies or industries are not eligible for election to the board of such companies. This follows from the State Personnel Handbook.43 The purpose of the prohibition is to prevent partiality issues or constellations that weaken trust in the public administration’s decisions.

Furthermore, the Storting has decided that members of the Storting should not be elected to offices in companies subject to the Storting’s control, unless it can be assumed that the member in question will not stand for re-election.44 It follows from the handbook of political management that it has been ‘an unwritten rule’ that newly appointed ministers withdraw from any boards and councils they serve on. The handbook also states that state secretaries and political advisers should also consider withdrawing from such offices.45

The Disqualification Act46 also contains provisions that provide for the possibility of imposing a period of disqualification on politicians, civil servants and other state employees when they move to a position outside the government administration.

8.5.2 Regulations on Financial Management in Central Government

The Regulations on Financial Management in Central Government47 contain guidelines on the state’s exercise of ownership. The purpose of the regulations is to ensure that the central government’s assets are properly managed. Section 10 of the Regulations states that:

‘Agencies with overall responsibility for (…) independent legal entities wholly or partially owned by the central government, shall draw up written guidelines on how management and control powers shall be executed for each individual company or for groups of companies. (…)

The central government shall, within the framework of applicable laws and rules, manage its ownerships in accordance with general principles of corporate governance with special emphasis on:

• a) that the chosen organisation of the company, the company’s articles of association, the financing and the composition of the management board are appropriate given the company’s purpose and ownership

• b) that the execution of the ownership ensures equal treatment of all owners and supports a explicit distribution of authority and responsibility between the owners and the management board

• c) that the objectives established for the company are achieved

• d) that the management board operates satisfactorily.

Governance, monitoring and control including appropriate guidelines shall be adjusted to the size of the central government shareholding, the distinctive characteristics of the company, risk profile and significance.’

Furthermore, Section 16 states that:

‘All agencies shall ensure that evaluations are performed to obtain information on efficiency, achievement of objectives and results within the agency’s entire area of responsibility and activities or within parts thereof. The evaluations shall focus on the appropriateness of for instance ownership, organisation and instruments, including grant schemes. The frequency and scope of the evaluations shall be based on the agency’s distinctive characteristics, its risk profile and its significance.’

The framework for the state’s exercise of ownership, as described in this white paper, is in accordance with the abovementioned provisions.

8.5.3 The OECD’s guidelines for corporate governance of companies with a state ownership interest48

The OECD has adopted guidelines on corporate governance of companies with a state ownership interest (referred to as the SOE Guidelines) and for anti-corruption and integrity in companies with a state ownership interest (referred to as the ACI Guidelines). The guidelines contain recommendations concerning frameworks for state ownership and good corporate governance of companies with a state ownership interest (referred to as state-owned enterprises (SOEs) in the guidelines), which can help companies with a state ownership interest to ensure that they are run as efficiently as well-run private companies. The guidelines are aimed at the member states’ authorities, but, by describing a set of good practices, they also provide guidance for the board and general manager of companies with a state ownership interest. The guidelines apply to companies with a state ownership interest that engage in economic activity,49 either exclusively or in combination with the pursuit of public policy objectives.50

The SOE Guidelines aim to (i) professionalise the state as an owner, (ii) make companies with a state ownership interest operate with the same efficiency and the same degree of transparency as well-run private companies, and (iii) ensure that competition between companies with a state ownership interest and private companies is conducted on a level playing field. The guidelines are a supplement to the OECD Principles of Corporate Governance.51

The SOE Guidelines state that the purpose of state ownership should be to create value. The guidelines contain recommendations on the following main topics: the rationale for state ownership, the state’s role as an owner, state-owned enterprises in the marketplace, equitable treatment of shareholders, responsible business, disclosure and transparency, and the responsibilities of the boards.

A central element in the SOE Guidelines are recommendations relating to frameworks that promote fair competition when companies with a state ownership interest engage in economic activities. It is clear from the annotations to the guidelines that, when companies with a state ownership interest engage in economic activities, those activities must be carried out without any undue advantages or disadvantages relative to other companies. The overarching recommendation relating to fair competition (a level playing field) is elaborated on through several sub-recommendations, including that there should be a clear separation between the state’s ownership function and other state functions, that high standards of transparency and disclosure regarding cost and revenue structure must be maintained for companies that combine economic activities and public policy objectives, that SOEs shall, as a general rule, be subject to the same legislation as other companies and financing on market terms.

The ACI Guidelines supplement the SOE Guidelines by providing supplementary guidance to the member states on how to fulfil their role as active and informed owners in the specific area of anti-corruption and integrity. The ACI Guidelines include recommendations on how the member states should organise state ownership and promote integrity, as well as how the member states as owners should follow up the companies in relation to this.

The Norwegian state’s exercise of ownership is mainly in accordance with the OECD’s guidelines on corporate governance of companies with a state ownership interest.

8.5.4 The Norwegian Code of Practice for Corporate Governance

The Norwegian Corporate Governance Board (NCGB) consists of representatives of different interest groups for owners, issuers and Oslo Stock Exchange.52 NCGB publishes the Norwegian Code of Practice for Corporate Governance and keeps it up to date. The objective of the Code of Practice is that companies shall practise corporate governance that regulates the division of roles between shareholders, the board and executive management more comprehensive than is required by legislation. The Code of Practice is intended to strengthen confidence in listed companies among shareholders, the capital market and other stakeholders.

The Code of Practice is primarily aimed at companies listed on a Norwegian stock exchange, but is also relevant for non-listed companies. It primarily addresses the companies’ boards, but several of the recommendations in the Code of Practice are also relevant for owners. This includes sections 2 (Business), 3 (Equity and dividends), 4 (Equal treatment of shareholders and transactions with close associates), 5 (Shares and negotiability), 6 (General meetings), 7 (Nomination committee), 8 (Board of directors: composition and independence) and 11 (Remuneration of the board of directors). The Code of Practice is a supplement to the state’s own corporate governance principles.

8.6 Special frameworks for companies that perform assignments for the state

The state awards assignments directly to several of the companies with a state ownership interest. This usually applies to companies in Category 3, but occasionally also to companies in Category 2. The awarding of such assignments is related to the state’s rationale for ownership and the state’s goal as an owner. The possibility of awarding assignments directly to companies is regulated by the regulations for public procurements, the state aid regulations, the Regulations on Financial Management in Central Government and any special legislation applicable to the company. For companies that perform assignments for the state, the state will follow up the companies as principal, regulatory authority and/or supervisory authority in addition to its capacity as owner. The follow-up exercised through these roles can partly replace or come in addition to the state’s follow-up as owner.

Examples of assignment the state can award to such companies include management of government schemes, construction and management of infrastructure, supply of goods and services and statutory monopolies. When the state instructs companies to perform assignments, the assignment is normally accompanied by financial compensation allocated over the national budget or through other regulated revenues.

The Regulations on Financial Management in Central Government can provide guidelines for the company’s performance of the assignment, both regarding funds transferred to the company and any state assets that the company manages. The state normally follows up assignments through letters of assignment/allocation, reporting and dialogue, and, if applicable, goal and performance management systems.

The state can also enter into agreements to purchase services from a company. In such case, the assignment and the financial compensation will normally be regulated in the agreement. Agreements are followed up through reporting from and dialogue with the company.

Companies performing assignments for the state can be fully or partly user-financed. Companies’ right to demand a fee for goods or services, or exclusive rights to a market (monopoly), is adopted by the Storting.

Some companies have dedicated supervisory bodies charged with following up their assignments.53

Companies that engage in economic activities in relation to state aid law, in addition to performing publicly funded assignments, shall separate these activities in its accounts.54 This highlights the company’s revenues and expenses, helps to prevent illegal state aid through cross-subsidisation from non-commercial to commercial activities and allows for efficient follow-up by the state as owner and principal.

Figure 8.1 shows different characteristics of the companies in Category 3: how they are financed, which roles the state plays in addition to the role as owner, and whether the companies operate in competition with others.

9 The state’s ten principles for good corporate governance

The principles, together with the state’s goal as an owner, form the basis for how the state exercises its ownership within the framework described in Chapter 8.

There is a broad political consensus about the key elements of the framework for the state’s exercise of ownership. This has created predictability for the companies and the capital market, which is an advantage of the way state ownership is exercised in Norway. In this white paper, the key elements of the framework for the state’s exercise of ownership are included in the state’s ten principles for good corporate governance.

Previously, the principles have concerned both the state’s exercise of ownership and some expectations of the companies. In this white paper, the principles exclusively concern the state’s exercise of ownership, as the title indicates. The state’s expectations of the companies, including of the companies’ goals and strategy, capital structure, diversity, executive pay and responsible business conduct, have been extended, clarified and compiled in Chapter 10.

The revision of the principles does not entail changes in the ownership policy. The purpose of the changes is to clarify what the companies and the general public can expect of the state and what the state expects of the companies.

The principles are reflected in the state’s expectations of the companies (Chapter 10), the state’s work on the election of boards (Chapter 11) and how the state follows up the companies (Chapter 12).

¹ For reasons of simplicity, ‘general meeting’ is used as a collective term for the companies’ supreme body; see section 8.3.

10 The state’s expectations of the companies shall contribute to the attainment of the state’s goal as an owner

By defining clear expectations of the companies through the white paper on ownership policy, the state wishes to contribute to attaining the state’s goal as an owner in a sustainable and responsible way. It also contributes to transparency about what the state is concerned with in its role as owner.

The state’s expectations are addressed to the companies’ boards. Under company law, the board is responsible for managing the company, while the managing director is responsible for the day-to-day management of the company’s business. Several of the state’s expectations concern areas where the work is normally followed up by the company’s administrative management (referred to as the management in this chapter). However, it is the board’s responsibility to assess whether and how the company shall work on the different areas and follow up the work. The state places emphasis on the boards taking active responsibility for this.

The companies differ in terms of their size, industry and international presence, among other things. The companies’ work on the different areas in which the state has expectations should be adapted to the companies’ distinctive nature, size, risk exposure and what is material to each individual company.

The state’s goal as an owner, either the highest possible return over time or the most efficient possible attainment of public policy goals, is reflected in a corresponding expectation of the companies. The state’s other expectations support the state’s goal as an owner. The expectations are largely based on international good practice and recognised international guidelines. The expectations are structured as follows:

• Elements of corporate governance that are expected to have a bearing on the companies’ long-term value creation/goal attainment:

  • An overarching agenda for sustainable value creation specified in terms of goals and strategies.

  • Factors with a bearing on attainment of the company’s goals and implementation of the company’s strategy: resources, organisation, incentives and responsible business conduct.

  • Performance and risk management as the basis for and assessment of attainment of the company’s goals and implementation of the company’s strategy.

• The Norwegian Code of Practice for Corporate Governance.

• Organisation of the board’s work.

• Transparency and reporting.

The expectations are summarised in Figure 10.1.

The state’s expectations of the companies are listed as bullet points in this chapter. An explanation of the expectations is provided under the bullet points. Unless otherwise specified, the expectations apply to all the companies. The areas where the state has expectations are included in the dialogue between the companies and the state. The state’s follow-up of and dialogue with the companies, including how the state follows up its expectations, are described in Chapter 12.

This chapter also includes examples of good practice in selected areas, described in dedicated boxes and figures. This is intended as inspiration for the companies’ work, not as expectations.

10.1 Operationalisation of the state’s goal: The highest possible return over time and the most efficient possible attainment of public policy goals

In line with the state’s goal as an owner, see section 7.1.1, the state expects the companies in Categories 1 and 2 to deliver the highest possible return over time, within the provisions of the companies’ articles of association. The state measures the company’s total shareholder return, meaning the change in the company’s value taking into account dividends, against what is considered the normal market return over time.55 The state places emphasis on the board having an opinion about the company’s value and regularly assessing the company’s total shareholder return. The same applies to those parts of relevant companies in Category 3 for which the state’s goal is the highest possible return over time, see section 7.1.2.

The state has defined public policy goals for each company in Category 3, see section 6.3, which should normally be reflected in the companies’ articles of association. The state expects public policy goals to be attained in the most efficient way possible, see section 7.1.2. This means that the company’s resources are allocated to activities that provide the highest possible public policy goal attainment and that the activities are carried out in the most cost-effective way possible. For example, this can entail that the company works to achieve the highest possible goal attainment with the available resources, or delivers on a given goal with as little resources as possible. In order to follow this up, it is crucial that the board regularly assesses the company’s goal attainment and efficiency.

If the goal attainment is poor, the state places emphasis on the boards taking necessary steps to address this. Poor goal attainment over time may entail adjustment or changes in the company.

10.2 Sustainable value creation, clear goals and strategies

An agenda for sustainable value creation shows the board and management’s plan for how the company can create value, meaning a return or the attainment of public policy goals, over time. This includes how the company understands its competitive advantages and what drives its long-term value creation. The agenda is given more concrete expression in short-term strategies and action plans. The company’s sustainable value creation agenda forms a basis for the company’s dialogue with its owners.56

Textbox 10.1 Who is the company for?

The fundamental limitations in the capital market’s ability to allocate capital in the best way possible has for a long time been the subject of international debate. The way many markets are organised can promote short-term interests at the expense of more long-term interests. Several investors and other stakeholders have called for companies to define their purpose, meaning the company’s reason for existing, beyond providing return to the owners. A company’s purpose describes the company’s role in society, including how the company benefits its customers and other key stakeholders in the long term. A well-defined purpose can guide the company’s work on strategy, corporate culture and long-term capital allocation.

For the companies in Category 3, the company’s purpose often follows from the state’s rationale for ownership and the state’s goal as an owner.

Value creation over time requires the company to be sustainable. A sustainable company balances financial, social and environmental factors in a way that contributes to long-term value creation, while ensuring that today’s needs are met without limiting the possibilities of future generations. This entails that the company identifies and addresses material opportunities and risks, both for the company itself and for those affected by its activities. It is easier for a company that monitors developments in its surroundings and understands its role in society and what its stakeholders are concerned with, to understand which factors influence opportunities for value creation.

Climate change is an example of a value driver that entails both risks and opportunities for the companies. Sustainable value creation requires the companies to address risks and opportunities relating to climate change in their plans and strategies. Climate risk is discussed in more detail in the report from Norway’s Climate Risk Commission: NOU 2018: 17 – Climate risk and the Norwegian economy.

The board is responsible for adopting goals and strategies for the company within the provisions of the articles of association. The state places emphasis on the board setting clear goals and strategies that contribute to achieving the highest possible return over time or the most efficient possible attainment of public policy goals. Clear goals and strategies provide the company with direction and contributes to the company prioritising and allocating resources to where they make the greatest contribution to value creation (return over time or attainment of public policy goals). Reporting on goals and strategies is normally part of the company’s annual report.

Source BCG.

Being capable of adaptation and innovation is crucial for a company’s further development and competitiveness. Good innovation processes, the ability to identify and understand changes in the external environment, and, if applicable, research and development, are important parts of a company’s strategy and can contribute to creating sustainable growth.

For some of the companies, transactions and other structural measures may be necessary or relevant to achieve sustainable value creation. The state places emphasis on the board considering such opportunities, regardless of whether they require a decision by the general meeting, and will consider any initiatives the company presents.57

Different strategies involve different risks. Determining how much and which types of risk the company is willing to accept, both financial and non-financial risks, is part of the board’s strategy work. The company’s strategy is adapted to its long-term risk profile.

It is decisive for goal attainment that the strategy is properly implemented in the organisation, for example using action plans with clear milestones for relevant levels of the organisation.

10.3 Resources and organisation

An appropriate set of resources, that the resources are adapted to the company’s strategy and that they are allocated where they best contribute to attainment of the company’s goals are decisive for goal attainment. By resources is meant everything the company utilises in its processes. Some of the resources are discussed in more detail below, but the state’s first expectation (as described above) applies to all the companies’ resources.

Organisation and resource management refers to, among other things, the company’s organisational and decision-making structures, guidelines on resource use and work methods. This includes the company’s processes, the division of responsibility and career paths.

The board is responsible for ensuring that the company’s business is soundly organised. The state places emphasis on the board regularly assessing whether the company’s organisation support the company’s strategy and whether its resources are used efficiently. The use of digital solutions can be an aid to increase efficiency.

New forms and models of organisation are tested and used to create more agile and resilient businesses that are more able to meet changes in the market and surroundings and achieve increased efficiency. Increased use of autonomy, inter-functional cooperation and the use of temporary groups with responsibility for performance are examples of new ways of organising a business.

Source BCG.

Corporate culture

The company’s culture influences employees’ behaviour and thereby the company’s ability for goal attainment and the ability to act responsibly. The factors that affect a company’s culture are complex and difficult to measure, but it is assumed that the culture is influenced by, among other things, the company’s vision and values and how they are communicated. Formal and informal incentives, performance management systems and decision-making and organisational structures also influence a company’s culture.

Source BCG.

The board has a specific role in defining, facilitating and evaluating the company’s culture, so that it promotes attainment of the company’s goals and supports the company’s strategy. This includes both assessing and providing advice on the company’s work on developing the desired culture.

The attitudes and conduct of managers are often decisive in developing the desired culture. For example, how managers communicate set the tone for how the rest of the organisation communicates. Appointments, promotions and pay schemes are also examples of factors that influence employees’ conduct.

There is reason to assume that companies with a corporate culture that can be characterised as value-creating and responsible reward behaviour that contributes to long-term value creation, encourage transparency about challenges and objections and create a low threshold for reporting matters that warrant criticism.

Employees and diversity

A good personnel strategy and a recruitment and development plan for managers and employees contribute to ensuring that the company has the managers and personnel it needs and the expertise required to implement the company’s strategy and achieve its goals. This requires, among other things, awareness of the skills that are required among managers and employees in the short and long term in order to succeed with the company’s strategy. This, in turn, requires that the company maps available expertise in the company at present and the expertise needed in the future. To have the best possible recruitment base, it is essential that the company recruits personnel from as broad a segment of the population as possible. For some of the companies, the recruitment of apprentices can also be a good way of accessing the right competence.

Textbox 10.6 Work on diversity

Companies that work to achieve diversity, including gender balance, integrates this into the company’s strategy and work in this area in the same way as in other prioritised areas. The point of departure is awareness of any imbalances that exist in the company and their underlying reasons (mapping), as well as the development of goals, strategies and concrete measures with clear milestones. This includes systematic work on recruitment, employee development, succession planning and support and mentor schemes, among other things. Measures are implemented for each area, and progress is measured and reported on. The board is involved in this work, and the managing director and other senior executives are held accountable for the company’s results.

What measures are most appropriate depends on the company’s size, the challenges it faces and the industry it is part of. Relevant measures the company can take to implement the strategy and achieve its goals may include a range of or a variety of the measures set out below:

• Transparent about the desire for greater diversity, including targets.

• Reporting on progress.

• Measurement of the management’s performance.

• Active use of role models for underrepresented groups.

• Awareness of how job advertisements are worded to encourage broad diversity.

• Diversity requirement/target, including gender, among candidates in recruitment processes.

• Diversity requirement/target, including gender, among candidates for key positions, in the final round.

• Diversity requirement/target, including a minimum percentage of each gender, among participants in internal management development programmes.

• Diversity requirement/target, including a minimum percentage of each gender, on lists of successors for key positions at all levels.

• Measures to help leadership talents from different backgrounds gain line experience.

• Special career development initiatives for underrepresented groups, such as mentor, sponsor and network programmes, management training and personal development programmes.

• Earmarked funds (‘equal pay pool’) to close gender-based pay gaps.

Source Korn Ferry.

Diversity refers to differences in terms of backgrounds and qualifications that provide different perspectives and opinions. Surveys show that there is a link between diversity in management, especially in terms of the proportion of women, and companies’ profitability and development.58 A diversity of backgrounds and qualifications provide different perspectives that may provide a better and broader basis for making good decisions. The surveys also point out that it may be easier for companies with a diverse workforce to attract the best employees. Companies with a diversity of backgrounds and qualifications and a culture for openly expressing different opinions can thereby have a competitive advantage. Awareness of the value of diversity, including gender balance in the company, is therefore crucial.

The state places emphasis on the board taking ownership of the company’s work on diversity and setting clear targets for diversity. Furthermore, it is essential that the board considers whether the company’s culture and measures promote relevant diversity, including a better gender balance that enable attainment of the company’s goals. Clear targets provide direction and contribute to diversity being prioritised and followed up.

What constitutes relevant diversity varies. Apart from gender, diversity includes different work experience, education, geography, cultural background, age, disability, sexual orientation and non-work-related experience.

Gender balance in particular

Several of the companies have a low proportion of female employees, and it will be crucial for these companies to recruit from both genders. Companies that use resources from both genders in their recruitment processes will have a broader and better basis for making new appointments. This is decisive for the companies in the ‘battle for the best minds’.

As mentioned, a diversity of backgrounds and experience among management can lead to a better and broader basis for making good decisions. Surveys show that there is a link between the proportion of women in management and companies’ profitability and development. In order to promote diversity in the company’s management, dedicated efforts must be made at all levels of the organisation. Clear targets and measures to achieve a better gender balance, and the board’s involvement in this work, are key elements for the work to be prioritised and followed up.

Capital structure and dividend

An appropriate capital structure promotes the company’s value creation or efficient attainment of public policy goals. A too strong balance sheet with easy access to liquid assets can result in unsound investments and less efficient operations. Correspondingly, a poor balance sheet can, among other things, prevent attractive investments from being made.

The board is responsible for ensuring that the company has an appropriate capital structure. This requires the board to consider whether the company’s capital structure is appropriate in relation to the company’s goals, strategy and risk profile, and that the board has set a target for the capital structure and a plan for achieving the target.

Dividend provides the owners with a direct return and is a way of adjusting the company’s capital structure. An appropriately dividend level promotes a long-term return and the most efficient possible attainment of public policy goals.59 In some cases, it may be appropriate for the company to buy back shares for the purpose of cancellation in addition to paying dividends. The state communicates concrete dividend expectations to the companies, as described in section 12.5.3.

The state places emphasis on the boards being transparent about their assessments relating to the companies’ capital structure and dividend, in order to enable a good dialogue with the board about these topics.

10.4 Incentives

By incentives is meant different ways of rewarding performance and conduct in an organisation. The right incentives contribute to implementing the company’s strategy and attaining the company’s goals, and promotes loyalty and an appropriate risk level. Remuneration is a key element, but incentives also include criteria that form the basis for promotions and what type of conduct is valued in the organisation.

Good remuneration schemes are linked to measureable factors that individual employees can influence and are designed to create a commonality of interest of long-term value creation between the owners, the board, the management and other employees. For companies whose shares are tradable, investments in the company’s shares may for example create a commonality of interest.

The companies vary considerable in terms of size, industry, complexity and area of business. What constitutes appropriate incentives and the right level and structure of remuneration will therefore vary between companies. The companies shall have the possibility to recruit and retain the desired expertise by offering competitive remuneration schemes.

Remuneration of senior executives in particular

The expectation that remuneration and other incentives promote attainment of the company’s goals also forms the basis for the remuneration of senior executives.

It is crucial that the companies succeed in recruiting and retaining good executives. At the same time, moderation is important to prevent unreasonable differences in society and to avoid undermining the company’s reputation. The remuneration shall be competitive, but not market-leading compared with similar companies or enterprises, and the state places emphasis on the board having due regard to the principle of moderation when setting and adjusting remuneration. This includes that the level of remuneration is not higher than necessary to attract and retain the desired expertise. The state places emphasis on the board taking responsibility for the company’s remuneration of senior executives so that they contribute to attainment of the company’s goals while promoting moderation.

Transparency about the structure, level and development of the remuneration of senior executives fosters public trust in the company and allows the owners to evaluate the schemes. The state places emphasis on the board, in its statement on executive pay, being transparent about the board’s assessment of how the remuneration contributes to attaining the company’s goals. The state also places emphasis on the board being transparent about, among other things, how the board in the process of setting and adjusting the remuneration has given due regard to the remuneration being competitive but not market-leading, and how it exercises moderation in this context.

For public limited liability companies, it is set out in law that the board shall present its statement on executive pay to the general meeting. In other companies,60 the state will include this in the articles of association to allow the owners to consider the board’s guidelines for remuneration of senior executives.61 An informed vote requires an understandable description of all elements of the remuneration and what payments they entail.

The state has adopted guidelines for the remuneration of senior executives in companies with a state ownership interest; see the Government’s web pages on state ownership. They show what the state emphasises when the statement on executive pay is put to the vote at the general meeting. The state’s guidelines shall be revised in light of, among other things, the state’s expectations and proposed amendments to the Public Limited Liability Companies Act’s provisions on the remuneration of senior executives, including the board’s guidelines and reporting, and the general meeting’s consideration of such matters.62

The state’s follow-up of deviations from the state’s expectations relating to executive pay is described in section 12.6.

10.5 Responsible business conduct

Responsible business conduct entails acting in an ethically sound manner. It also entails identifying and managing the risks the company’s operations pose to society, people and the environment. Such risk also affects the company’s ability to deliver sustainable value creation. Companies with a state ownership interest attract great public interest. Responsible business conduct helps to increase confidence in and the legitimacy of the companies.

That a company leads the field in its work on responsible business conduct means, among other things, that the company identifies and manages important risk areas, including in the supply chain, for those affected by the company’s operations. The work is supported by the board and incorporated into the company’s goals, strategy and guidelines. Furthermore, the company follows internationally recognised guidelines, principles and conventions, such as the OECD Guidelines for Multinational Enterprises63 and the UN Guiding Principles on Business and Human Rights (UNGP).64 The work on responsible business conduct is adapted to the business, nature, risk exposure and size of the individual company.

Textbox 10.7 The UN Sustainable Development Goals

Source UN.

Many companies use the UN Sustainable Development Goals (SDGs)¹ as a frame of reference in their work on sustainability and responsible business conduct.

The following five steps have been developed to make it easier to integrate the SDGs into the company’s goals, performance indicators and target figures:²

1. Understand the SDGs and identify the opportunities they represent to the company.

2. Map the value chain to identify the company`s impact on the environment and define priorities.

3. Define the scope of goals and select KPIs, set level of ambition and align the company`s goal with the SDGs.

4. Anchoring sustainability goals in the business and embedding sustainability across all functions. Engage in partnerships across the value chain or with governments and civil society organisations.

5. Effective reporting on performance, and demonstrate transparency about successes and challenges.

¹ In 2015, the UN member states adopted 17 goals for sustainable development to be achieved by 2030.

² Global Reporting Initiative, United Nations Global Compact, World Business Council for Sustainable Development (2015): ‘SDG Compass. The guide for business action on SDGs’.

The OECD Guidelines for Multinational Enterprises are the most comprehensive set of guidelines for responsible business conduct and include considerations set out in the UNGP and the ILO Core Conventions.65 The OECD guidelines and the UNGP are non-legally binding provisions that the Government expects all Norwegian companies to comply with. They set out standards for the work on respecting human rights and labour rights including assessing, preventing and dealing with violations, reducing negative impact on the climate and environment and preventing economic crime, including corruption and money laundering, both in the companies’ own operations and in risk-exposed parts of the supply chain. There may also be other guidelines that are relevant to individual companies.

The SDGs are a global roadmap for sustainable development. Both governments and companies use them in their efforts to contribute to a more sustainable global development. Companies can use the SDGs to incorporate sustainability and responsible business conduct in their strategies.

A well-founded tax policy sets out the main principles on which the company’s tax strategy is based and why, including the main principles underlying the company’s tax reporting.

Due diligence for responsible business conduct is a method that companies can use to identify, manage, report and assess risk. It also entails having systems in place for remedying any adverse impact the company has on people, society and the environment. This requires the company to engage in meaningful stakeholder dialogue. The OECD has, in cooperation with businesses and organisations, developed guidelines66 for how companies can conduct due diligence to align their practices with the OECD Guidelines for Multinational Enterprises and the UNGP. Compliance with the UNGP means that the company has declared that it will respect human rights, conduct due diligence and have a grievance and remedy mechanism. The six steps of such due diligence are described in Box 10.9.

Transparency about material issues relating to the company’s work on responsible business conduct gives the outside world, owners, customers and other stakeholders information about how the company manages material risks and its basis for future value creation. Transparency is essential in order for a company to be considered to lead the field in responsible business conduct.

Textbox 10.9 OECD Due Diligence Guidance

One of the main principles in the OECD Guidelines for Multinational Enterprises is that companies shall contribute to sustainable development and, as part of this effort, shall conduct due diligence to prevent harm to people, society and the environment. The OECD Due Diligence Guidance for Responsible Business Conduct was published in 2018. The guide describes a method that companies can use to achieve responsible business conduct by identifying the risk of adverse impacts and harm caused by their own operations, in supply chains and by business associates, with regard to employees, human rights, the environment and corruption, among other factors. Figure 10.8 shows the different steps in the due diligence process, in which organisational support and management systems play a central role. The method is about identifying and assessing any adverse impacts on people, society and the environment, and then giving priority to the most serious risks. The company shall cease, prevent or mitigate any adverse impacts/harm identified. Measures must be monitored to determine whether they lead to the desired result and be communicated to the affected parties. The company provides for remediation where appropriate.

Source OECD (2018): ‘OECD Due Diligence Guidance for Responsible Business Conduct’.

10.6 Performance and risk management

Good performance management leads the company in the right direction and contributes to strategy implementation and to better fact-based decisions. Performance management enables the owners, board and management to follow up the company’s performance, goal attainment and measures.

Key performance indicators67 are defined for areas the company has identified as material and where the company has set goals. Good indicators measure value creation and goal attainment, are both financial and non-financial and are defined in areas the company can influence. The indicators are implemented throughout the organisation. Insight from the indicators are used to make fact-based decisions and to implement measures. The most important key performance indicators relating to the company’s goals and strategy are reported through the organisation to the board and owners.

Risk management and internal control are tools for the board to supervise the management and contribute to increased goal attainment and value creation. Many of the companies operate in complex environments where the risk situation and business models can change rapidly, and are large companies of great significance to the population. Identifying relevant risks, including risks that cannot be easily quantified, is essential.

A precondition for effective risk management is that risk assessments are incorporated into the company’s strategy, core activities and decision-making processes. A good risk management system helps the company to identify, evaluate and report on risks and enables it to respond with strategic, operational and financial measures. It also includes crisis management. The purpose of risk management is to manage, not eliminate, risk.

10.7 The Norwegian Code of Practice for Corporate Governance

The Norwegian Code of Practice for Corporate Governance is principally intended for companies whose shares are listed on regulated markets in Norway.68 The Code of Practice is also relevant for non-listed companies. Adherence to the Code of Practice shall be based on the ‘comply or explain’ principle. It follows from the Code that companies shall issue a comprehensive report on their corporate governance practices. The report shall be adapted to the company’s operations.

The Norwegian Code of Practice for Corporate Governance covers the following areas:

1. Implementation and reporting on corporate governance.

2. Business.

3. Equity and dividends.

4. Equal treatment of shareholders and transactions with close associates.

5. Shares and negotiability.

6. General meetings.

7. Nomination committee.

8. Board of directors: composition and independence.

9. The work of the board of directors.

10. Risk management and internal control.

11. Remuneration of the board of directors.

12. Remuneration of executive personnel.

13. Information and communication.

14. Take-overs.

15. Auditor.

10.8 Organisation of the board’s work

The state places emphasis on the board functioning well and contributing to the company’s value creation in line with the state’s goal of the highest possible return over time or the most efficient possible attainment of public policy goals.

A well-functioning board organises and prioritises its work and utilises the board’s overall expertise so that it promotes value creation in the most efficient way and safeguards the board’s supervisory tasks. It is a prerequisite that the board members are dedicated and put in a sufficient work effort.

Section 7.2 describes societal developments that have a bearing on the companies and thereby the boards’ work. Good board work has changed over time from emphasising control and compliance to more strategic, performance-oriented work that supports, guides and challenges the company’s management. At the same time, regulatory requirements have increased and entails an enhancement of the board’s supervisory tasks. These changes place higher demands on the board’s expertise and work, and require more time to be dedicated to the office of board member.

The chair of the board has a special responsibility for ensuring a well-functioning board. This includes structuring the board’s work by setting the agenda and addressing relevant matters at the right level so that the board spends its time right. It also involves facilitating active discussions that make effective use of the board’s overall expertise. Openness, trust and a constructive exchange of opinions are factors expected to have a positive impact on decision-making processes. The chair of the board is responsible for ‘setting the tone’ to achieve a board culture that fosters these values.

The cooperation between the owners, the board and the management influences the company’s ability to create value. Good cooperation is characterised by trust, openness and information.

A well-functioning board sets clear expectations and is constructive in its dialogue with the management. It marks out a course for the company and serves as a resource and discussion partner for the management, at the same time as the board understands its role as a non-operative unit in the company. The chair of the board plays a special role in this work, and is the point of contact with the management.

10.9 Transparency and reporting

The state manages its ownership on behalf of the population. Giving the public insight into material matters relating to the company’s business is necessary in order to build confidence in the company and the state as an owner. Transparency is essential to enable stakeholders to assess the company’s activities, goal attainment and the risks the company poses to society, people and the environment. Transparency is also important to gain the public’s trust that there is fair competition between companies with and without a state ownership interest. Moreover, transparency can provide easier access to capital.

Good corporate reporting and insight into the company’s business are a prerequisite for good exercise of ownership. Access to relevant information at the right time makes it possible to evaluate many aspects, including the company’s goal attainment, targets, strategy, performance, development, risk exposure and material elements of corporate governance, such as responsible business conduct and remuneration of senior executives. For the state, and other owners not represented on the board, good information and reporting from the company are decisive to be able to evaluate the company’s business and goal attainment.

Good reporting provides insight into the company’s ability to create value, either in the form of a return over time or efficient attainment of public policy goals, in the short and long term. This means starting with what is material to the company’s value creation and to highlight links between the company’s goals, strategy and risks, and its financial and non-financial performance. The most important key performance indicators relating to the company’s goals and strategy are reported through the organisation to the board and owners. Good reporting can also be a driver for better goal attainment.69

The content and scope of transparency and reporting, as well as the way it is communicated, will vary between companies depending on their business, risk exposure and size. Transparency can be achieved through periodic reporting in annual and interim reports, or through other channels such as websites.

The listed companies are subject to much more comprehensive requirements for disclosure than the non-listed companies. Being owned by the state, however, indicates that also the non-listed companies should maintain a high degree of transparency about material matters, not just in relation to their owners, but also the public. This means, among other things, that the companies publish interim reports and information about material company events and decisions, such as minutes of general meetings, unless special considerations indicate otherwise.

Since the state’s ownership is managed on behalf of the Norwegian people, it is relevant for companies with a state ownership interest to publish material information that is included in the annual report in the Norwegian language, unless special considerations indicate otherwise.

In addition to the overarching expectation of transparency and reporting about material matters, the state has some specific expectations concerning transparency and reporting. This concerns reporting on goals and strategies (section 10.2), key performance indicators (section 10.6) and the Norwegian Code of Practice for Corporate Governance (section 10.7), as well as transparency about the company’s capital structure and dividend level (section 10.3), executive pay (section 10.4) and responsible business conduct (section 10.5).

About disclosure of information to the owner in particular

In principle, the state expects the companies to be open to the public about material matters. However, certain limitations may apply to what a company can and should disclose, for example when it comes to business-sensitive information.

Companies that are wholly owned by the state can choose to disclose more information to the owner than they make public, for example to allow the state to efficiently follow up the company and its goal attainment. The state normally engages in dialogue with the company about the content and frequency of reporting to the owner.

In companies that are partly owned by the state, the state as an owner will normally not have access to more information than other shareholders.70 However, the board may decide that the company shall exchange information with some large shareholders if the board considers that there are reasonable grounds for doing so based on the company’s interests and the common interest of all shareholders. One example could be if a requirement for being able to conduct a transaction is that large owners vote in favour of it at the general meeting. Another example could be matters that are expected to attract a lot of media attention and where the company has a special need to inform some large owners.

See more details about the owner dialogue in section 12.3.

In cases where the state awards assignments to companies with a state ownership interest, the state can define separate reporting requirements through its other roles. This usually applies to companies in Category 3 and is often related to allocations.

11 The composition and remuneration of the board shall contribute to the attainment of the state’s goal as an owner

One of the state’s most important tasks as an owner is to contribute to composing competent and well-functioning boards of directors that meet the companies’ needs and safeguard the interests of all shareholders. The state is not represented on the boards of directors.71

Board members are elected by the general meeting in accordance with the main rule in company law, normally for a term of up to two years.72 However, the composition of the board is assessed on a continuous basis, based on the company’s performance and needs and the board members’ contributions. Board members may therefore be replaced during the term of office.

In companies wholly owned by the state, the state nominates and elects board members at the general meeting.

Several companies partly owned by the state have established dedicated nomination committees elected by the general meeting in accordance with the Norwegian Code of Practice for Corporate Governance. The nomination committee arrangement is not regulated by law.73 The duties of the committee are to nominate candidates for election to the board and the nomination committee, or the corporate assembly, and to propose the remuneration to be paid to members of these bodies to the general meeting, or the corporate assembly.74 In accordance with the Norwegian Code of Practice, the members of the nomination committee should be selected to take into account the common interests of all the shareholders. The state will normally propose that an employee from the ministry that administers the state’s ownership of the company be elected to the committee.

In companies partly owned by the state that do not have a nomination committee, the state nominates candidates for the board in cooperation with the other shareholders.

11.1 Considerations relating to the composition of the board

Relevant expertise shall be the state’s main consideration in its work on the composition of boards of directors. The state shall also emphasise capacity and diversity based on the distinctive nature of the company, see principle 7 of the state’s principle for good corporate governance.

Expertise is the state’s primary consideration when composing boards. Together, the board of each individual company should have the expertise required based on the company’s business (object), industry, opportunities and challenges, and the state’s goal as an owner.

Expertise is about relevant experience and background as well as personal qualities. When composing the board, the state will emphasise management experience, board experience, relevant industry experience with good results. The board should consist of members with a good understanding of the industry the company operates in and relevant management experience, enabling the board to support and challenge the company’s management on strategic and other important priorities.75 Areas of expertise such as restructuring, digitalisation, economy and finance are normally also relevant.76 For the companies in Category 3 in particular, a good understanding of the state’s goal as an owner and the state’s different roles will also be relevant.

The board members should have personal qualities that enable them to work well in a collegiate body. As regards the chair of the board, good leadership skills will also be emphasised, such as the ability to facilitate open discussions based on trust.

Based on the expertise needed, the state will help to ensure that each board comprises a diverse range of relevant members based on the distinctive nature of the company. By diverse is meant that the board members represent different backgrounds and expertise, including as a result of different work experience, education, gender, age, geographical affiliation and cultural background. Diversity provides different perspectives and facilitates open, well-informed discussions that may, in turn, result in better decisions. This is based on experience indicating that diverse perspectives reduces the risk of groupthink and that complex issues are best solved when considered from different perspectives.77 The state endeavours to achieve an as equal gender distribution as possible when selecting board members.78

Furthermore, the state emphasises individual candidates’ capacity to contribute to the board and that they devote sufficient time to the office of board member. The candidates’ other positions and offices shall be compatible with the time it is reasonable to expect them to spend on board work.

In accordance with the Norwegian Code of Practice for Corporate Governance, the composition of the board should ensure that it can operate independently of any special interests.

When board members stand for re-election, the state will consider each board member’s contribution to the company’s goal attainment and his/her continued relevance, as explained in section 11.2.

11.2 The state’s processes relating to board election/work of the nomination committee

All boards and board members are subject to an annual assessment, regardless of whether they are up for re-election. The purpose of the assessments is to determine whether the board and the board members’ contribution to goal attainment, and whether the board’s composition, work method (internally and with the management), expertise and effort indicate a need for changes. The size of the board is also considered. The assessment depends on the need for expertise, the size and complexity of the company, and the interest of maintaining the board as an effective decision-making body, among other things. In order to contribute to well-functioning boards over time, the state seeks to facilitate good succession processes (plan for replacement of board members) and continuity.

In companies wholly owned by the state, the state conducts interviews with all owner-appointed board members and the managing director of the company as part of the assessment process. The state also endeavours to conduct interviews with board members elected by and among the employees. The state endeavours to maintain a dialogue with the chair of the board during the work of considering possible changes to the board.

In companies that have a nomination committee, the committee is tasked with assessing the composition of the board and nominating candidates for the board, but the state carries out its own review in these cases. Through the nomination committees, where one of the members is normally an employee of the relevant ministry, the state seeks to contribute to ensuring that the nomination committee’s work is in accordance with best practice and the Norwegian Code of Practice for Corporate Governance. It is crucial that the nomination committee has access to necessary expertise to be able to attend to the committee’s tasks.

In companies partly owned by the state without a nomination committee, the above-mentioned processes will form the basis for the board election process as far as appropriate.

11.3 Considerations governing the remuneration of the board and other governing bodies

One of the state’s most important tasks is to ensure capable, well-composed boards that contribute to goal attainment. The remuneration of the companies’ governing bodies is decided by the owners at the general meeting,79 unlike the remuneration of senior executives, which is decided by the board and the managing director.

Having the right remuneration can be crucial in terms of attracting and retaining people with relevant and necessary expertise, and contribute to ensuring that board members devote sufficient time to their office.80 The state emphasises the following factors in its assessment of the board’s remuneration:

• That the remuneration reflects the board’s responsibility, expertise, time commitment and the complexity of the company’s activities, in accordance with the Norwegian Code of Practice for Corporate Governance. Comparable Norwegian companies will normally be used as a frame of reference when stipulating the remuneration.

• That the remuneration is at a moderate level. This means that the remuneration shall not be higher than what is necessary to ensure relevant expertise on the board, and that it should reflect the board’s responsibilities and workload.

The work of the board is becoming increasingly complex and demanding in a rapidly changing world. Changes in the companies’ framework conditions and regulations entail increased requirements of the boards’ expertise and work. Making the right decisions is decisive to the company’s development, while the consequences of wrong decisions can be catastrophic. In light of this, the state expects more of the boards than previously, especially with regard to their time commitment. The amount of time spent on board work has increased and will probably continue to do so going forward.81

The state carries out a specific assessment of each company’s remuneration of governing bodies before the general meeting, see the considerations described above:

• The state will normally propose, or, in companies with a nomination committee, endorse growth in line with the general wage growth in Norway in cases where the state considers the board’s remuneration to be at the correct level. This is both to ensure moderation and to maintain an appropriate level over time.

• The state will only propose or endorse a bigger increase in remuneration if the level is considered to be too low to achieve the best possible composition of the board and seen in relation to an assessment of the board’s responsibility, expertise, time commitment and the complexity of the company’s activities. This means that an increase in remuneration that significantly exceeds general wage growth is only acceptable when it is necessary to contribute to ensuring that the remuneration is at the right level, especially to be able to attract the necessary expertise.

• The state will propose or endorse zero growth if the level of remuneration is deemed to be too high. There may also be cases where there are grounds for reducing the remuneration, for example if the company’s scope of activities or complexity is materially reduced.

As described above, Norwegian companies will normally be used as the frame of reference in this assessment.

The state will emphasise a moderate level of remuneration. Since 2010, the Norwegian Institute of Directors has conducted board remuneration surveys of companies listed on Oslo Stock Exchange and companies with a state ownership interest. The 2018 survey shows that Equinor, Telenor, Yara International and Norsk Hydro, which are partly owned by the state and are among the biggest companies on Oslo Stock Exchange in terms of market value, are not among the companies that pay the highest remuneration to the chair or members of the board.82

The remuneration of the board should not be linked to the company’s performance, see the Norwegian Code of Practice for Corporate Governance. An assessment of the board’s remuneration that takes into account the factors described above can also lead to an increase in remuneration, for example in companies with poor results and find themselves in challenging circumstances.

The chair of the board carries a particular responsibility for organising the work of the board,83 for maintaining a dialogue with the management and the shareholders and for devoting time to external representation of the company and other hospitality activities if relevant.84 The chair of the board’s remuneration will reflect the scope of the duties that the office entails. Board members who are members of board committees may receive special compensation for this work. This will be decided on an individual basis. The state will normally vote in favour of such compensation. For some companies, it may be necessary to have people who live abroad as board members. In such case, the state will normally endorse supplementary pay as compensation for travel.

In recent years, Norwegian institutional investors have endorsed significant increases in remuneration in companies they invest in, in return for a portion of the increase to be invested in the company’s shares. The justification for this is that owning shares leads to a commonality of interest between the board and the owner. The state encourages board members in listed companies to own shares in the company in line with the Norwegian Code of Practice for Corporate Governance, and may to this end endorse any proposals by the nomination committee/corporate assembly that require part of the board’s remuneration to be invested in shares in the company.

The remuneration of other governing bodies, such as the corporate assembly and nomination committee, is decided based on the same considerations as the remuneration of the board.

12 The state’s follow-up of the companies shall contribute to the attainment of the state’s goal as an owner

The state’s goal as an owner governs how it exercises ownership. For companies in Categories 1 and 2, the goal is the highest possible return over time, and for the companies in Category 3, it is the most efficient possible attainment of public policy goals, see section 7.1.

12.1 The state shall be a responsible owner

It follows from the state’s principles for good corporate governance that the exercise of ownership shall contribute to the attainment of the state’s goal as an owner (Principle 3) and that the state shall be a responsible owner (Principle 1). Being a responsible owner entails promoting responsibility in the companies. This is reflected in the state’s expectations of the companies as set out in Chapter 10.

The state’s exercise of ownership is based on the division of roles and responsibilities set out in company law between the owner, the board and the general manager, and on generally recognised principles and standards for corporate governance (Principle 4). In addition, the state systematically follows up the companies and aims to be a predictable owner.

To be able to follow up a company in a good way, the state must have good insight into the company’s activities and sufficient expertise and resources.

The state will endeavour to engage in dialogue with any co-owners where relevant.

12.2 Follow-up of the company and the state’s expectations are based on materiality

The board is responsible for managing the company. The state assesses the company’s goal attainment, its efforts regarding the state’s expectations and the board’s contribution in this context, see Principle 6. The state contributes to goal attainment by, among other things, holding the board accountable for the company’s performance.

In its follow-up of the company, the state will emphasise what is material to goal attainment and the areas where the state can best contribute to this in the short and long term. Assessments of the factors that have the greatest bearing on the company’s development form the basis for the state’s priorities when it comes to determining what is most important to follow up in each company. The most material follow-up points vary between companies and over time. Priorities are typically set on an annual basis as part of the state’s planning of its follow-up of the company, and adjusted as needed.

12.3 The state engages in dialogue with the company – the authority as owner is exercised through the general meeting

The state’s exercise of ownership is based on the division of roles and responsibilities between the owner, the board and the general manager set out in company law. The state’s authority as owner is exercised through the general meeting, see Principle 5. This typically concerns approval of the annual accounts and possible annual reports, including the distribution of dividend, election of board members and determination of the board’s remuneration, election of the auditor and approval of the auditor’s fee, as well as the adoption of changes to the share capital and other amendments to the articles of association. The state as an owner does not have any authority in the company outside the general meeting.85

This does not prevent the state from receiving information from and engaging in dialogue with the company other than through the general meeting, on a par with other shareholders. Such contact is required to give the owners the necessary insight to be able to exercise ownership in a satisfactory manner and make expedient decisions at the general meeting. Dialogue based on confidence and trust is a prerequisite for good cooperation between the company and the owner.

The flow of information from a company to its owners can take place through different channels, for example official interim and annual reports and other publicly available information, the general meeting, and the company’s reporting to and meetings with the owners.

The state holds regular meetings with each company. This and other contact with the company is referred to as the owner dialogue. Through the owner dialogue, the state can raise matters, ask questions and communicate points of view that the company can consider in relation to its activities and development. Such dialogue is intended as input to the company, not as instructions or orders. The board shall manage the company in accordance with the company’s interest and the common interest of all shareholders, and must consider and make decisions on concrete matters. Matters that require the owners’ support must be considered at the general meeting.

The owner dialogue in particular

The core of the state’s owner dialogue with the company is usually regular meetings every quarter, as is customary between companies and large private owners. The meetings typically include a review of the company’s development and prospects, various matters relating to the state’s expectations and topics the state emphasises as owner, as well as specific issues. What is relevant and material topics to be discussed at the meetings depends on the state’s goal as an owner and the company’s activities and circumstances. This will vary between companies and over time.

It is up to the board to decide who represents the company in meetings with the shareholders.86 To ensure a direct dialogue with the board, the state normally prefers that the chair of the board of the wholly owned companies attends the meetings on a regular basis, and that the chair of partly owned companies attends at least one meeting a year. Normally, the state also engages in dialogue with the chair outside of the regular meetings and holds an annual meeting with the whole board. If the board does not attend the meetings, the state assumes the company’s management to inform the board about the topics addressed in the owner dialogue.

The state places emphasis on the board members having a good understanding of the state’s rationale for its ownership and the state’s goal as an owner of the company, as well as the state’s expectations of the board as set out in this white paper. The state therefore normally holds onboarding meetings with newly elected board members in companies wholly owned by the state.

In addition to the regular meetings, the state also engages in dialogue with the company about special topics or issues.

12.4 The state shall exercise its ownership in accordance with the principle of equal treatment of shareholders

It follows from Principle 8 that the state shall exercise its ownership in accordance with the principle of equal treatment of shareholders set out in company law. A company’s ability to attract capital depends on the investors’ confidence that other shareholders are not given unfair opportunities to promote their own interests at their expense. As a part-owner of several companies, it is crucial that the state contributes to equal treatment of shareholders.87

In principle, the state as an owner does not have access to more information than other shareholders, and the state cannot demand more information. However, the board may decide that the company shall exchange information with some large shareholders if the board considers that there are reasonable grounds for doing so based on the company’s interests and the common interest of all shareholders, see section 10.9. The state shall not act wrongfully on the basis of information about the company that is not known to other shareholders.

12.5 Follow-up of the company is structured around different topics to contribute to attain the state’s goal as an owner in a sustainable and responsible way

The state’s follow-up of the companies is structured around the topics outlined in Figure 12.1. In companies partly owned by the state, the assessments and dialogue are normally based on information available to all shareholders, see section 10.9.

12.5.1 Assessment of the company’s goal attainment

Follow-up of highest possible return over time

In companies in Categories 1 and 2, the state’s goal as an owner is the highest possible return over time, within provisions of the companies’ articles of association, see section 7.1.1. If companies in Category 3 also operate in competition with others, the state normally has a goal of the highest possible return over time for this part of the companies’ activities, see section 7.1.2. This goal has been operationalised through a corresponding expectation of the companies, see section 10.1.

When the state assesses a company’s return over time, the total shareholder return achieved (change in value and dividend) is normally compared with a calculated required rate of return,88 comparable companies and, if relevant, benchmark indices. Such assessments are carried out on a regular basis for companies in Categories 1 and 2, and for relevant activities in the companies in Category 3 if this part of their business is material. When the rate of return is not directly measureable in the stock market, the state seeks to use its own valuations, among other sources. Recognised methods are used to calculate return requirements and the value of the company. The total shareholder return and the company’s outlook are discussed with the company’s board and management.

Follow-up of most efficient possible attainment of public policy goals

In the companies in Category 3, the state’s goal as an owner is the most efficient possible attainment of public policy goals, see section 7.1.2. This goal has been operationalised through a corresponding expectation of the companies, see section 10.1.

Since the state’s public policy goals vary between the companies, the way goal attainment is evaluated must be adapted to the individual company. In line with the state’s goal as an owner, the state imposes restrictions on the companies’ activities, primarily through the articles of association.89 In order to achieve this, the articles of association for companies in Category 3 often impose greater and more specific restrictions on the companies’ activities than is normally the case for most of the companies in Categories 1 and 2. Within the framework of these restrictions, however, it is important that the companies are given adequate freedom of action and sufficient predictability to be able to attain the state’s goal as efficiently as possible. The state engages in dialogue with each company about how the state’s goal should be understood and how the company operationalises and measures goal attainment, see Figure 12.3.

The company’s goal attainment and efficiency are assessed on the basis of, among other things, the reporting from and the owner dialogue with the company. It may be relevant in this context to look at comparable enterprises, the company’s development over time and other evaluations of the business. The results achieved and the company’s outlook are discussed with the company’s board and management.

Several of the companies in Category 3 are wholly or partly financed via the national budget or through regulated revenues, and some of the companies are subject to special legislation. The state will therefore often follow up the company’s goal attainment in other ways than as owner, for example as a principal, contract party and regulatory and/or supervisory authority. The follow-up exercised through other roles can therefore partly replace or come in addition to the state’s follow-up as owner.90 The state shall be conscious of its different roles and make it clear to the company at all times in which capacity it is acting.

12.5.2 Corporate governance

Corporate governance means how and on which basis decisions are made in a company. The state has expectations of the companies’ corporate governance, see Chapter 10. The expectations are related to the company’s goals and strategy, resources and organisation, incentives, responsible business conduct, and performance and risk management, see Figure 12.2. The state also expects the companies to comply with the Norwegian Code of Practice for Corporate Governance where relevant, adapted to the company’s activities.

The board and the management are responsible for the company’s corporate governance. As a responsible owner, the state endeavours to understand how different aspects of a company’s corporate governance contribute to sustainable goal attainment. Topics and expectations relating to corporate governance are included in the owner dialogue based on their materiality to goal attainment.

Insight into the company’s agenda for sustainable value creation, including the company’s goals and drivers of goal attainment, are a good starting point for the owner dialogue. The purpose of this dialogue is to create a shared understanding between the board and the owner about material opportunities and risks to the company’s value creation and the state’s goal attainment.

It is also essential in the dialogue to follow up the company’s strategy and factors for efficient implementation of the strategy, such as resources and organisation, including the company’s work on diversity and gender balance, incentives and responsible business conduct. It is also crucial to follow up developments in the company’s financial and non-financial results. The state assesses the company’s goals, key performance indicators and target figures,91 and challenges the company on whether they are relevant and expedient.

In addition to assessing the company’s corporate governance in relation to the state’s expectations, it may be relevant to take good practices, comparable companies and enterprises or development over time into consideration.

12.5.3 Capital structure and dividend

An appropriate capital structure92 promotes the company’s value development or efficient attainment of public policy goals. The board is responsible for the company’s capital structure, but decisions made at the general meeting concerning dividend and capital adjustments will affect the capital structure. When proposals that will have an impact on the capital structure are put to the vote at the general meeting, the state will emphasise whether the proposal promotes efficient goal attainment. In this assessment, it is relevant to consider, among other things, the company’s goal attainment, business, opportunities and risks going forward, any comparable companies and whether the company’s utilisation of capital is efficient.

If a company’s capital structure is considered inexpedient in relation to the state’s goal, the capital structure should be adjusted through, for example, the distribution of dividend or capital contributions.

Several of the companies in Category 3 are subject to restrictions on the possibility of obtaining borrowings. This may be particularly relevant if the company is financed via the national budget or through regulated revenues.93 Debt in companies that are not financed on market terms can lead to undesirable risk exposure for the state. It can also result in more funds being spent on an activity than the state desires. Any restrictions on borrowing set by the owner shall be reflected in the company’s articles of association.

Dividend expectations and decisions

Dividend from a company provides the owner with a continuous direct return (relevant for the companies in Categories 1 and 2, and some of the companies in Category 3), and is a way of adjusting the company’s capital structure (relevant for all companies). The board is responsible for proposing the allocation of the company’s annual result, including how much, if anything, should be distributed as dividend.

The state communicates both long-term and annual dividend expectations to the companies in Categories 1 and 2, and to companies in Category 3 where relevant. Long-term expectations usually apply to a period of three to five years, and should contribute to predictability for the company. Annual expectations are adjusted to the company’s current situation and capitalisation.

The state’s expectations of and decisions concerning dividend shall contribute to the attainment of the state’s goal as an owner. Dividend expectations are determined based on, among other things, the state’s assessment of the company’s capital structure, earnings outlook, investment needs and opportunities, and how dividend contributes to goal attainment.94 The state engages in dialogue with the company about this and annually communicates its dividend expectations to the board, before the board presents its dividend proposal to the general meeting.

A resolution on the distribution of dividend is adopted by the general meeting following a proposal by the board for such distribution or other allocation of the profit. As a general rule, the general meeting may not adopt a resolution to distribute dividend exceeding the amount proposed by the board. There is an exemption provision95 in company law, however, stating that the general meeting of state-owned limited liability companies and state enterprises is not bound by the board’s proposal for the distribution of dividend. For all the companies, the state will define expectations and make decisions on dividend in line with what is described above.

Dividends to the state are recognised as revenue in the national budget. When the national budget is presented in autumn, the companies’ annual accounts, relevant market conditions and other material circumstances that form part of the basis for the board and owners’ assessment of dividend towards the general meeting the following year are to a large extent not available. The state’s dividend estimates are therefore highly uncertain. An updated estimate is presented to the Storting in amending propositions the following year. For the listed companies, it is budgeted with the same dividend distribution per share as the previous year. Decisions to distribute dividend are made by the general meeting based on the board’s proposal.

For companies in Category 3 that are financed via the national budget or have regulated revenues, annual dividends are often not expedient, but may nonetheless be used to adjust the companies’ capital structure. Several of the companies in Category 3 have activities that operate in competition with others or receive other revenues from which it is natural to pay dividend.

12.5.4 Transparency and reporting

The state expects the companies to be transparent about and report on material matters relating to their activities, see section 10.9.

The state assesses each company’s transparency and reporting in relation to its expectations and approves the company’s annual report and accounts at the general meeting.

Good corporate reporting provides insight into the company’s activities and is a prerequisite for good exercise of ownership. Access to relevant information at the right time makes it possible to evaluate many aspects, including the company’s goals, strategy, performance, development, material elements of corporate governance and risk exposure.

The state engages in dialogue with the company about the content of the regular reporting to the owners and the general public. The purpose is to ensure that the reporting provides sufficient insight to be able to assess goal attainment and exercise ownership effectively, including that it covers relevant goals and indicators.

12.6 Follow-up in the event of poor goal attainment over time or significant deviations from the state’s expectations

In the event of poor goal attainment over time or significant deviations from the state’s expectations, the state will consider how this should be followed up.

The first step is to discuss the reasons for the situation and possible ways of improving it with the company. It may be expedient for the company or owner to carry out special analyses. It will usually be natural to follow up the company’s plans for improving its performance with the board and management as part of the owner dialogue.

If the dialogue is unsuccessful, the state can exert influence through decisions at the general meeting. This applies in the event of both poor goal attainment over time and significant deviations from the state’s expectations. Whether the state should exert influence through decisions at the general meeting and, if so, in what way, will vary depending on, among other things, the company’s situation and the reasons for the poor goal attainment or deviation from expectations.

The state can provide an explanation of vote, orally or in writing. Regarding the remuneration of senior executives, for example, the state will consider the board’s guidelines for the fixing of salaries and other remuneration of senior executives in connection with the general meeting. The state will consider providing an explanation of vote if there is a need to clarify the state’s stance on a subject, for example in the event of lack of transparency.

In the event of poor goal attainment over time or significant deviations from expectations without the company implementing successful improvement, it is natural that the board considers the need for adaptation or changes in the company. The situation and how the board deals with it will form the basis for the state’s assessments of the composition of the board.96

The company’s goal attainment will also influence the state’s voting on other matters considered at the general meeting, for example capital infusion and dividend.

12.7 The state takes a positive view of transactions aimed at contributing to the attainment of the state’s goals as an owner

In general, the state takes a positive view of a company’s strategic initiatives and transactions that can be expected to contribute to the attainment of the state’s goal as an owner. The state shall act in a way that helps the company to exploit good business opportunities, and the state will therefore consider any initiatives presented by the company. The state shall act in line with market practice in its dialogue about and, if applicable, participation in capital increases or other transactions.

Transactions can also be a way of reducing the state’s ownership interest in companies where this is relevant, see section 5.2. This is particularly relevant for companies in Category 1, where the state no longer has any rationale for its ownership. The state normally engages in dialogue with the boards of non-listed companies in Category 1 about the best ownership structure and timing for possible reductions of the state’s ownership interest. It may also be relevant to reduce the state’s ownership interest in other companies, for example if the state’s rationale for the ownership no longer applies or can be sufficiently fulfilled with a smaller ownership interest.

12.8 Fair competition and distinguishing between the state’s different roles

The state has several roles, for example as supervisory and regulatory authority, principal and owner. Among other things, the state adopts laws and regulations, stipulates fees and charges, awards licences and grants, purchases services, carries out supervisory activities and makes decisions in individual cases. To create legitimacy in its different roles, the state should be aware of which capacity it is acting in at all times, and, in its actions, clearly distinguish its role as owner from the state’s other roles, see Principle 9. Considerations that are not justified by the state’s goal as an owner shall be addressed by other means than state ownership.

State ownership shall not give companies with a state ownership interest undue competitive advantages or disadvantages compared with companies in which the state does not have an ownership interest, see Principle 10. The state shall not abuse the power and influence it exerts through its other roles to promote its interests as owner. Companies with a state ownership interest shall deal with regulatory authorities and supervisory activities in the same way as companies without a state ownership interest. Nor shall the state make political decisions or exercise authority in ways that give companies with a state ownership interest undue advantages or disadvantages relative to privately owned companies.

12.9 Organisation of the state’s ownership management

Responsibility for managing the state’s direct ownership is currently divided between 12 different ministries.97 Regardless of whether the state’s role as owner and official authority is exercised by the same or different ministries, the state’s role as owner shall be distinct from its other roles. Over time, several ministries have delegated different roles to different departments or otherwise organised its follow-up of the companies in a way that the ministry’s is clear about the separation of the different roles it exercises.

The role of the central ownership unit

The central ownership unit – the Ownership Department in the Ministry of Trade, Industry and Fisheries – serves as a resource centre and a centre of expertise for the state’s direct ownership, both in relation to other ministries and internally within the Ministry of Trade, Industry and Fisheries. This entails coordinating the ministries’ board election work, assisting other ministries and departments as needed, organising competence-raising seminars and meetings, and helping to spread good practices. The latter includes developing methods and guidelines for ownership topics described in section 12.5. Furthermore, the central ownership unit is involved in processes that can lead to changes in the state’s ownership interest in a company. The measures above shall contribute to as professional and consistent exercise of ownership as possible across ministries.

In addition, the central ownership unit seeks to spread good practices among the companies, and participates in different forums to foster good standards for corporate governance, and other tasks relating to state ownership. This includes participating in the OECD’s Working Party on State Ownership and Privatisation Practices, and the Norwegian Institutional Investor Forum.98

The state’s ownership interests in the companies in Categories 1 and 2 are mainly managed by the central ownership unit

The state’s ownership interests in companies in Categories 1 and 2 are managed by the ownership unit unless special considerations indicate a different solution. Centralised management of the state’s ownership interests in companies that primarily operate in competition with others helps to distinguish the state’s role as owner from its other roles, and to bolster confidence in the state’s exercise of ownership and other roles. Such centralised management also helps to raise the level of professionalism and efficiency in the state’s exercise of ownership. This is in line with the OECD’s recommendation for how the exercise of state ownership should be organised. A further centralisation of the responsibility for managing the state’s ownership interests in the companies in Categories 1 and 2 is considered on a regular basis.

The state’s ownership interests in the companies in Category 3 are mainly managed by the relevant sector ministry

The state’s ownership interests in companies in Category 3 are currently managed by the relevant sector ministry, unless special considerations indicate a different solution. This enables a better overall assessment of the policy for each sector. This type of organisation requires internal procedures to avoid an unfortunate mixing of roles. It can also affect the state’s follow-up as owner, see section 8.6.

13 The state shall demonstrate transparency about its ownership and exercise of ownership99

As owner, the state manages substantial assets on behalf of society as a whole. Transparency is decisive in order to give the general public, co-owners and potential new shareholders, competitors, lenders and others insight into how the state exercises its ownership, among other things to be able to evaluate the state as an owner and determine whether there is a level playing field between companies with and without a state ownership interest. Transparency creates predictability and is important if the general public is to trust that these assets are managed in a good way. Democratic considerations are thereby safeguarded. As a result of the Norwegian state’s extensive ownership, transparency is also important if investors are to trust the Norwegian capital market.

Since 2002, a white paper on the state’s overall direct ownership has been submitted to the Storting in each parliamentary session. In the white paper, the Government describes why the state has direct ownership interests in companies, what the state owns, including the state’s rationale for its ownership and the state’s goal as an owner of each company. The white paper also describes how the state exercises its ownership, including the state’s principles for good corporate governance and the state’s expectations of the companies.

In the State Ownership Report, the Ministry of Trade, Industry and Fisheries, in cooperation with other ministries, provides an overview and a description of the state’s direct ownership in the preceding year.

The Government’s website contains updated, relevant information about the state’s ownership, including a collection of relevant publications and news. The ministries also reports on several companies to the Storting, particularly relating to, for example, allocations granted for follow-up of public policy tasks.

At the general meeting, the shareholders exercise supreme authority in the company. This is the forum where the state exercises its authority as owner. Minutes of the companies’ general meetings are made publicly available, which provides transparency about decisions the state has voted on.

The state shall be a professional, responsible owner. This means that there are aspects of the exercise of ownership the state cannot be transparent about. In connection with the state’s dialogue with the company, topics may be discussed and the state may receive documents that are business-sensitive or for other reasons should be exempt from public disclosure.100 A confidential dialogue with the company is important for the state to enable the state to properly manage its ownership interests.

The state expects the company to be transparent about and report on material matters relating to their activities, see section 10.9.

14 Financial and administrative consequences

Using state ownership when it is the most effective way of achieving the state’s intentions, defining expedient goals as owner in each company and following up ownership in a good way will contribute to better goal attainment for the state in the form of value creation and efficient utilisation of the state’s resources.

The day-to-day management of the state’s ownership is covered within the budget in force.

The Government can be authorised to reduce the state’s ownership interest in individual companies. A reduction through the sale of shares will entail changes in the state’s investment of wealth.