1 Introduction and executive summary

1.1 Introduction

The state’s direct ownership comprises the companies where the state’s ownership is managed directly by a ministry. There are currently 73 such companies. Since 2002, a report to the Storting (white paper) on the state’s overall direct ownership, referred to as a white paper on ownership policy, has been presented to the Storting (the parliament) in each parliamentary session. In the white paper on ownership policy, 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.

The companies in which the state has an ownership interest constitute a significant group of companies in Norway that provide important goods and services to society. Ultimately, it is the Norwegian people that own the state’s ownership interests in these companies. The state manages its ownership on behalf of society at large. In order to safeguard these assets, they must be managed in a professional and responsible manner. If not, the value of society’s assets will depreciate. The substantial size of the state’s ownership interests means that professional and predictable management of the ownership also affects the credibility of the Norwegian capital market.

The framework for the state’s exercise of ownership remains unchanged

The framework for the state’s exercise of ownership has remained unchanged since the early 2000s. It has worked well and has a broad political consensus. Certain key elements have been of importance, and they still form the basis for this white paper:

• The division of roles between the owner, the board and the general manager set out in company law.

• Generally recognised principles and standards for corporate governance.

• The state’s authority as owner is exercised through the general meeting.

• Competent boards of directors.

• A clear distinction between the state’s role as owner and its other roles.

• Fair competition between companies with and without a state ownership interest.

This framework provides predictability for the companies and the capital market, thereby enabling the companies to further develop their businesses and create value. At present, nothing indicates that state ownership of listed companies causes the shares in such companies to be priced at a discount compared to shares of other companies.

In this white paper, the state’s principles for good corporate governance exclusively concern the state’s exercises of ownership, as the title indicates. The key elements of the framework mentioned above are included in the principles.

The Government will continue to pursue a responsible ownership policy based on an established framework. With this as a starting point, the ownership policy is clarified and further developed. Regular development of the state’s ownership policy through white papers and follow-up of the white paper on ownership policy are the Government’s most important contribution to ensuring good management of the state’s ownership interests. Norway aims to lead the field internationally in its exercise of state ownership.

The rationale for state ownership and the state’s goal as an owner of each company are clarified

The rationale for ownership states the reason why the state is a direct owner of the company in question, and it is fulfilled by owning a certain percentage of the company, and usually through provisions in the company’s articles of association. Civil protection and emergency preparedness are one rationale for state ownership that is clarified in this white paper.

The state’s goal as an owner is aimed to be achieved within the provisions in the companies’ articles of association. The state sets clear goals as an owner of each company, and gives the company’s board autonomy to manage and develop the company in the best possible way. The state contributes to goal attainment by being a supportive and challenging owner.

For the companies that primarily operate in competition with others, the state’s goal as an owner is the highest possible return over time. Governance based on such a goal leads to favourable use of the resources of each individual company and contributes to the companies’ profitability and competitiveness, and their ability to create value over time. This is a prerequisite for responsible management of the Norwegian people’s assets.

For the companies that do not primarily operate in competition with others, the state as an owner has different public policy goals, often related to an assignment they have been given on behalf of the state. The public policy goals shall be achieved as efficiently as possible.

In order to achieve the highest possible return or the most efficient possible attainment of public policy goals over time, the companies must be sustainable. This means that the companies must balance financial, social and environmental factors in a way that contributes to long-term value creation.

The system for categorising the companies has been simplified

The companies are assigned to three categories based on the state’s goal as an owner and on whether the state has a rationale for its ownership. This is a further development and simplification in relation to previous white papers on ownerships policy. The aim is to emphasise the distinction between the companies for which the state’s goal as an owner is the highest possible return over time and the companies for which the state has public policy goals.

The companies that primarily operate in competition with others, where the state’s goal as an owner is the highest possible return over time, are placed in Categories 1 and 2. Category 1 comprises companies where the state no longer has any rationale for its ownership. Category 2 comprises companies where the state has a specific rationale for its ownership. The companies in Category 3 do not primarily operate in competition with others. For these companies, the state has different public policy goals for each company that shall be attained as efficiently as possible.

Previously, the companies that the state owned in order to maintain head office functions in Norway were placed in a separate category. It is no longer considered expedient to highlight just one rationale for state ownership in the system for categorisation. For several of the companies that the state owns in order to maintain head office functions in Norway, the state also has another rationale for its ownership. The change in the system for categorisation does not affect how the state exercises its ownership in these companies.

In 45 of the companies, the state’s goal as an owner is the most efficient possible attainment of public policy goals (the companies in Category 3). This white paper is made more applicable to the companies in Category 3 by ensuring that the description and examples of how the policy is to be understood are more pertinent to the companies in this category.

The state’s exercise of ownership shall contribute to sustainable value creation

The state’s exercise of ownership shall contribute to the attainment of the state’s goal as an owner. As a long-term and responsible owner, the state contributes to sustainable value creation and promotes responsibility in the companies. Good ownership helps to create value and good services and products for society at large, both now and in future.

Societal developments, such as globalisation, technological development, climate change and scarcity of resources, affect the companies and the state’s exercise of its ownership. Global targets for sustainable development have been set through the UN Sustainable Development Goals and the Paris Agreement. They will affect most of the companies in the state’s portfolio. 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 given sufficient freedom of action to enable them to adapt to changed circumstances. This is reflected in the state’s expectations of the companies.

The state’s expectations of the companies have been further developed and clarified

The state has clear expectations of the companies in a number of areas. All these expectations support the state’s goal as an owner of achieving the highest possible return over time or the most efficient possible attainment of public policy goals.

Among other things, the state expects the companies to have an overarching agenda for sustainable value creation. This presupposes that the companies understand what drives their value creation in the long term. In light of recent societal developments, this is crucial. One example is climate change, and the resultant risks and opportunities the companies must manage. The agenda for sustainable value creation is specified in terms of clear goals and strategies. Furthermore, the state is clearer about what it expects the companies to report on and be transparent about.

There are still too few women at the top in Norwegian business and industry. The low proportion of women means that valuable resources are not being fully utilised. The Government’s ambition is at least 40 per cent of both genders in the senior management teams of state companies. The State Ownership Report for 2018 shows that, for the companies with a state ownership interest, the average proportion of women in senior management is already 40 per cent. However, the proportion varies between companies, and it is lower at the management level below senior management. Surveys show a correlation between diversity in management and companies’ profitability and development. The Government has clear expectations of the companies about both diversity in general and the gender balance in particular. The state expects the companies to have clear goals and measures in place for increasing relevant diversity, including a better gender balance in the company. We are dependent on the companies utilising the competence of all sections of society.

It is crucial that companies with a state ownership interest succeed in recruiting and retaining good executives. The Government expects the remuneration of the companies’ senior executives to be competitive, but not market-leading compared with similar companies and enterprises. At the same time, the Government has a clear expectation that due consideration is given to moderation. In this white paper, the Government has strengthened its expectations of the companies’ transparency about the structure, level and development of the remuneration of senior executives. This includes transparency about the board’s assessment of how the remuneration contributes to achieving the company’s goals, and ensuring competitiveness and moderation.

Society is gradually demanding and expecting more of companies’ work on responsible business conduct. The companies with a state ownership interest attract great public interest. Responsible business conduct helps to increase confidence in and the legitimacy of the companies. The Government expects the companies to lead the field in their work on responsible business conduct. Among other things, this entails identifying and managing important risk areas for those affected by the company’s operations, ensuring board support for this work, incorporating it into the company’s goals, strategy and guidelines, and following internationally recognised guidelines, principles and conventions.

Corporate tax behaviour 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. The Government expects the companies to have a publicly available, justified tax policy that sets out the main principles on which the company’s tax behaviour is based.

The Government places emphasis on the boards delivering on the state’s goal as an owner and taking responsibility for the areas where the state has 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. This is primarily done through the owner dialogue and, when necessary, through decisions by the general meeting.

The Government wishes to reduce state ownership over time

The Government believes that private ownership should be the main rule in Norwegian business and industry. The state should only have ownership interests in companies when this is the best means of meeting the state’s needs. The state should not have larger ownership interests in individual companies than the rationale for ownership requires. To contribute to a more diversified ownership, the Government wishes to reduce the state’s ownership over time. The Government has been authorised by the Storting to reduce the state’s ownership, in whole or in part, in the following companies in Category 1: Ambita, Baneservice, Entra and Mesta. In the national budget for 2020, the Government has also asked the Storting to authorise the full or partial sale, or alternatively dissolution, of GIEK Kredittforsikring.

1.2 Executive summary

This chapter is a summary of Chapters 2 to 13 of the white paper.

Why the state is an owner

The companies with a state ownership interest can roughly be divided into three groups based on how the state came to own them: Business activities initiated by the state, existing businesses that were taken over by the state and the production of goods and services by state-owned undertakings.

The rationale for state ownership in companies today can be divided into two groups. The first group comprises companies that primarily operate in competition with others. The rationale for state ownership in these companies includes the positive spillover effects of maintaining head office functions in Norway, civil protection and emergency preparedness, a failure in parts of the capital market, and ownership of natural resources. The second group comprises rationale to organise state tasks through a company. Such rationale include giving a business greater operational autonomy or professional independence. These companies do not primarily operate in competition with others, and the alternative to state ownership is often to organise the business as a government agency.

The Government uses state ownership when this is an expedient measure.

Even though there is a valid rationale in many cases for the state owning companies, state ownership entails certain challenges, for example potential conflicts between the state’s different roles, intensified principal-agent problems, a weaker foundation for exercising value-creating ownership and an undesirable concentration of power. The state’s ownership policy, as set out in this white paper, aims to reduce such challenges and to contribute to the best possible goal attainment in the individual companies.

What the state owns

The state’s direct ownership currently comprises 73 companies. The state’s ownership is substantial in terms of both the number of companies and their total value. At year-end 2018, the value of the state’s ownership interests in companies for which the state’s goal as an owner is the highest possible return over time was estimated to be NOK 833 billion. The state’s shares listed on Oslo Stock Exchange accounted for NOK 698 billion of the total value. In the other companies, the state’s share of book equity minus minority interests amounted to NOK 155 billion at year-end 2018.

The state regularly assesses the rationale for its ownership and its goal as an owner in each company, to ensure that they are updated and relevant, and to help the state to efficiently solve different tasks or safeguard different needs.

Categorisation of the companies

The companies are assigned to three categories based on the state’s goal as an owner and on whether the state has a rationale for its ownership. The companies that primarily operate in competition with others are placed in Categories 1 and 2, while the companies that do not primarily operate in competition with others are placed in Category 3.

Category 1 comprises the companies where the state’s goal is the highest possible return over time and where the state no longer has any rationale for its ownership. It is the Government’s ambition to reduce state ownership in these companies.

Category 2 comprises the companies where the state’s goal is the highest possible return over time and where the state has a specific rationale for its ownership. The rationale for having an ownership interest in each company is fulfilled by the state owning a certain percentage of the company and usually through provisions in the company’s articles of association.

Category 3 comprises the companies where the state seeks the most efficient possible attainment of public policy goals.

The state’s rationale for its ownership and its goal as an owner in each company are described in Chapter 6.

The Government wishes to reduce state ownership over time

The Government continuously assesses the possibilities of, and the timing and process for, reducing state ownership in the companies in Category 1. State ownership will only be reduced if doing so is deemed to be financially favourable for the state. It may also be an option to reduce the state’s ownership in other companies, for example if the state’s rationale for owning a company no longer applies or if the rationale can be fulfilled through different ownership structures or measures.

It can be an option for the state to form new companies, including by hiving off state-run activities, if there are a good reasons for doing so. The Government will not normally acquire shares in established companies in which the state is not currently an owner.

How state ownership is exercised

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

The Government aims for the highest possible value creation in a sustainable manner and to provide good services for the population. Here, 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.

The state’s exercise of ownership shall contribute to the attainment of the state’s goal as an owner. In order to achieve 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 emphasises that the companies conduct their 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 and how the state follows them up.

The state’s ten principles for good corporate governance

Together, the state’s principles for good corporate governance and the state’s goal as an owner form the basis for how the state exercises its ownership. The key elements of the framework for the state’s exercise of ownership – about which there has been a broad political consensus over time – are included in the state’s ten principles for good corporate governance in this white paper, see Figure 1.1.

The state’s expectations of the companies

As an owner, the state has clear expectations of the companies, through which it wishes to contribute to attain the state’s goal as an owner in a sustainable and responsible way.

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 expectations are largely based on international good practice and recognised international guidelines.

The expectations are summarised in Figure 1.2 and explained in Chapter 10. Examples of good practice in selected areas have also been included as inspiration for the companies’ work.

Board composition and remuneration that contributes to goal attainment

One of the most important tasks of the state 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.

Relevant expertise is the state’s primary consideration in its work on the composition of boards of directors. 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. The state also emphasises capacity and diversity based on the distinctive nature of the company.

The remuneration of the companies’ governing bodies is decided by the owners at the general meeting, or, if relevant, by the corporate assembly. 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. When assessing the remuneration of the board, the state emphasises that the remuneration reflects the board’s responsibility, expertise, time spent on board work, and the complexity of the company’s activities, and that the remuneration is at a moderate level.

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. As a responsible owner, the state contributes to sustainable value creation and promotes responsibility in the companies. 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 goal attainment in the short and long term.

The state holds regular meetings with each company. In its dialogue with the company, 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 instructions or orders.

The state’s follow-up of the companies is structured around the following topics:

• Assessment of goal attainment.

• Corporate governance.

• Capital structure and dividend.

• Transparency and reporting.

• Composition of the board.

In companies in Categories 1 and 2, the state’s goal as an owner is the highest possible return over time. When the state assesses a company’s return over time, the total shareholder return achieved is normally compared with a calculated required rate of return, comparable companies and, if relevant, benchmark indices. The total shareholder return and the company’s outlook are discussed with the company’s board and management.

In the companies in Category 3, the state’s goal as an owner is the most efficient possible attainment of public policy goals. 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.

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. The development of the company’s performance is also important.

Moreover, the state promotes a capital structure that contributes to efficient goal attainment, and expects transparency and good reporting by the companies.

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 follow-up is primarily done through the owner dialogue.

The state generally takes a positive view of strategic initiatives and transactions in the companies that can be expected to contribute to the attainment of the state’s goal as an owner.

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. To create legitimacy in its different roles, the state should be aware of which role it is acting in all times, and, in its actions, clearly distinguish its role as owner from its other roles. Considerations that are not justified by the state’s goal as an owner must be addressed by other means than ownership.

State ownership shall not give state-owned companies undue competitive advantages or disadvantages compared to companies without a state ownership interest.

Organisation of the state’s ownership management

The central ownership unit, the Ownership Department in the Ministry of Trade, Industry and Fisheries, serves as a resource centre and 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. 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. 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.

Transparency about the state’s ownership

The state is transparent about its ownership and how it exercises its ownership, including through white papers on ownership policy, the State Ownership Reports and the Government’s website. As an owner, the state manages substantial assets on behalf of society as a whole. 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.