How state ownership is exercised
Article | Last updated: 03/02/2023 | Ministry of Trade, Industry and Fisheries
The Government’s ambition is that the Norwegian State’s exercise of ownership shall be in accordance with the best international practice. The State shall be an active owner with a long-term perspective in line with good and responsible private owners. The Government will continue to further develop and professionalise the State’s exercise of ownership in order to contribute to public assets being managed and developed in the best possible manner.
The State’s 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, whether this be the highest possible return over time in a sustainable manner or sustainable and the most efficient possible attainment of public policy goals.
The State shall be an active owner with a long-term perspective. Active ownership shall be exercised in accordance with the division of responsibilities and roles laid down in company law between the State as owner of companies, on the one hand, and the board and general manager on the other. As a responsible owner the State promotes responsibility in the companies. It is important for the State that the companies are managed responsibly, which entails acting in an ethical manner and identifying and managing the company's impact on people, society and the environment.
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 within the framework of company law. The key elements of the framework conditions for the State’s exercise of ownership are collated in the State’s ten principles for good corporate governance.
The State’s expectations of the companies
By defining clear expectations of the companies, the State wishes to be an active owner to contribute to attaining the State’s goal as an owner in a sustainable manner. This presupposes that the companies balance economic, social and environmental factors without reducing the ability of future generations to meet their own needs. Clear communication of the expectations also contributes to transparency regarding what is important to the State as an owner, and what the State will follow-up when exercising its ownership.
Unless otherwise specified, the expectations apply to all companies. Among other things, the companies differ in terms of their size, industry and international presence. The companies work within the different areas in which the State has expectations should be adapted to the companies’ distinctive nature, size, risk exposure and factors that are of importance for each individual company.
The State's expectations are largely based on recognised guidelines, international good practice and the expectations of other leading investors.
An overview of all the State’s expectations is found here. The expectations are explained in Chapter 11 in the white paper on ownership policy. The white paper also includes examples of good practice in selected areas, as inspiration for the companies’ work.
Transparency about the state’s ownership
In its capacity 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 fair competition 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 being managed in an optimal manner. 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 markets. 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.
One of the most important tasks for the State as 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 shall be the State’s main consideration in its work on the composition of boards of directors. Given expertise, the State shall emphasise capacity and diversity.
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.
The State's owner follow-up is based on the State's goal as owner, the State's expectations and materiality. In the follow-up of the company, the State will emphasize what is essential for goal attainment and areas where the State can best contribute to goal achievement in the short and long term.
The State holds regular meetings with each company. This and other contact with the company is referred to as 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 to serve as input to the company, not instructions or orders. The board shall manage the company in accordance with the interests of the company and all shareholders, and must make specific assessments and decisions. Matters requiring the approval of the owners must be considered at the general meeting.
The State’s goal as owner in the companies in Category 1 is the highest possible return over time in a sustainable manner. When the State assesses the company's return over time in a sustainable manner, the State normally assesses the development in the value of the company’s equity. To calculate the company's value-adjusted equity, cash flow and multiple analyses are used, among other things, where different scenarios are weighted. The company's achieved total return (change in value and dividend, adjusted for any capital contributions and share buy-backs) is then assessed in relation the State's calculated required rate of return, developments in comparable companies and any benchmark indices. The total return achieved and the company's potential for a long-term return are discussed with the board and management.
The State’s goal as owner in the companies in Category 2 is sustainable and the most efficient possible attainment of public policy goals. The State engages in dialogue with the company regarding how the public policy goal should be understood and how the company operationalises and measures this. Among other things, the company’s goal attainment and efficiency are assessed on the basis of the company’s reporting and the state’s 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.
As a responsible and active owner, the State has expectations of the companies that relate to ambitions, goals and strategies, social, environmental and financial factors, and corporate governance. The State will follow up how the companies work in an integrated and systematic manner with the state's expectations in these areas and how this contributes to the State's goal as an owner.
In the event of poor goal attainment over time or significant deviations from the State’s expectations, the State will consider how this can be followed up. This primarily takes place 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 owner.
The State has several roles, for example, as regulatory and supervisory authority, principal and owner.
In order to create legitimacy for the various roles, the State should be aware of the role it has assumed at any given time, and, by its actions, clearly distinguish the role of owner from the State's other roles. Considerations that are not justified by the State’s goal as an owner must be addressed by using policy instruments other than state ownership.
State ownership shall not give companies with a state ownership interest different competitive conditions in comparison with companies without a state ownership interest.
The Central Ownership Unit, which is 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. Unless special considerations dictate otherwise, the State’s ownership interests in the companies in Category 1 shall be managed by the Central Ownership Unit. Unless special considerations dictate otherwise, the State’s ownership interests in the companies in Category 2 shall now be managed by the relevant sector ministry.