Norway SWF wages lone governance crusade

October 8, 2009

Norway’s $420 billion oil fund is rattling the cage of some of the foreign companies in which it has invested. As a shareholder it deserves praise for putting its head above the parapet. But as a sovereign wealth fund it is treading a fine line.

Norges Bank Investment Management (NBIM) has been stung into action by a combination of domestic political pressure to account for its investments and heavy losses on some parts of its extensive external investment portfolio.

NBIM has publicly chastised Volkswagen for its plans to take over Porsche assets as part of a cosy merger between the two German carmakers. A detailed letter to VW Chairman Ferdinand Piech, published in full on its website, doesn’t mince words.

The fund’s list of gripes is pretty long, ranging from conflicts of interests, a lack of transparency, questionable financial and strategic logic for the deal to concerns about the treatment of minority shareholders.

NBIM’s intervention may well be too late to have any effect on the outcome of the planned tie-up. Only legal action by the fund, which had a 0.35 percent stake in VW at the end of 2008, could prevent the deal.

Nevertheless, the VW letter goes further than NBIM has before in openly criticising one of the companies in its extensive portfolio of 8,000 equity investments. This is unlikely to be a one-off, as NBIM is attempting to raise its profile.

At a presentation in London last week it laid out the tools it has at its disposal for achieving its goals. These include dialogue and engagement, contact with regulators, proxy voting, shareholder proposals and legal action.

NBIM has used this to good effect in the case of Constellation Energy  where it managed to block a unit of Warren Buffett’s Berkshire Hathaway from taking over the energy group by successfully postponing a shareholder meeting. And it is seeking a change in bylaws at four U.S. companies where it is demanding the appointment of an independent chairman.

A similar tactic at Sara Lee Corp resulted in a change to the U.S. consumer goods and food group’s rules. On one level, NBIM should be applauded. Its actions are precisely the kind that large institutions should be taking to ensure the companies they own are governed properly. This is a duty that many shareholders failed to perform in the past.

In the U.S. activist investors such as Calpers — the country’s biggest public pension fund — have been doing this for years.

However, NBIM’s position is complicated because it is the arm of a sovereign government. Agitating for change at foreign companies leaves it open to accusations that it is interfering inappropriately in the affairs of other countries. That charge has mostly been levelled at sovereign wealth funds (SWFs) from the Middle East and Asia that have taken high-profile stakes in Western companies.

NBIM, which is far more transparent than most other SWFs and based in a neutral Nordic country, has a more credible claim to be a dispassionate investor rather than a tool of Norwegian foreign policy. Nevertheless, it should not be surprised if its activism is met with a backlash.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

As much as NBIM might be acting in its proper interests, the fact of the matter is that the largest shareholders in both VAG and Porsche (the Porsche/Piech families and Niedersachsen) are supporting the deal. That right there is all that is really required.

Posted by Joseph Hillenburg | Report as abusive


VAG and Porsche are supporting the deal at the EXPENSE of the OTHER shareholders. NBIM is entitled to complain about a deal that’s only fair for those two groups! NBIM is right to demand a fair price.

Posted by Andrew | Report as abusive