On Friday, Norges Bank Investment Management (NBIM) published three corporate governance policy position papers calling for its portfolio company boards to be industry-savvy, led by an independent chair, and ensure sufficient time is devoted to their directorship responsibilities. Each of the position papers outline, and note that NBIM has considered, three commonly-expressed arguments both in favor of and against its position, but determined the merits of its position to outweigh those associated with the alternative for specified reasons.
More specifically:
- The industry expertise position paper calls for an industry-savvy board characterized by: (i) a majority of directors with fundamental industry oversight; (ii) at least two independent directors with actual industry workplace experience; and (iii) an "effective nomination process" that identifies candidates with industry expertise (in light of the company's circumstances), with associated disclosure to shareholders as to the relevance of their qualifications.
- The independent chair position paper posits that independent chairs are better positioned than combined CEO/Chairs to guide corporate strategy, oversee management, and promote shareholders' interests. For those companies that combine the CEO/Chair roles, it calls for (i) limiting that leadership model to a "set period" (e.g., a particular phase of the company's life cycle); (ii) the board's implementation of measures to mitigate any conflicts of interest associated with the combined roles - including as respects management hiring, monitoring, and compensation; and (iii) regular reporting to shareholders on such measures' effectiveness.
- The time commitment position paper provides that:
- Listed company directors shouldn't concurrently serve on more than five boards.
- "Leading company" board chairs generally shouldn't chair other company boards.
- Directors should attend all meetings, and companies should disclose individual director attendance rates and explain any absences.
- The board should disclose directors' external board assignments, committee roles, and employment "so that shareholders can assess the functioning of the board."
According to NBIM Chief Corporate Governance Officer Carine Smith Ihenacho, the positions will serve as a basis for the investor's "voting, dialogue and engagement” with its portfolio companies.