Though Norway’s NBIM has held a 3% ownership stake in five U.S.-based companies, the fund has never submitted a shareholder proposal or started an activist campaign against one of those companies. However, the fund could be a valuable ally for activists, notes FactSet.
Anthony Garcia of FactSet in s note dated December 3, 2014 points out that an analysis of the correlation between its ownership positions and proxy access proposals reveals Norges is not using proxy access proposals as a strategy to take over company boards.
World’s largest sovereign wealth fund
The government pension fund of Norway is the world’s largest sovereign wealth fund. The fund is managed by Norges Bank Investment Management (NBIM), but is owned by the Norwegian state. The fund is run by the central bank and its decisions are followed closely by international borrowers.
Norwegian government transfers public revenue from petroleum to the fund to avoid overheating the Norwegian economy and to shield it from the effects of oil price fluctuations. The fund defines good governance standards as the principle of one share-one vote and the abolishment of all kinds of anti-takeover mechanisms and transactions that don’t treat all shareholders equally.
Last month, ValueWalk highlighted a recent report from FactSet Insight pointing to the growing trend of public corporations trying to avoid proxy fights by limiting dissident shareholder access to proxies. The report highlighted The Western Union Company (NYSE:WU) management’s proposal to replace the proxy access proposal submitted by NBIM. However, Western Union eventually withdrew its no-action letter and the proposal to facilitate proxy access to shareholders with just 1% of the float was voted down at the shareholders meeting.
Norges has AUM of $893 billion
FactSet’s report points out that with AUM of over $893 billion, 98% of Norges’ current positions are equity based, representing 8,251 separate companies globally. The fund has an ownership stake greater than 1% in 2,673 companies:
The FactSet report highlights that the fund holds a 3% ownership stake in five U.S.-based companies: AFLAC Incorporated (NYSE:AFL), BlackRock, Inc. (NYSE:BLK), Cadiz Inc (NASDAQ:CDZI), Green Plains Inc (NASDAQ:GPRE), and Itron, Inc. (NASDAQ:ITRI). Analyst Anthony Garcia points out that the threshold is critical given Norges’ focus on submitting shareholder proposals related to increased proxy access. Moreover, since 2012, the company has filed seven such proposals against five companies: Charles Schwab Corp (NYSE:SCHW), CME Group Inc (NASDAQ:CME), Staples, Inc. (NASDAQ:SPLS), Wells Fargo & Co (NYSE:WFC), and The Western Union Company (NYSE:WU).
The following graph captures Norges’ sector and country portfolio trend:
The latest research report from FactSet points out that with $167 billion currently invested in U.S.-based companies, a wave of proxy access may entice Norges to consolidate its positions and reach the 3% for three years threshold to begin influencing U.S. corporate governance practices on its own accord as well.
The author of the report notes Norges is not using proxy access proposals as a tactic to gain control of the board. The author concludes that despite Norges having a legislative mandate of not investing over 10% of voting shares of any individual company, an activist with an agenda in line with the Norges governance mandate could look to the fund for support in its campaign for board seats without worrying about competition for actual board control.