The oil fund wants lower executive salaries, better salary-earnings compatibility, and says categorically no to bonus transfers in the companies in which the fund invests.
Executive salaries have become very high, especially in the United States. There we see the size of the salary packages only getting bigger and bigger,” said Karen Smith Iheanacho, Director of Ownership and Compliance at NBIM – Norges Bank Investment Management during the presentation of the semi-annual figures for the oil fund on Wednesday.
The Government Pension Fund Abroad voted against a total of 142 salary proposals for chief executives and managing directors of US companies during the first two quarters of the year. The fund believes that the salary packages that boards will offer company directors are often too complex and too generous.
In 82 of the cases, the reason for the fund’s “no” vote was because the salary packages were too expensive and because there were major concerns about how they were put together.
In all, the fund’s representatives voted against each proposal for a one-tenth salary package in the companies in which the fund invested.
– This year we’ve been much stricter with higher salary packages. “We want to see a better correlation between wages and returns,” Inacho said.
– Steal our money
Director salaries in the United States are among the highest in the world and have risen significantly since the 1980s, notes NBIM in an Ownership Practice report released at the same time as the results report.
But the average salary of regular employees has risen by about the same amount. Whereas in 1965 the average director’s salary in the United States was 20 times higher than the average employee salary, in 2021 the director’s salary was up to 399 times that of a worker.
By then, the average CEO salary of the top 500 companies had risen to $15 million – about 150 million kroner.
In 2021, the fund voted against Apple CEO Tim Cook’s astronomical salary package. Last year they also voted against the salary package of Coca-Cola CEO James Quincy, and they also did the same for tech giants IBM and Intel.
During the World Economic Forum in Davos in January, oil fund manager Nikolai Tangin told E24 that “in many cases, top management steals our money in broad daylight.”
– Although the United States is home to many of the world’s most valuable companies, there is evidence to suggest that higher CEO salaries do not necessarily correlate with higher performance, NBIM wrote in the report.
No transfer bonus
The oil fund is particularly critical of the so-called “golden hi” – large one-off payments early in the working relationship that are often compared to signing and relocation bonuses.
In new guidelines for the preferred composition of executive salary packages, the NBIM calls for simpler structures, whereby performance-driven bonuses and incentives must have long-term value-creation goals for companies and shareholders.
– We will not support any salary package that rewards senior managers with equity over a time frame that we believe is short-term or contains large one-off payments. We will also vote against packages that appear unnecessarily expensive and when we are concerned about the composition of salary arrangements and/or how they relate to performance and results, says the property report.
Fund representatives voted on more than 95,000 decisions at more than 8,000 company meetings in the first half of the year. NBIM representatives voted against the proposals at nearly every third general meeting. This corresponds to about 5 percent of all proposals voted on by representatives.
– We are an investor who mostly supports companies, but not always, said Ihenacho.
“Coffee trailblazer. Certified pop culture lover. Infuriatingly humble gamer.”
