Large, listed companies with executives earning large salaries have been warned. The world’s biggest sovereign fund has decided to change its approach to excessive executive salaries and has chosen to pursue these organizations in an extremely open way.
Paris, France, May 24, 2016 — After initially refusing to be drawn into the issue surrounding the amounts CEOs are being paid at the organizations it holds stakes in, Norway’s sovereign fund has changed its position. It has decided that its past position is no longer justifiable.
Norway’s $870bn sovereign fund is of huge significance. Notwithstanding being the world’s greatest sovereign fund, by value it could own 1.3% of the world’s publicly traded companies if it wanted to, according to reports by FT.
Norway’s Government Pension Fund Global, is supported by the nation’s oil incomes and produced a yearly return of 3.8% between 1998 in 2014, with 9,000 holdings in 75 nations.
The Fund’s CEO Yngve Slyngstad told the Financial Times, “We have so far taken a look at this in a way that concentrated on salary structures as opposed to pay levels. We think, because of the way the issue of corporate executive’s compensation has escalated, that we will need to take a closer look at what is deemed a fitting level of official compensation.”
The sovereign fund had shied already kept away from taking a stance on official pay over concerns that its position might be seen as being affected by Scandinavian salary conditions. Officials in the region are paid substantially less than in the UK or the US, the FT noted. Furthermore, the gap between the highest and the least paid in the organizations is far smaller.
Steve Rogers, Director of Asset Allocation at Orix Capital Trading said “Fat cats at the big oil companies should be quivering in their boots at this news. It seems the industry is not going to stand for their inflated salaries any longer, which is good news for the lower tiers of organizations”.
The fund now understands that over compensation has turned into a worldwide issue.
“We are seeing how to approach this issue in the public domain. We will pick the right example for the right instance of voting,” Slyngstad told the FT.
The FT noticed that the fund had voted for BP CEO Bob Dudley’s compensation rise despite the fact that the majority of investors voted against his 20% pay climb. The organization produced its worst financial results over the period for which Dudley was being rewarded with a significant salary increase.
BP’s 15 main shareholders had asked the organization to observe the developing shareholder dispute. It had also requested that BP change it’s “excessively mind boggling” compensation approach before the 2017 AGM.
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