OSLO (Reuters) - Norway's $915 billion sovereign wealth fund, the world's biggest, stepped up pressure on the companies it invests in with a call for them to be more transparent about taxes and to overhaul executive pay.
Norwegian lawmakers last year ordered the fund, which said on Friday it earned 298 billion Norwegian crowns ($34.6 billion) from its investments in the last quarter, to be more involved in global efforts to combat tax havens.
Norges Bank Investment Management, which invests the proceeds of Norway's vast offshore oil and gas production, said that public country-by-country tax reporting is a core element of transparency, taxes should be paid where economic value is generated and boards are responsible for tax arrangements.
"This is a question for the very long run. We are not likely to put any shareholder proposal to any AGM on this issue," CEO Yngve Slyngstad told Reuters.
"Our starting point is that we are building on the international principles that are agreed in international organizations like the OECD. Then we ask the companies to take a hard look at these suggestions. They are not binding regulations, they are suggestions," he added
The fund itself has been criticized for having subsidiaries in countries such as Luxembourg, although Slyngstad said there was a clear rationale for using them and no need to change.
Groups that have campaigned on tax transparency gave the fund's stance on tax a cautious welcome.
"The oil fund is taking a big and important step in fighting tax evasion," Kjetil Abildsnes from the Norwegian Church Aid NGO said.
"At the same time they do not set expectations on the transparency of ownership of companies," Abildsnes added.
NBIM also joined calls for so-called long-term incentive plans (LTIPs) as part of executive pay to be scrapped.
"For us long-term incentive plans should be removed from pay packages. The packages we want in the future are very different from what they are now. They are too complicated," Slyngstad told reporters following its results. "We want simplicity."
He said the fund would engage in a dialogue with companies during this voting season and if it is not satisfied, it would consider further steps such as motions or coordination with other investors, next year.
"If we find we are a minority investor way off what other investors are thinking, there is no purpose in trying to enforce that in a vote that will be not be successful," Slyngstad said.
The fund's approach would differ in individual countries, he added. While welcoming the lower pay package for BP (BP.L) CEO Bob Dudley, Slyngstad did not say how the fund would vote at the oil major's upcoming AGM.
With stakes in close to 9,000 companies globally, owning on average 1.3 percent of all listed equities, the fund is among the world's most influential investors and from time to time expresses its "expectations" in a bid to influence behavior.
The fund said in the first quarter it earned a return of 3.8 percent and beating its benchmark index by 0.1 percentage point. In the fourth quarter it booked a return of 2.17 percent.
The fund also reached a milestone during the first quarter in that the total return it has earned on investments since its inception is now greater than the cash directly injected.
"Measured in Norwegian crowns, this was the third best quarter in the history of the fund, driven by strong returns on the equity investments. In the last month, the total return exceeded the total inflow of the fund," Slyngstad said.
Additional reporting by Camilla Knudsen; editing by Alexander Smith