Government to ban share options for managers in state-owned enterprises

The government has put forward new guidelines on management remuneration in state-owned companies, in connection with the presentation of its white paper on state ownership in December 2006. The guidelines stipulate that state-owned companies are not to make use of stock options in their management remuneration programmes.

On 8 December 2006, the Norwegian government presented its white paper on state ownership (in Norwegian). The paper considered the various principles underpinning state ownership in commercial enterprises which are either fully or partly owned by its various government ministries. Such enterprises include larger stock-listed companies such as the oil company Statoil, the energy supplier Hydro, the high technology company Kongsberg Gruppen, the financial services group DnB NOR, the fertiliser supplier Yara and the communications service provider Telenor, as well as the Scandinavian airliner SAS. The government’s stake in these companies varies between 14% in SAS to 70% in Statoil. Companies affected by the new guidelines also include commercial enterprises that are not listed on the stock exchange, such as different types of state enterprises.

The government emphasised that the main objective of state ownership is to ensure the continued stability of companies and to contribute to the maintenance of companies’ long-term growth and industrial development. It further underlined that ‘the boards of these companies must give due consideration to the environment, diversity, ethics, research and development in order to support such long-term development’. Moreover, it added that companies vital to the development of research and development should be nurtured in Norway. For some enterprises, particularly most of the aforementioned larger companies, it is therefore an expressed goal to retain their headquarters in Norway.

The government underlined its wish to maintain future state ownership at the same level as it is at today. As a result, it is asking parliament to withdraw authorisations given by the previous government to reduce the state’s ownership in these companies. The government is also set to issue an annual report on its ownership policy.

Management remuneration in state-owned companies

A subject of considerable controversy and attention in recent years concerns the remuneration of those in top management positions (NO0303101F, NO0603029I). In the autumn of 2006, considerable media attention was given to the stock option scheme of the managing director of Telenor. Subsequently, the government put forward new guidelines (in Norwegian) regarding its position on management remuneration, including pension provisions, in fully state-owned enterprises. Accordingly, management salaries in companies with partial or full state ownership should be competitive, but not the highest when compared with similar enterprises.

Among its guidelines, the government stipulated the following:

  • share options or similar forms of remuneration are not be used in the companies;
  • in relation to guidelines for variable salary components, for example bonuses, such salary components are not to make up more than six months of fixed pay, and the criteria by which to determine the level of such remuneration should be based on factors over which management may have some influence;
  • the level of management pensions should not exceed those of ordinary workers. Managers resigning from their position before the age of 65 years will receive a lower pension;
  • Severance pay packages should not exceed 12 months’ salary, excluding the salary received during the period of termination of the employment contract.

The Norwegian parliament (Stortinget) is also considering a legislative proposal whereby the principles underpinning management remuneration in a company are to be determined by the general assembly and not by the board, as is currently the case. This includes possible share option schemes. In this way, the various ministries – in undertaking the day-to-day ownership responsibility of the state – may exert a greater influence in companies of which the state is the sole owner or in which it has a large ownership share.

Views of social partners

The largest trade union confederation, the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO), was largely satisfied with the government’s white paper. LO welcomed a more active ownership by the state and the fact that management salaries are to be curtailed. This view was also shared by the Confederation of Vocational Unions (Yrkesorganisasjonenes Sentralforbund, YS) and the Confederation of Unions for Professionals (Hovedorganisasjonen for universitets- og høyskoleutdannede, Unio).

The Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon, NHO) was more critical of what it regards as a blurred understanding of the role of state as owner. NHO emphasised that state ownership should be predictable and should not change according to alterations in government.


Most commentators argue that the white paper does not represent a significant shift in the state’s ownership policy. However, companies in which the state has a large stake are central to the Norwegian economy, and thus there is considerable interest in how the state manages its ownership. One possible illustration of this is the report issued on 18 December 2006 about the planned merger between Statoil and the oil activity of Hydro. In this instance, the government immediately rallied behind the proposal to create what will be the world’s largest offshore oil and gas company. The Norwegian government will have a 62% ownership share in the new company, and aims to increase its ownership to 67% (see report (in Norwegian)).

Kristine Nergaard, Fafo Institute for Labour and Social Research

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