According to the 2005 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), Norway has a sound corporate governance regime which is governed by provisions contained in primary legislation, secondary legislation, and a comply-or-explain approach to the Code of Practice for Corporate Governance, most recently updated in 2006. The IMF's assessment team found that the enforcement of corporate governance in Norway is sufficient to provide the financial sector with financial integrity. However, a more specific assessment of Norway's compliance with the Organization for Economic Cooperation and Development's Principles of Corporate Governance is not publicly available, thereby preventing Norway from achieving a potentially higher level of compliance with this standard.

General Overview

In 2005, the International Monetary Fund (IMF) conducted a Financial System Stability Assessment (FSSA) for Norway, in which corporate governance was implicitly addressed. The assessment mentioned that Norway has a sound corporate governance regime which is governed by provisions contained in primary legislation, secondary legislation, and a comply-or-explain approach to the Code of Practice for Corporate Governance. The Code was most recently updated in 2006. Especially in the financial sector, the IMF assessment team found that enforcement of corporate governance in Norway is sufficient to provide financial integrity and market discipline. Financial services companies are subject to supervision, including on-site inspection, external audits, and internal audits. Insurance companies must maintain a control committee.

The 2004 Code of Practice for Corporate Governance encompasses company, accounting, stock exchange, and securities legislation by either elaborating on existing legislation or including topics not addressed in existing legislation. The purpose of the 2004 Code is to ensure that the responsibilities and expectations for shareholders, the board of directors and executive management are clarified more extensively than required by existing legislation. The Code was then revised in 2005, and then again in November 2006. The 2005 Code of Practice for Corporate Governance incorporates changes to the Accounting Act's information requirements that went into effect in 2006 and the European Union's (EU) 2004 recommendations pertaining to the remuneration of the directors of listed companies. As a member of the European Economic Area, Norway is required to implement EU financial services Directives that foster stronger and more transparent prudential rules into Norwegian legislation. Specifically, the annual report should include information on the remuneration of each director and how all the elements of remuneration benefit the members of the executive management.

The 2006 Code of Practice for Corporate Governance includes an additional section on risk management and internal control, noting that the board of directors is responsible for risk management and internal control. The Section incorporates the requirements of EU Directive 2006/46/EF on annual and consolidated accounts. Also, a statement on corporate governance must be included in the annual report. The section seeks to improve risk management and financial reporting. The 2006 Code expanded the section on takeovers to improve shareholders' ability to evaluate any bid for the company. Also, changes were made to the sections on nomination committees and the work of the board of directors. Choosing the chairperson of the nomination committee and the committees' remuneration are to be decided by the annual general meeting (AGM), and the revisions include guidelines for the composition of the committee. Finally, the audit committee's role in the election of the auditor and the board's access to resources within and out of the company have been clarified.

In its 2008 Doing Business report, the World Bank perceives investor protection in Norway in 2007 as being slightly above the OECD average. The Investor Protection Index is a subcomponent of the World Bank's 2008 Doing Business Indicators, and consists of three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index) and shareholders' ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index). The indexes range between 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection. Norway scores 7.0 in the disclosure index against an OECD average of 6.4. It scores 6.0 in the Director Liability Index against an OECD average of 5.1 and 7.0 in the Shareholder Suits Index against an OECD average of 6.5.

The Principles

Principle I: Ensuring the Basis for an Effective Corporate Governance Framework

EN

According to the IMF's 2005 FSSA, Norway has a sound corporate governance regime which is governed by provisions contained in primary legislation, secondary legislation, and a comply-or-explain approach to the Code of Practice for Corporate Governance, most recently updated in 2006. The IMF's assessment team found that the enforcement of corporate governance in Norway is sufficient to provide the financial sector with financial integrity. Financial services companies are subject to supervision, including on-site inspection, external audits, and internal audits. Insurance companies must maintain a control committee.

The 2004 Code of Practice for Corporate Governance encompasses company, accounting, stock exchange, and securities legislation by either elaborating on existing legislation or including topics not addressed in existing legislation. The purpose of the 2004 Code is to ensure that the responsibilities and expectations for shareholders, the board of directors, and executive management are clarified more extensively than required by existing legislation. The Code of Practice for Corporate Governance was revised in 2005, and then again in November 2006.

Principle II: The Rights of Shareholders and Key Ownership Function

II

According to the 2004 Code of Practice for Corporate Governance, the Public Companies Act allows the AGM to waive pre-emption rights for existing shareholders in the case of a capital increase, but requires that an explanation be included in the agenda for the AGM. The 2004 Code of Practice for Corporate Governance expands on the existing laws and regulations that allow for the inclusion of restrictions in the articles of association in certain circumstances. The 2004 Code of Practice for Corporate Governance prohibits the inclusion of any restrictions on the negotiability of its shares in the articles of association. The AGM should effectively represent the views of shareholders and the board by including as many shareholders as possible. The Public Companies Act permits shareholders to vote via proxy, but there is no electronic participation. The nomination committee should be elected by the AGM and be responsible for suggesting candidates for the corporate assembly and board of directors, as well as proposing remuneration. The 2006 Code of Practice for Corporate Governance states that the election of the chairperson of the nomination committee as well as the committees' remuneration is to be decided by the AGM. The 2004 Code of Practice for Corporate Governance indicates that "any transaction that is in effect a disposal of the company's activities should be decided by a general meeting, except in cases where such decisions are required by law to be decided by the corporate assembly" (p. 40). The 2006 Code expanded the section on take-overs to improve shareholders' ability to evaluate any bid for the company. However, the publicly available information is insufficient to rate Norway's compliance with this principle.

Principle III: The Equitable Treatment of Shareholders

II

The 2004 Code of Practice for Corporate Governance mentions that the Public Companies Act prohibits the AGM and board of directors from providing an advantage to some shareholders at the expense of others. The Stock Exchange Regulations also provide for the equal treatment of shareholders. The Public Companies Act requires that shareholders of the same class be treated equally. "The Code of Practice is more restrictive than the Public Companies Act in that the Act does permit different classes of shares" (p. 15). However, the publicly available information is insufficient to rate Norway's compliance with this principle.

Principle IV: The Role of Stakeholders in Corporate Governance

II

The 2004 Code of Practice for Corporate Governance reports that its purpose is to improve confidence in Norway's companies and help companies grow while acting in the best interest of shareholders, employees and other stakeholders. However, the publicly available information is insufficient to rate Norway's compliance with this principle.

Principle V: Disclosure and Transparency

II

The 2004 Code of Practice for Corporate Governance requires the board of directors to establish reporting guidelines for financial and other information. It should release an annual plan including its objectives, strategy, and implementation. The annual report should include a report on corporate governance that indicates whether the company has complied with the Code of Practice for Corporate Governance and explains the reason for any divergences from the Code. Legislation covers the financial reporting responsibilities of the board of director. Guidelines should be established for the remuneration of board members and executive management. The board of directors should receive an annual audit plan from the auditor, as well as a review of the company's internal control procedures. The board should also ensure auditor independence by receiving written confirmation from the auditor.

The 2005 Code of Practice for Corporate Governance incorporates changes to the Accounting Act's information requirements that went into effect in 2006 and the European Union (EU) 2004 recommendations pertaining to the remuneration of the directors of listed companies. Specifically, the annual report should include information on the remuneration of each director and how all the elements of remuneration benefit the members of the executive management. The 2006 Code of Practice for Corporate Governance includes an additional section on risk management and internal control, noting that the board on directors is responsible for risk management and internal control. The Section incorporates the requirements of EU Directive 2006/46/EF on annual and consolidated accounts. Also, a statement on corporate governance must be included in the annual report. The section seeks to improve risk management and financial reporting. However, the publicly available information is insufficient to rate Norway's compliance with this principle.

Principle VI: The Responsibilities of the Board

II

The 2004 Code of Practice for Corporate Governance charges the board of directors with ensuring good corporate governance, and should include a report on corporate governance that indicates whether the company has complied with the Code and explains the reason for any divergences from it. In the absence of an established agreement that indicates otherwise, companies with more than 200 employees must elect a corporate assembly that protects the interests of the shareholders and supervises the board and executive managements' handling of the company. The composition of the board of directors should represent the common interests of the shareholders, fulfill the company's requirements with respect to expertise, capacity, and diversity, and maintain its independence of special interests. Consequently, it should not include members of the company's executive management. If it does, the rationale for that should be explained. The board of directors' independence, capacity, and expertise should be defended in the annual report. The 2004 Code sets a two-year limit on a director's term of office. Also, the board of directors should establish reporting guidelines, for financial and other information. It should release an annual plan including its objectives, strategy and implementation.

The 2005 Code of Practice for Corporate Governance incorporates changes to the Accounting Act's information requirements that went into effect in 2006, and the European Union (EU) 2004 recommendations pertaining to the remuneration of the directors of listed companies. Specifically, the annual report should include information on the remuneration of each director and how all the elements of remuneration benefit the members of the executive management. The 2006 Code of Practice for Corporate Governance includes an additional section on risk management and internal control, noting that the board on directors is responsible for risk management and internal control. The Section incorporates the requirements of the European Union (EU) Directive 2006/46/EF on annual and consolidated accounts. The section seeks to improve risk management and financial reporting. Also, changes were made to the sections on nomination committees and the work of the board of directors. Choosing the chairperson of the nomination committee and the committees' remuneration are to be decided by the AGM, and the revisions include guidelines for the composition of the committee. Finally, the audit committee's role in the election of the auditor and the board's access to resources within and out of the company have been clarified. However, the publicly available information is insufficient to rate Norway's compliance with this principle.