Norwegian sovereign fund stresses on firms' board diversity
The Norwegian sovereign fund stressed that it is particularly concerned by the persistent underrepresentation of women on boards. “Such underrepresentation may indicate that a board is recruiting too narrowly and does not have a clear view of the full range of backgrounds and competences required to be effective. Based on our experience from markets with mandatory gender quotas for company boards, we do not believe that gender diversity will crowd out other qualifications,” said NBIM, the asset management arm of Norges Bank, which manages the €1trn fund.
As a long-term investor, NBIM’s management is concerned that companies with boards that are not diverse will not be able to maintain the trust of their customers, investors, and society at large over time. Diversity will bring additional perspectives and approaches to the board’s discussions and ultimately improve the quality of its decision-making process, said NBIM, in its position paper on the subject. Therefore, the fund will mandate boards where either gender has less than 30% representation should consider setting targets for gender diversity and report progress. In addition, it urged the board to have a formal nomination process to identify potential candidates, who can contribute to the diversity on board, which would include rigorous search extending to a broad range of people from different backgrounds. NBIM will use this position in its discussion with boards of the companies that it invests in.