All questions

Corporate leadership

i Governance regime

The Norwegian governance regime draws a fundamental line between a company's management and its owners. The shareholders exercise the highest authority in the company through the general meeting and may, through the general meeting, decide on any matter provided that it has not expressly been made subject to the exclusive authority of another corporate body (e.g., the board of directors).

A company's management is divided into two corporate bodies: a board of directors (consisting in practice only of non-executive directors) having the overall responsibility for the management of the company, and a CEO who is in charge of day-to-day management.

A special feature of the Norwegian governance model is the obligation to appoint a corporate assembly in companies with more than 200 employees. The principal tasks of the corporate assembly consist of board elections and, following a recommendation from the board of directors, to resolve on matters regarding significant investments in relation to the company's resources, and any rationalisation or alteration of the company's operations that may cause extensive changes or a reallocation of the company's workforce. The Public Companies Act does, however, allow a company to agree with a majority of its employees (or unions representing two-thirds of the employees) that a corporate assembly should not be established in exchange for extended employee representation on the company's board of directors (see below). It is common practice to enter into such agreements.

Another fundamental characteristic of the Norwegian governance regime is the rules in Norwegian companies' legislation that grant a company's employees the right to elect members to the board of directors and the corporate assembly. The main rule regarding employee representation is that one-third of the members of the board of directors or one-third of the members of the corporate assembly, or both, are elected by and among the employees. The employee representatives act as ordinary members of the board or corporate assembly, and have the same authority and responsibility as the members elected by the general meeting.

ii Board structure and practicesSize and composition of the board of directors

The board of directors must consist of at least three members (five in companies with a corporate assembly). In practice, the boards of Norwegian listed companies tend to consist of between six and 10 directors, of which one-third is elected by and among the employees.

As regards the composition of the board of directors, at least half of the directors must be resident within the EEA and citizens of an EEA country. Since 2006, the legislation pertaining to Norwegian companies has also contained requirements relating to gender representation on the boards of directors of public limited companies. These rules provide that each gender must, at a minimum, be represented by approximately 40 per cent of the total number of directors elected by the general meeting. According to the Public Companies Act, the CEO cannot be a director.

The Oslo Stock Exchange Listing Rules contain further requirements for listed companies. Pursuant to these rules, at least two of the shareholder-elected directors must be independent of the company's executive management, material business contacts and the company's larger shareholders (meaning shareholders who own more than 10 per cent of the company's voting capital or share capital). No members of executive management may be represented on the board, unless warranted by special circumstances. Finally, all directors must be fit and proper and have satisfactory knowledge of the rules applicable to listed companies on the Oslo Stock Exchange.

Further guidelines and recommendations regarding the composition of the board of directors are set out in the NCCG relating to, inter alia, independence and expertise of the directors.

The chair of the board of directors

The chair of the board is the leader of the board of directors and carries a particular responsibility for ensuring that the work of the board is well organised and that it functions effectively. The chair normally has the casting vote in the event of a parity of votes on the board. The chair shall ensure that matters of current interest are presented to the board. This rule indirectly implies that the chair has a duty to keep him or herself continuously up to date on material matters regarding the company.

Responsibilities of the board

The board of directors has the principal responsibility for the management of the company, and for supervising the company's day-to-day management and activities in general. This includes ensuring that the company's activities are soundly organised, drawing up plans and budgets for the activities of the company, staying informed of the company's financial position, and ensuring that its activities, accounts and asset management are subject to adequate control.

The principal task of the board of directors, as well as of the other managing corporate bodies (i.e., the CEO and the corporate assembly), is to promote the company's commercial interest, facilitate value creation and, as a consequence thereof, safeguard the shareholders' general interest in gains and dividends on the capital invested in the company. However, the managing bodies of a Norwegian company are also entitled – and sometimes obliged – to consider non-shareholder interests (e.g., the interests of the company's employees, creditors and contract parties), as well as the company's obligations towards society and the environment. The common view is that the boards of directors of Norwegian companies must to some extent have a broader perspective than the sole economic interest of the shareholders. This particular point is reflected in the NCCG, which recommends that the board of directors 'should define the company's basic corporate values and formulate ethical guidelines and guidelines for corporate social responsibility in accordance with these values'.

The liability of directors is several and not joint, meaning that each individual director may be held responsible for his or her actions or inactions as a director on the board.

Board committees

The Public Companies Act requires that listed companies of a certain size appoint an audit committee (Section III). Apart from this requirement, the Public Companies Act neither requires nor prohibits the establishment of specialised board committees.

The NCCG further recommends that the board of directors of listed companies consider appointing a remuneration committee consisting of independent directors to help ensure thorough and independent preparation of matters relating to executive compensation. Many listed companies also choose to appoint other specialised board committees dealing with particular matters of interest (e.g., corporate social responsibility and social responsibility, human resources and workplace environment issues).

However, it should be noted that, to the extent board committees are established, such committees cannot be granted authority that is vested in specified corporate bodies according to law. Thus, the principal responsibility for tasks delegated by the board of directors to a board committee will always remain with the board and its individual directors. The work being carried out by a board committee must therefore only be viewed as preparatory or advisory for the board's discussions.

Remuneration of directors and the CEO

Except in cases where the company has a corporate assembly, the remuneration of directors shall be determined by the general meeting. The Public Companies Act does not contain rules or guidelines with respect to the size of the remuneration of the directors, but further guidelines are provided in the NCCG, which states that the 'remuneration of the board of directors should reflect the board's responsibility, expertise, time commitment and the complexity of the company's activities', and that the 'remuneration . . . should not be linked to the company's performance'. The NCCG also states that share options should not be granted to directors. The size of the remuneration paid to directors in Norwegian companies varies in practice, but historically has been seen as modest when compared with other industrial countries.

The remuneration of the CEO is determined by the board of directors. The board of directors is obligated to produce an annual statement setting out guidelines for the determination of salaries and other remuneration to the company's executive personnel, including the CEO, for the next financial year. This statement is subject to the consideration of the annual general meeting each year.

iii DirectorsElection of directors

Directors are elected by the general meeting, which also determines whether deputy directors shall be elected. In companies with a corporate assembly, this body is responsible for electing the directors. A decision to remove directors may be taken by the same corporate body authorised to elect the directors, which means that the removal of directors is normally resolved by the general meeting. A characteristic feature of Norwegian corporate law is that a majority of the shareholders, acting through the general meeting, may replace one or several directors at any time during their term without cause. This grants the majority shareholders authority to determine and alter the composition of the board of directors at any time. Staggered boards, where directors cannot be removed until the end of their term, are not permitted according to Norwegian law. An important caveat is that directors who are elected by employees cannot be removed by the general meeting, but may only be replaced pursuant to a decision by the employees.

The NCCG recommends that the task of proposing eligible candidates for the board of directors, as well as proposing the directors' remuneration, is prepared by a nomination committee. This recommendation is followed by a majority of Norwegian listed companies, even though there is no legal requirement to appoint a nomination committee. Whether a company shall have a nomination committee is usually (but not necessarily) governed by the company's articles of association.

The starting point of the Public Companies Act is that directors are elected for a period of two years, provided a company's articles of association do not state otherwise. The term cannot, however, exceed four years. The NCCG recommends that directors are not elected for a period of more than two years.


All Norwegian public limited companies must have one or several CEOs. In practice, Norwegian listed companies have only one CEO. The CEO is normally appointed and dismissed by the board of directors.

The CEO is in charge of the day-to-day operations of the company and responsible for executing the board's resolutions and addressing external relations. The authority of the CEO is generally limited with respect to matters of an unusual nature or major importance to the company. The CEO is subordinate and reports to the board of directors, while the board, in turn, has a duty to supervise the CEO. The board of directors may also instruct the CEO on the day-to-day operations of the company.