Compensation principles for Norges Bank Investment Management employees

Laid down by Norges Bank Executive Board 2 March 2011, last amended 15 May 2024.

Main principles

Norges Bank Investment Management (“NBIM”) shall have a compensation system that is aligned with the strategy, overall objectives, risk tolerance and long-term interests  of the Government Pension Fund Global (“GPFG”) and  the requirements in the Ministry of Finance Mandate.  

The compensation system shall not encourage risk-taking which is inconsistent with NBIM’s risk profile, the Ministry of Finance and Executive Board mandates for the GPFG or other rules and regulations that apply. NBIM shall offer competitive compensation but shall in general not be a market leader. The compensation system shall include measures to avoid conflicts of interest.

The compensation system  applies to all NBIM employees , regardless of employment location, including employees employed by Norges Bank’s subsidiaries. NBIM shall ensure that the subsidiaries adopt adequate compensation policies, where relevant.

Compensation structure

The Executive Board shall approve and ensure that NBIM  maintains and practices guidelines and limits for a compensation system. The compensation system shall include special provisions for

The term “compensation” shall have the same meaning as “salary and other compensation” as specified in section 6-16a) of the Norwegian Public Limited Liability Companies Act.

Compensation shall be closely tied to the individual’s competencies, responsibilities and performance. It must be aligned with the local market compensation practices to ensure that NBIM is able to recruit and retain the best professionals.

NBIM’s compensation system may consist of both fixed and variable components. NBIM’s compensation system shall provide an appropriate balance of fixed and variable components for employee groups, depending on their function and responsibilities, as well as their contribution to the risk profile of NBIM’s investment activities.

Employees in Norway shall be covered by collective personnel insurances and pension plan. For local employees of foreign offices, personnel insurances and pension plans shall be established in accordance with local market practice.

Compensation levels and structures shall be benchmarked annually in the local markets where NBIM operates. This benchmarking shall be presented to the Executive Board.

NBIM shall conduct an annual review of the practices of the compensation system. Following such reviews, a report shall be submitted to the Executive Board through the Board’s Remuneration Committee. This report shall be subject to independent internal control of compliance with the regulatory framework by Norges Bank Internal Audit.

The Executive Board shall review the compensation system annually, at a minimum. The Board shall monitor the practices and the effects of the system. The review and monitoring shall be carried out by the Executive Boards Remuneration Committee.

Compensation of executives

Employees who are members of the NBIM Leader Group shall be considered executives in relation to the requirements set out in section 2-4 of the Regulation of financial reporting of Norges Bank. Members of the NBIM Leader Group shall not receive variable compensation.

Compensation to executives with risk management and compliance functions in NBIM shall be subject to direct supervision by the Remuneration Committee.

The NBIM CEO shall submit proposals for salary intervals for NBIM executives, to be decided by the Executive Board following discussion in the Remuneration Committee in accordance with the Committee’s mandate. The NBIM CEO may in special situations decide on salary levels outside these intervals. The Executive Board shall be informed of such decisions in a timely manner. The Chair of the Executive Board prepares proposals for Executive Board’s decision regarding compensation to the NBIM CEO.

Compensation of investment personnel

Investment personnel in NBIM may be entitled to variable compensation. The fixed and variable components of the total compensation shall be appropriately balanced. The fixed component of the compensation shall represent a sufficiently high proportion of the total compensation to allow for the possibility to pay no variable compensation component.

Guaranteed variable compensation is exceptional, shall occur only in the context of hiring new staff and is limited to the first year of employment.

Where compensation is variable, the total amount of compensation shall be based on a combination of the assessment as to the performance of the individual, the performance of the relevant organisational unit and NBIM as a whole. When measuring performance current and future risks shall be taken into account. The basis for variable compensation related to the performance of NBIM shall be a period of at least two years.

Maximum limits for variable compensation shall be established. As a main rule, the variable component shall not exceed 100 per cent of the fixed component of the total compensation for any individual. For employees based outside Norway, a higher maximum level of the variable component may be agreed, where this is considered necessary due to the local market practice where NBIM operates. In special circumstances, the Chair of the Executive Board may grant exemptions for individual employees based in Norway. The variable component shall not exceed 200 per cent of the fixed component. The total number of individuals eligible for variable compensation at a higher level than 100 per cent of the fixed component shall be presented to the Executive Board for approval.

At least 50 per cent of the variable component shall be deferred and paid out in equal instalments over a period of at least three years, or over a longer period if so indicated by the investment horizon aligned with the nature of the risks of the GPFG. If the variable component constitutes a particularly high amount, at least 60 per cent shall be deferred and paid out in equal instalments over the period mentioned above. The deferred amount shall be adjusted with the absolute return of the GPFG.

Investment personnel on career level 1 and 2 are not considered to have duties of material importance to the GPFG or Norges Bank’s risk exposure and may get all of the earned variable compensation paid out the consecutive year.

Employees who leave will generally get the deferred variable compensation paid out unless otherwise decided by the NBIM CEO. Payments related to the early termination of a contract shall reflect performance achieved over time and shall be designed in a way that does not reward failure.

The NBIM CEO shall annually propose payout of variable compensation, to be decided by the Executive Board following discussion in the Remuneration Committee in accordance with the Committee’s mandate.

Variable compensation, including the deferred portion shall vest or be paid only if it is, justified according to the performance of NBIM in total, the relevant business unit and of the individual concerned. The total variable compensation shall  generally be  contracted or terminated if the  relative return of NBIM  is severely negative.  Actions or omissions that represent breaches of relevant rules and regulations may lead to a reduction of individual employee’s variable compensation.  

Investment personnel shall not have agreements or insurance that ensures against loss of variable compensation.

Compensation of other employees

All other employees in NBIM shall receive fixed compensation only, unless specifically determined by the NBIM CEO. Any variable compensation determined by the NBIM CEO shall comply with the regulations for variable compensation to investment personnel.

Annual reporting on the compensation system

The annual reporting of the GPFG shall contain information on the total amount of paid compensation for the financial year, split into fixed and variable compensation, specifying the number of beneficiaries by the categories of employees covered by the compensation system, how the compensation is calculated, the outcome of periodic review of compensation system and significant changes in the compensation system.