NEWS ANALYSIS: Norges Bank’s supervisory board is demanding more answers into the central bank’s suddenly controversial hiring of a highly successful London-based Norwegian financier to manage Norway’s Oil Fund. Some claim the controversy around billionaire Nicolai Tangen is simply rooted in a “cultural collision” or pure envy, while others stress that the Oil Fund boss must have the full confidence all Norwegians.
The supervisory board (representant-skapet), which monitors the central bank on behalf of the Norwegian Parliament, wasn’t satisfied with the answers it received during an extraordinary meeting with Norges Bank Governor Øystein Olsen on Wednesday. At issue was the process that Olsen oversaw for hiring a new chief executive for Norges Bank Investment Management (NBIM), which runs Norway’s huge sovereign wealth fund.
Newspaper Dagens Næringsliv (DN) reports that Olsen had to admit at the meeting, for example, that no thorough examinations of Tangen’s companies, fortune or investments were conducted. Most startling was that the central bank, which is responsible for NBIM, did not request a list of holdings in Tangen’s highly successful firm AKO Capital or other entities he has controlled. There reportedly was thus no clarification of whether Tangen or his AKO funds hold investments in any companies banned by the Oil Fund for ethical reasons (like tobacco, weapons or coal producers), or whether Tangen owns shares in some of the same companies as the Oil Fund. That could lead to conflicts of interest.
The meeting with Olsen went on for nearly five hours, with the supervisory board members especially interested in what efforts were made to avoid potential conflicts regarding Tangen’s employment. Board leader Julie Brodtkorb told Norwegian media that they received an “accounting” from the central bank chief, but it was clearly insufficient. The board, Brodtkorb told DN, asked for “more detailed answers in writing from the central bank’s board to some questions that weren’t answered.” Her board will then decide whether further investigation is needed.
Runar Malkenes, Norges Bank’s communications director, stressed that Tangen “has been open” about AKO’s holdings and stated that he has only invested in stocklisted firms and follows the same ethical exclusions as the Oil Fund. Norges Bank did receive a list of AKO Capital’s 50 largest customers before Tangen was hired, and Tangen oriented the bank about how he would dissolve his AKO Trust and put all its assets into the charitable AKO Foundation, but the bank never asked for any documentation of investments or company structures that involve several tax havens including the Cayman Islands, British Virgin Islands and Channel Islands. Nor did the bank evaluate whether that could be problematic, given Norway’s strict tax policies and general aversion to tax havens.
“This is incredibly serious,” claimed Kari Elisabeth Kaski, a Member of Parliament for the Socialist Left party (SV) who also is a member of the Parliament’s finance committee. “This puts his hiring in a completely new light.” She stressed that the supervisory board’s questions “must be answered,” and that “we must have a full overview over (Tangen’s) companies and where he’s placed his fortunes.” She and several other MPs have stressed that the Parliament and Norwegian public in general must be able to have full confidence in whoever is managing what amounts to the country’s piggy bank.
The Oil Fund itself, in which Norway’s huge oil revenues have been invested since 1996 to cover future generations’ pensions, has also become more important than ever in recent weeks. Only 3 percent of its asset value is generally allowed to be added to the state budget and spent on an annual basis, but the government and Parliament have been raiding the Oil Fund recently to finance all their emergency relief packages during the Corona virus crisis. Hundreds of billions of kroner committed to everything from enhanced unemployment benefits to cash support for business to hinder bankruptcies will come from the Oil Fund. That has allowed state officials to avoid borrowing the money needed, as many other countries have done, but it also comes at the expense of future generations.
It’s all made the hiring of the person responsible for ensuring future growth of the Oil Fund a topic of more public interest than ever before. There have only been two Oil Fund chiefs during its 24 years of existence (Knut Kjær and Yngve Slyngstad) and neither has attracted much widespread attention outside the business community. In the case of Nicolai Tangen, who grew up in the southern city of Kristiansand (to which he has donated his large personal art collection) and built up a huge fortune of his own managing money in London, interest has soared, not least because of a lavish seminar he hosted last fall at his alma mater, the Wharton School of the University of Pennsylvania, that’s now calculated to have cost Tangen nearly NOK 30 million.
Guests served as references
Several of his guests, who included both Kjær and Slyngstad along with many other prominent Nowegians in business and government, ended up on Tangen’s list of references (who were consulted during the central bank’s employment process). Slyngstad, meanwhile, apologized on Thursday for having flown back to Norway one of the luxurious private jets Tangen chartered for the event. The apology came after supervisory board leader Brodtkorb had told state broadcaster NRK that “we are interested in the process around the employment of Tangen and Slyngstad’s participation in the seminar,” and whether it was in line with the ethical guidelines of Norges Bank.
Other guests at Tangen’s seminar have been all but lining up to express regrets over accepting Tangen’s generous hospitality and even declaring that they’ll pay Tangen for the costs of their attendance. In the cases of either Slyngstad or Norway’s ambassador to the UN Mona Juul, however, that could simply pass on the high costs of their travel, accommodation and attendance at a private concert by Sting to the Norwegian taxpayers. That’s raising objections as well: “In the state’s travel regulations it states that state employees should choose moderate modes of travel,” Jan Fridthjof Bernt, a law professor at the University of Bergen, told DN. “We’d end up sending state employees over the Atlantic on a luxury jet. I can’t see how such expenses can be covered before examining the rules.”
‘Best person for the job’
Amidst all the noise around Tangen’s employment, several business and finance experts continue to contend (as has Norges Bank’s chief Olsen) that Tangen remains the best person for the job. NBIM must be headed by a Norwegian citizen who can communicate in Norwegian, and with Tangen’s years of financial experience and international entrepreneurship in London, he’s said to be uniquely qualified to take the Oil Fund into a new era of growth.
He understands complicated, modern markets better than most, argue economists and professors including Gøril Bjerkan of the University of Oslo. “Nicolai Tangen is the best-qualified person who could have stood on the applicants’ list, given the limitation that he must be a Norwegian citizen and speak Norwegian,” Bjerkan wrote in a commentary in DN on Thursday.
Debate ‘characterized by envy’
She’s far from alone, after Tangen won rave reviews from many in Norwegian business and finance circles after his appointment was announced. Aksel Mjøs, an assistant professor at the Norwegian business school NHH (Norges Handelshøyskole) in Bergen, noted in a commentary in newspaper Aftenposten that the debate around Tangen “is characterized by envy.” It also smacks of the notoroius Norwegian janteloven, an unwritten “law” that nobody should think to highly of him- or herself, or others will cut them down to size.
Mjøs rhetorically asked “what’s the problem with the seminar at Wharton,” which ranks as one of the world’s most prestigious business schools. He described it was “professional” event with “an extremely exciting program” that allowed any guest to defend his or her participation. Tangen paid for it all himself, he’s a major philanthropist and certainly didn’t need the job at NBIM.
Aftenposten commentator Halvor Hegtun cited a “collision between a careful Norwegian financial management culture and a global money-mover like Nicolai Tangen” who doesn’t quite fit the mold of the “modest, worried men” who’ve traditionally reigned at Norges Bank.
Others claim it’s not petty to question Tangen’s employment, which is what’s happening regardless. Perhaps the biggest question of all is whether Tangen will get so disgusted by all the fuss that he’ll quit before assuming his new job in August. That, worry people like Bjerkan, could be the biggest loss of all.