After weeks of criticism over the hiring of an expat billionaire to run Norway’s huge Oil Fund, the country’s central bank in charge finds itself facing claims of crisis and scandal. Speculation is flying over whether heads will roll, and whose they may be.
Norges Bank chief Øystein Olsen has already been cross-examined by a Parliamentary commission responsible for Norway’s central bank, and it was far from satisfied with his answers.
Now it’s up to the bank’s own board to determine whether they’ll go ahead this week with the official employment of the wildly successful hedge fund manager Nicolai Tangen as chief executive of Norges Bank Investment Management (NBIM). It’s the central bank unit that manages what’s developed into one of the largest sovereign wealth funds in the world, fueled by Norway’s offshore oil revenues since 1996.
That makes the post both important and of wide public interest, since NBIM’s boss is in charge of what’s widely considered to be Norway’s ultimate piggy bank. Not only is it currently helping the country deal with the ongoing Corona virus crisis and its economic ramifications, it’s mostly supposed to fund the pensions of future generations.
At issue is a long list of questions and concerns over how Tangen, a Norwegian who’s long been based in London, came to be chosen and how he’ll function as the Oil Fund’s boss. The quesions involve potential conflicts of interest between Tangen’s own investments and those of the Oil Fund, his ownership of the funds he established through his London-based firm AKO Capital, and his frequent use of tax havens for everything from various investments to the crewing firm for his private yacht. Tangen has stated that he will be cutting all ties to AKO Capital, transferring its wealth to a charitable foundation and personally moving from London to Oslo, where he’ll start paying taxes to Norway.
He remains AKO’s owner, however, and that raises questions that haven’t been answered. They were accumulated and formulated by the Parliament’s control commission known as Norges Banks representantsskap, and weren’t resolved, leaving its leader Julie Brodtkorb to forward its ongoing reservations to Norges Bank’s own central board.
“We’re accustomed to being heard,” Brodtkorb told newspaper Morgenbladet last week, but her control group has no power itself to reject Tangen’s candidacy. Instead she and her 14 fellow commission members sent a letter to Norges Bank’s board, listing its concerns and recommendations.
The employment process itself raised concerns because Olsen and his colleagues at Norges Bank withheld Tangen’s name and several others from what’s supposed to be a public candidates’ list until the last minute. “There are questions with regard to Norwegian laws around openness,” Brodtkorb told Morgenbladet. Newspaper Dagens Næringsliv (DN) has also reported that the central bank’s hiring committee, led by Olsen, even dropped interviews with internal candidates on the grounds they already “had good knowledge of them.”
Brodtkorb also noted that concerns about the use of tax havens had also been reported by DN long before newspaper VG revealed hos Tangen had hosted an extravagant seminar in Philadelphia last fall that assembled a veritable who’s who of Norwegian officials, many of whom ended up serving as personal references for Tangen after an executive search firm put forward his candidacy. The current, outgoing Oil Fund boss, Yngve Slyngstad, has later publicly apologized for accepting Tangen’s hospitality, not least a flight home to Oslo on board one of the luxury jets Tangen had chartered for his guests.
Olsen now a target, too
Much of the criticism from law professors and economists lately has been directed squarely at central bank chief Olsen, an otherwise respected and unassuming state official with a long career in public service. He’s been challenged over why Norges Bank hadn’t settled many of the potential conflicts of interest and money mangement methods swirling around Tangen long before his appointment was announced in late March. Olsen has also been criticized and questioned over why Tangen’s candidacy was withheld.
Olsen has insisted that openness around Tangen’s own financial situation was among the “most important” factors in hiring a new Oil Fund boss. He has addressed the tax haven issue by insisting, also at a hearing before the Parliament’s finance committee, that “investors actually pay tax where they live.” He admitted to “considerable challenges” tied to investments registered in tax havens, “but that’s primarily up to the authorities and outside the central bank’s responsibility.”
Egil Matsen, a former central bank deputy leader who was involved in Tangen’s hiring, has claimed Tangen’s business operations were evaluated but that it wasn’t possible to clarify all issues by the hiring deadline. “In the dialogue with Tangen and other candidates, we involved as few people as possible,” Matsen told newspaper Aftenposten. “If it became known that a certain person in a certain position is interested in another job, it can have great economic consequences.” He tied the alleged secrecy and lack of detail around Tangen and his business interests to the need to confidentiality.
Others link the fuss around Tangen to a cultural collision between the high-flying hedge fund world in London and the relatively cautious and even idealistic management of Norway’s Oil Fund. “Prudence collides with a willingness for risk,” wrote Aftenposten commentator Halvor Hegtun in April. Tangen also has lots of supporters: economist Steinar Juel, for example, has called Tangen the “right person” for the job as has the Oil Fund’s first CEO, Knut Kjær, who told newspaper Klassekampen that he’s been impressed by Tangen and what he’s built up for years. Kjær called Tangen “a good leader” with keen insight into managing risk who’s also armed with strong international experience, and able to make demands on the boards of companies in which the Oil Fund invests.
Uneasiness over Tangen nonetheless persists, and several commentators have suggested that he’s not the right person to lead the Oil Fund. “The storm around Nicolai Tangen won’t settle down until he withdraws himself,” wrote Arne Strand, political commentator in newspaper Dagsavisen. He and many top left-center politicians simply aren’t comfortable with a “super capitalist” like Tangen, who has no experience in public sector service, being in charge of the nation’s piggy bank. Getting the highest returns and paying the least amount of tax are not qualities they value. Member of Parliament Kari Elisabeth Kaski of the Socilaist Left party (SV) has called for a “full review” of Tangen’s own companies and investments, while MP Marianne Marthinsen of Labour questions whether Tangen has the credibility needed to lead the Oil Fund.
In the end, only the finance minister can halt Tangen’s assumption of the Oil Fund post. Under law, the central bank’s independence and autonomy is so strong that it “can’t be instructed,” regarding its operations, unless there are “extraordinary situations.” Only the government can define “extraordinary situations.” Nicolai Tangen, who has claimed he’ll work day and night “to prove why he was chosen,” was, at the very least, an extraordinary choice that’s put an equally extraordinary spotlight on the central bank itself.
“It’s east to forget,” editorialized DN, “that the board of Norges Bank … has managed to find a person with extremely good qualifications to lead a large fund.” That, it added, is “in fact what’s most important.”