Embattled central bank chief Øystein Olsen had to defend his bank board’s hiring of Norway’s new Oil Fund boss in Parliament on Monday. Olsen claimed that billionaire hedge fund manager Nicolai Tangen was “clearly the strongest candidate,” and could show “impressive results” and a “deep understanding” of the strategic challenges the Oil Fund faces.
Olsen also claimed at a special hearing held by the Parliament’s finance committee that he and the board of Norges Bank, which is responsible for Norway’s huge sovereign wealth fund, had addressed possible conflicts of interest in the management of the Oil Fund’s assets and Tangen’s own sizeable fortune.
Julie Brodtkorb, leader of the Parliament’s own regulatory organization for the central bank (called Norges Banks representantskap), isn’t so sure. She agrees that the bank’s board has imposed measures that reduce the risk of conflicts of interest, but she thinks such risks need to be eliminated.
Olsen and his board have also been sharply criticized for keeping Tangen’s surprise interest in, and candidacy for, the post a secret until just days before his appointment was announced last spring. His name was not included on the list of applicants for the position that’s supposed to be made public, and Olsen conceded that he didn’t inform the finance ministry about important issues tied to Tangen’s candidacy earlier in the employment process.
The Parliament itself has no power to either employ or fire the Oil Fund boss, raising questions about why the Parliament’s finance committee should hold a hearing on Tangen’s hiring. MP Hadia Tajik of the Labour Party, who led the hearing, told newspaper Aftenposten Monday that it was nonetheless “important to clarify” whether Tangen received any special treatment during the hiring process, and to ensure there will be no conflicts of interest in the years ahead. Tajik claimed Labour won’t accept either.
Monday’s hearing at least offered finance committee members a chance to hear Brodtkorb’s objections, grill Olsen and make their own concerns known, before also listening to Olsen’s defense. Then they’ll go through Olsen’s answers before issuing their own verdict on the hiring later this month.
Tajik said the Parliament’s most important role in the controversy that’s swirled around the new Oil Fund boss is to determine whether the employment process has followed guidelines and won public confidence. If not, Parliament can put pressure on the government, via the finance ministry, to fire the central bank’s board. Tangen could find himself under enormous pressure to resign.
Norwegian law is very clear that the government can’t appoint or reject the head of the Oil Fund, not can it instruct the central bank to do so barring any “extra-ordinary circumstances.” The government must ensure, however, that large public institutions like Norges Bank earn confidence and have a good reputation among the public.
The board’s and Olsen’s failure to identify Tangen among all the other candidates for the Oil Fund job, meanwhile, may have broken disclosure regulations and the central bank’s own regulations. Brodtkorb also made it clear in her opening remarks to the Parliament’s finance committee on Monday that she and her board “don’t share the bank board’s opinion that the risk of conflicts of interest have been eliminated.” Olsen himself admitted that Finance Minister Jan Tore Sanner of the Conservative Party wasn’t informed about the issues surrounding Tangen and his personal billion-krone fortune, or what still needed to be done to ward off conflicts of interest.
After Tangen had been offered the job, “we (Olsen and Sanner) talked about Tangen’s economic background, his fortune, his country of residence for tax purposes, and we also touched on some issues regarding his reputation tied to the situation in Kristiansand (Tangen’s hometown),” Olsen testified. “The minister expressed some concerns around these issues to me.” Political controversy in Kristiansand flew around Tangen long before the Oil Fund job came up, after he offered to donate his personal collection of contemporary art in return for the city transforming old grain silos into a new art museum to house the art. That’s now costing city taxpayers several hundred million kroner.
Tangen also caught lots of criticism just after his Oil Fund job was announced, when newspaper VG first reported how he’d hosted a lavish “back to university” seminar and social gathering at his alma mater, the University of Pennsylvania’s Wharton School of business and invited lots of Norwegians in powerful positions including the man he’ll be succeeding as Oil Fund boss. It’s all added up to a rocky start for the man who’ll now be managing Norway’s enormous oil wealth that’s supposed to finance pensions for years to come.