Academic

This Blog Essay site devotes every February to a series of integrated but short essays on a single theme.  The Ruminations Series in 2009 produced a series of aphoristic (?????????) essays, meant to provoke thought rather than explain it. The hope was that, built up on each other, the series would provide a matrix of thoughts that together might lead the reader in new directions. Ruminations continue to be produced form time to time.  For 2010, this site introduced a new series--Business and Human Rights.  The series took as its starting point the issues and questions raised by John Ruggie, the United Nations Special Representative of the Secretary-General (SRSG) on business and human rights, in a global online forum. 

For 2011, this site introduces a new series of integrated essays--Developing a Coherent Transnational Jurisprudence of Ethical Investing: The Norwegian Sovereign Wealth Fund Ethics Council Model.  The object of this series to to consider the work of the Ethics Council of the Norwegian Sovereign Wealth Fund.  The thesis of this series is this:  The Norwegian Sovereign Wealth Fund (NSWF ) investment program is grounded in the application of a set of Ethical Guidelines adopted by the Storting (the Norwegian Legislature) and enforced through an Ethics Council charged with determining whether a company should be excluded from investment by the NSWF.  The work of the Ethics Council has produced the beginnings of a coherent jurisprudence of ethics for corporate investment.  That jurisprudence may contribute significantly both to the development of transnational social norm standards and  affect the way domestic corporate law is understood. This is Part II of the series.

This month long project has sought to consider in some detail a critical aspect of the organization of the sovereign investing project of Norway.  Undertaken through its sovereign wealth fund, Norway is seeking not merely to project public wealth into private global markets.  Norway appears to be attempting the construction of a complex rule-of-law centered framework that blends the imperatives of a state based public policy with a rules based governance system that incorporates domestic and international norms.  To this Norway adds a policy oriented use of traditional shareholder power to affect the behavior and governance of companies in which the Fund has invested.   The object is not merely to maximize the welfare of the funds ultimate investors, the people of Norway (through its state apparatus), but also to use the fund to advance Norwegian public policy in the international sphere and within the domestic legal systems of other states to achieve a measure of horizontal harmonization of corporate governance. Norway has developed a tool box to effectuate its policy centered investment strategy consisting of both the traditional forms of regulatory governance, and a policy centered invocation of shareholder power, both within the corporation and, as a large investor, as an advocate for change within those foreign states where those companies are domiciled. In effect, Norway acknowledges three intertwined but autonomous governance realms. The first is the traditional territorially based law-state.  The second is the governance sphere of the corporation--affecting not only relationships within its operations but also the rules that reflect the choices it makes about how it deals with others.  The third is the international governance sphere,where common traditions are developed that have a direct and indirect effect on both domestic legal orders and corporate behavior choices.  Norway has sought to operate within and between these three governance realms, and to some extent affect their content, through the investment strategies of the NSWF.

The Ethics Council plays a critical role in this complex governance machinery. It is the primary vehicle for applying and elaborating the substantive standards of investment that are at the heart of the Norwegian regulatory effort.  It operates in the form of a court, in part to enhance the legitimacy of its pronouncement.  The Ethics Council is meant to operationalize the substantive provisions of the Ethics Guidelines by serving as a more formally constituted vehicle for applying its provisions to individual companies under unique sets of facts and circumstances. At the same time it also serves as a tool of Norwegian public policy, both long term general policy, and short term political objectives.  These are effected through the interaction between the Ethics Council and the Ministry of Finance. It is also served through the interplay between the exclusion determinations of the Ethics Council and the Norges Bank's active shareholder engagement program.   

These essays served as a first attempt to organize more systematically my thinking about this framework and to provide a more organized basis for theorizing its construction, operation and effect.  Ultimately the object will be to consider whether the system can be generalized and adopted elsewhere and also whether the framework represents a new form of public-private transnational enterprise that will help reshape the  fabric of governance for this century.    I started with an introduction of the series theme and thesis.  I then considered the structure and operation of the Norwegian sovereign wealth fund.   The Ethics Guidelines were then introduced and considered. This provided the context for a consideration of the structure of the Ethics Council itself.  The bulk of the essays then considered the exclusion determinations themselves.  After an overview, the essays considered the cases.  These were divided along the lines suggested by the Ethics Guidelines themselves, first exclusions based on products and then the cases based on conduct.  The essays then looked to aggregate the case determinations.  What emerged from those aggregations was both the impact of the decisions and their scarcity. The Ethics Council has not issued a large number of determinations--though the investment universe fo the NSWF might have suggested otherwise.  Each of the cases appeared to be chosen to maximize its leveraging effect--leveraging media interest and impact through wide dissemination of the "rule" extractable from the exclusion determination.  But the cases also suggested the large number of potential determinations that might be made in the future.  .          

Index:

Part I:  Introduction of the Series Theme and Thesis.

Part II: The Structure of the Norwegian Sovereign Wealth Fund. 

Part III: Framing a Operational Structure for Responsible Investing:  The NSWF Ethical Guidelines.

Part IV: Operationalizing the Ethics Guidelines--The Structure and Functions of the NSWF Council on Ethics.


Part V: Responsible Investment Through the Ethics Guidelines--Overview of the Exclusion Determinations.