Statoil’s Place in Norway

The Norwegian Public

Statoil's relationship with the people of Norway was deep and complex, extending beyond the revenues it provided to the country. According to historian Einar Lie, many Norwegians saw Statoil as Norway’s ‘national champion’ - “a company that exemplified Norway's nation-building and the values of the state in the world.” Statoil was not just the company with the largest revenues in a small economy, but it was a creation of the Norwegian state, providing a model for other small countries with exploitable fossil fuel deposits. The international prominence of Statoil was a source of national pride. Many of Statoil’s Norwegian employees saw a dual allegiance in their job – not just making the company successful but also fulfilling its perceived societal purpose and its representation of Norway’s society.^[1]  

With Statoil’s image as a national champion, its activities were always of interest to the Norwegian people and press. As Jannik Lindbæk, Senior. VP of Corporate Communications noted, "We can't stay below the radar - that's not an option. The press has always been interested in the company and its internal workings."

Statoil's goals of openness and trust were not always comfortable for the company. Statoil’s decisions were dissected in the press, sometimes to the company’s embarrassment. There were frequent leakages of internal information, and Statoil’s labor conflicts were fought out in national media rather than corporate boardrooms.^[1]  In one infamous example, the Norwegian newspaper Dagens Næringsliv (DN) [in English: Today's Business] in 2020 published a 16-page report detailing Equinor’s large losses in its North American investments, predominantly from write downs after the sharp decline in oil prices from late 2014 and some questionable spending in the U.S., all events from nearly a decade earlier. The revelations became a national scandal.^[2] 

Statoil’s leadership had promoted transparency in its operations, and Statoil's then-CEO Helge Lund saw a trend in the larger society that expected all companies to be more open with their intentions. Lund made a speech in 2012 at a major oil conference promoting the values of openness and transparency as the new currency of trust. Although there was some pushback from other oil companies at the time, in a few years the idea was generally accepted. As Lund looked back at the impact of this approach on Statoil, he said, "By exposing ourselves to critics, to NGOs, and others, we simply become a better company."

New Governance Structure

Statoil’s IPO in 2001 changed the formal relationship between the national government and the company. Before the IPO, the Board and CEO of Statoil had a direct reporting relationship with the Norwegian Ministry of Petroleum and Energy (and by extension, the Storting). Even though the government retained a lion’s portion of the shares after the IPO, the government’s role in Statoil’s governance was channeled through its position as majority shareholder and its role as a member of the Nomination Committee, which in turn suggested the composition of the board. 

Jon Erik Reinhardsen, the current chair of Equinor’s board, pointed out that the company’s board operated independently and made decisions on behalf of the company that made sense for the company's strategy, well-being, and development. All members of the board come from outside the company and the government – except the three elected employee representatives, as required of all Norwegian businesses. As Reinhardsen described the board, “We elect the CEO, approve strategy, control, monitor, and approve. So, it's an oversight role. We approve all policies.  Our main mandate from the government at the time of the transition [to a publicly traded company] was to maximize shareholder value over time.”

Board members were recommended by the Nomination Committee, an independently elected group, separate from the board. The government (represented by the Ministry that held the ownership of the shares in Statoil/Equinor) was one of four representatives on the committee. The committee recommended external Board candidates to the corporate assembly, a larger group elected by shareholders, who then voted on who should serve.

Three board members were elected by the company’s employees. Their compensation and responsibilities were the same as those for shareholder-elected board members, and they were expected to consider all issues. Many served in long-term positions on the board. For example, one employee representative, Stig Lægreid, served on the Board for over 20 years. 

Besides revising governance procedures, Statoil’s privatization caused the Norwegian government to reconsider its relationships with all of its state-owned enterprises (SOEs). While Statoil was the largest and most profitable, the state of Norway partially or completely owned 71 companies. In order to boost confidence in all SOEs, the Storting formulated a list of ten principles that the government pledged to follow in the operation of these companies:

1. Shareholders are treated equally.
2. The state is transparent about its ownership in SOEs.
3. Shareholder decisions are taken at the General Meeting.
4. The state formulates objectives for SOEs and the Board is responsible for their realization.
5. Capital structure shall be adapted to the state’s objectives and the position of the SOE.
6. Board compositions shall be marked by competence, capacity and diversity, reflecting each company’s character.
7. Wages and incentives are reasonable and promote value creation in SOEs.
8. The Board shall ensure independent control of the company’s management on behalf of the shareholders.
9. The Board formulates a plan for its own functioning and proactively develops its own competences. The Board’s functioning shall be evaluated.
10. SOEs must be aware of their corporate social responsibility.

Public and Governmental Shareholders

The government’s stance regarding its relationship with Statoil had given public shareholders confidence in the management of the company. Equinor CFO Torgrim Reitan, said, “From the time of the privatization, the government has acted on a very arm's-length basis, taking a very professional investor approach. The state has always worked to give us the same tools and the same freedom as other companies, while following and governing with the same resolution as a public shareholder.”

The ownership structure did create some distinctions between Statoil and a firm that was completely owned by public shareholders. One difference was that the value of Equinor public shares would not include an acquisition premium, because the company could not be sold. Furthermore, if the company wanted to do a large merger using stock as the currency, the state would need to agree to be diluted. Reitan added, “I don't see it as a big hurdle, but it is more complicated for us to use our shares as a currency than it would be for a hundred-percent listed company."

Another distinction between Statoil's government-owned shares and its publicly traded shares was that, like many government entities, the Norwegian state could take a very long-term horizon in considering the company's future, while individual investors tended to focus on shorter-term returns. Having a majority owner with an infinite time horizon created stability for Equinor, but the implementation of long-term strategic planning might not align with the goals of many public investors.