KLP, the Norwegian local government pension fund, has called for the chairman of chemicals producer Yara International to step down, following governance concerns over the company’s involvement in Norway’s biggest-ever corruption scandal.KLP is one of Yara’s largest shareholders. The offences included bribes to consultants or other contacts in India, Libya and Russia, some of them to secure joint venture deals.The bribes were paid between 2004 and 2009. This January, Yara – one of Norway’s biggest companies – admitted responsibility and accepted a fine of NOK295m (€35.4m) imposed by ØKOKRIM, the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime.One member of staff and three former employees were also indicted and now face trial.In April 2011, Yara had informed ØKOKRIM of “possible irregularities”, at the same time hiring legal firm Wiersholm to conduct a private investigation.This uncovered “unacceptable” payments, including $15m (€10.9m) of disbursements from Yara Balderton (now Yara Switzerland), the company’s Swiss subsidiary, to individuals working with suppliers.Yara says it has invested considerably in its long-term work to ensure compliance with its ethical standards and has continued to strengthen its ethics and compliance function since its establishment in 2009.Since 2011, it has fully integrated its ethics and compliance programme in investment activities, published a manual with rules of conduct when participating in joint ventures and amended reporting lines so the chief compliance officer reports directly to the chief executive.But, in spite of Yara’s subsequent efforts to improve governance, KLP still has concerns, which it has communicated to Yara’s management through letters, meetings and the nomination committee, which represents shareholders and elects four directors to the Yara board.It has also conducted its own investigation, including speaking to former company employees.Earlier this month, KLP told other members of the nomination committee that it felt Yara’s chairman, Bernt Reitan, should resign.The news was published on KLP’s website in a blog written by Jeanett Bergan, KLP’s head of responsible investment.In her blog, she said: “Yara has established a sound regulatory framework that includes policies and procedures as well as training programmes and controls.“Nevertheless, the information we have shows there is doubt as to whether the company’s actions are in keeping with this policy.”The blog continued: “This includes the lack of response to warnings about possible corruption, the central location of the accused employee and the circumstances surrounding the departure of key staff in ethics and the control area, as well as further problematic transactions. The company would be best served by a change in its board.”Bergan told IPE: “We have been following up this governance problem as we always do with companies we invest in. We are not sure whether the action taken has been enough.”She added: “We have asked the nomination committee to strengthen the board because we don’t think the board has performed its control function, and the board must bear the responsibility for the doubts we have concerning the corruption case.” But she said KLP had never been in a situation that required divestment, and that the pension fund did not believe divestments would be necessary in the case of Yara either.Other shareholders have also had concerns, including the Norwegian Ministry of Trade, Industry and Fisheries, representing the government – the biggest shareholder in Yara, with a 36% stake.Ministry representatives have already met Reitan to discuss how Yara now acts to prevent corrupt activities happening again.The ministry said it is encouraging Yara to be as transparent about the matter as possible.Martine Røiseland, head of communication at Norway’s Ministry of Trade, Industry and Fisheries, said: “Corruption is illegal. There should be no doubt the state as owner has zero tolerance for corruption and expects Norwegian companies to have the same attitude.”Meanwhile, Folketrygdfondet, the manager of the Government Pension Fund-Norway, which owns 5.6% of Yara’s shares, has also met Reitan and the company’s chief executive, and received confirmation that anti-corruption measures have now been implemented.But Olaug Svarva, managing director at Folketrygdfondet, said: “We recommend that the board of Yara present a summary of the corruption case and explain its decision to accept the fine.“We assume this to be public information and thus available to the entire market.”At its quarterly results meeting on 12 February, Yara emphasised that it has established and developed routines and systems to prevent the irregularities from happening again.It said it regards zero tolerance for corruption as a licence to operate, and that this is a solid platform for the company going forward.