Even Swedes angered by management bonusesMarch 21st, 2009 - 8:58 am ICT by IANS
By Lennart Simonsson
Stockholm, March 21 (DPA) Timing is of the essence - a lesson several big Swedish banking groups as well as private and government-run pension funds and corporations have learned in recent days.
And proposing large bonus payments to top management is simply not on amid daily reports of layoffs and financial turmoil. Yet the proposals have been made - and in some case executed - to the surprise and anger of critics.
Among groups forced to make an about-turn are banking group SEB, insurance group Skandia Life owned by Old Mutual, and heavy-vehicle-maker Volvo Group, which does not include car maker Volvo Cars, owned by US group Ford.
Critics have included Prime Minister Fredrik Reinfeldt and Finance Minister Anders Borg from the conservative Moderate Party, the main force in the ruling centre-right coalition, who have called for moderation.
“We have an economic downturn and rising unemployment. For many it is objectionable when some seem to award themselves very large income increases that others perceive as fantasy sums,” Reinfeldt said last week.
His remarks, mirroring those of opposition leader Mona Sahlin of the Social Democrats, came after it emerged that the SEB board had proposed a new salary system, effectively raising salaries for several top managers by up to 25 percent, according to estimates by public broadcaster SVT.
The bank, with close ties to the influential finance family Wallenberg, had late February informed shareholders at its annual general meeting that it was scrapping its short-term bonus system and seeking a 15-billion-kronor ($1.7 million rights issue).
SEB chief executive Annika Falkengren had been estimated to get 9 million kronor ($1.06 million) as a fixed salary, compared to 7 million kronor and a bonus, SVT calculated.
The Swedish Shareholders’ Association slammed the move as did financial commentators. SEB board chairman Jacob Wallenberg went on television to defend the plan but March 13 the board said it had shelved the plan.
Wallenberg cited the need to accommodate requirements from the Swedish National Debt Office that handles the government’s guarantee programme for banks that SEB has indicated it wants to sign up to.
Falkengren conceded over the weekend that the row had harmed “confidence and trust in SEB and me” and apologised to customers and employees.
On Monday, Skandia Life Insurance Company which has said it would lower payments to policy owners said it would also scrap a plan to pay an extra bonus to management.
AMF, co-owned by the Confederation of Swedish Enterprise and the Swedish Trade Union Confederation (LO), over the weekend also scrapped bonus payment plans.
The pension group’s woes continued Tuesday when it said a deputy chief executive would leave the company with immediate effect.
An internal review had revealed he had moved his savings from AMF last month shortly before AMF said it would lower returns to its some 3.9 million pension savers.
“This sort of action is impossible to defend or accept,” AMF chief executive Ingrid Borg said, saying it was key to uphold the principle of “equal for all”.
“All companies and organisations have to take the issue seriously,” Finance Minister Anders Borg told Swedish radio when asked what advice he had on restoring trust in the institutions.
Borg recently said he would take a closer look at bonuses paid to some state-owned companies under his ministry’s supervision, counter to the government’s principle of moderation.
SVT had in a documentary disclosed handsome payments and other bonuses to top managers in state pension funds as well as energy giant Vattenfall.
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Tags: annika falkengren, annual general meeting, bonus payments, bonus system, close ties, economic downturn, financial turmoil, group seb, income increases, jacob wallenberg, moderate party, mona sahlin, opposition leader, prime minister fredrik reinfeldt, public broadcaster, salary system, shareholders association, social democrats, volvo cars, volvo group