Bonuses rocket at Vattenfall

Tough cut backs have contributed to a sharp increase in bonuses at Vattenfall's German subsidiary. Since 2003, two directors have shared 18m kronor in bonuses. During the same period, 2,200 staff have lost their jobs.

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German Klaus Rauscher is probably the best paid director in the entire state-owned conglomerate. Rauscher, head of Vattenfall's German subsidiary, has earned over 28m kronor, 10m of which has been in bonuses. That amounts to more than 3m kronor more in earnings than the actual group chief, Lars G Josefsson.

Mats Fagerlund, head of distribution and transmission at the German company, and as with Rauscher, a member of the Vattenfall board, has earned almost 17m kronor since 2003, of which 8m has been in bonuses.

The bonus payments to the two directors have shot up in recent years, as profits in Germany have soared. In 2003, Rauscher and Fagerlund received a combined sum of 1.4m in bonuses. The following year, that figure became 4.1m and in 2005 they received a total of 6.3m. In addition to these "regular" bonuses, the two directors have received almost 6m kronor from another long-term bonus programme introduced by Vattenfall in 2002.

So what's been the reason behind Vattenfall's improved profits in Germany? The energy giant's own annual reports emphasise the economy drive, which included slashing the payroll by 2,200 employees. But Vattenfall's communications director, Knut Leman, points out that there's been more to it that redundancies.

"It's no exaggeration to say that there were over a 100 different measures. There were staff reductions, rationalisations, departments were merged, businesses and property sold, and so on," he said.

Even the weather gods were on Vattenfall's side as a number of other factors which influence electricity prices contributed to the increase in profits. Last year, prices on the German electricity exchange were on average 61% higher than in 2004.

According to Leman, however, the electricity price is no longer a contributory factor when bonuses are calculated.

"The electricity price isn't part of the equation. There was a discussion about that a year or so ago and it was decided that we shouldn't get credit for what we can't influence."

Government guidelines state that state-owned companies, including subsidiaries, should be extremely conservative in applying bonus programmes. But Vattenfall's interpretation is that the rules only concern Swedish businesses.

Under secretary of state, Sven-Eric Söder has, however, expressed a desire for Vattenfall's board to try to "come to an agreement whereby the flexible aspects of the bonus programme disappear", even in Germany.