“We need to review the rules, primarily limits for the levels and the scope. If there are going to be bonuses, there needs to be special and particular reasons to which the board of directors can refer,” said Minister of Finance Anders Borg on Thursday.
“I think it’s especially hard to justify performance-based compensation when an operation shows a loss.”
The comments come following a report by Sveriges Television (SVT) which showed that the tough bonus rules Borg requires for banks wishing to participate in Sweden’s credit guarantee schemes don’t apply to state-owned companies.
According to the SVT report, performance-based variable salaries for top managers at state-owned companies have increased, and in some instances payments were made despite losses.
At the Swedish Export Credit Corporation (SEK), bonus payments have increased six-fold, from 2.8 million kronor ($3.1 million) to 17.7 million kronor.
And state-owned mortgage company SBAB paid out bonuses in 2008, despite missing targets.
Last year the government changed the rules for bonuses at state-owned companies.
Previously, bonuses had been capped at the equivalent of two months’ salary and were only paid if the company turned a profit. Under new rules, the limit for bonuses was increased to four months’ salary for directors, while investment managers and other employees had no limits whatsoever, according to the Dagens Nyheter (DN) newspaper.
As a result, bonuses were still paid out to managers at the four state-owned AP pension funds, even though they lost around 200 million kronor in 2008.
Borg characterized the 500,000 kronor payment to the Third AP Fund’s CEO and the bonuses awarded to managers at the credit guarantee board as “grave infractions”.
He wants the board of directors at the pension fund to think over their policies regarding bonuses.
“What we have in other areas when it comes to improper payments, like social insurance or salaries, is that they are corrected,” said Borg.
“I think that improper payments should be corrected.”
Borg added that it’s worth reviewing whether or not any form of bonuses ought to be paid at the AP pension funds, but hasn’t made a decision one way or the other as of yet.
One reason to question bonus payments at the funds, according to Borg, is that they manage the pension savings of the Swedish people but that the managers themselves face no personal risk for investment losses.
He said it’s time for the state to clean its own house and that the decision taken last summer to change the guidelines for bonuses was wrong.
“I’m not backing away one millimeter from the criticism I’ve directed toward bonuses at banks,” he said.
“We want to make it especially clear to the boards of directors of state-owned companies so that they can correct their mistakes and infractions. And I really want to underline that they are to take responsibility and adhere to the current regulations.”
He said as well that the European Union finance ministers will meet next week to discuss rules for bonuses which will serve as the basis for a summit later this spring.