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Reinfeldt calls SEB pay raises 'indulgent'

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Reinfeldt calls SEB pay raises 'indulgent'
18:22 CET+01:00
Swedish Prime Minister Fredrik Reinfeldt has joined Social Democratic leader Mona Sahlin in lashing out against the SEB banking group over a decision to hike executive pay.

“In times like these it's serious and a little insulting to a lot of people when some seem to be indulging themselves with huge pay raises which others perceive to be sums of pure fantasy,” Reinfeldt said on Thursday.

The comments come two days after Sveriges Television (SVT) revealed that, in lieu of bonuses, SEB's nine highest ranking executives were instead set to get pay raises of between 10 and 25 percent.

CEO Annika Falkengren is expected to see her pay go up by between 700,000 and 1.75 million kronor ($80,000-$200,000), according to SVT.

News of the raises prompted an angry reaction from the Folksam insurance company, one of SEB's owners.

“It's unpleasant having a built-in bonus, because that's basically what this is,” said Carina Lundberg Markow, Folksam's head of owner relations, to the TT news agency.

The pay raises were also significant as they disqualified SEB from participating in the banking sector support programme recently set up by the government.

According to the programme's rules, banks asking for help from the government can't raise salaries after October 2008.

SEB has not as of yet requested any assistance from the state.

On Thursday, SEB board chairman Marcus Wallenberg defended the pay raises, arguing that, when factoring in the scrapped bonuses, the bank's top managers were actually looking at a significant drop in their overall compensation.

“The background is that we have, for different reasons, decided to change our compensation system. We've removed the variable part and raised fixed salaries, but the total amount is lower,” Wallenberg told SVT.

The prime minister wasn't moved by Wallenberg's argument, however, calling the pay raises “provocative” at a time when unions and employers elsewhere are agreeing to lower pay and other measures to ensure their future.

And criticism wasn't restricted to political leaders on the right, as the Social Democrat's Sahlin also voiced her criticism to SEB's decision.

“That someone with a high salary who has received huge tax reductions, not to mention coming from a sector like banking, would give themselves a pay raise of 2 million kronor is provocative and indecent. It doesn't help rebuild confidence among all the individual customers or companies,” Sahlin said of Falkengren's salary bump.

“To be perfectly honest, I just don't comprehend this in the least. Why choose to aggravate things instead of building confidence?”

Wallenberg continued his defence of the new pay system.

“The final amount is a reduction. We've tried to adjust the compensation system to external conditions, primarily for three reasons. Firstly, we think the short-term variable part [of the system] is misconstrued. Secondly, through discussions with the government we've tried to make adjustments and move to more fixed salaries. Thirdly, we're trying to move toward a more long-term incentive programme,” he said, adding that he hoped to continue talks with the government.

Previously, Falkengren earned a fixed salary of 7 million kronor and a variable bonus of up to 12 million kronor. Her new salary comes to 9 million kronor, he explained.

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