SEB executives will now forego the pay rises.
“It all went very wrong,” Falkengren said.
Swedish prime minister Fredrik Reinfeldt was among the large number of customers, staff, politicians and shareholders that were vocal in their condemnation of the decision to raise executive pay.
Annika Falkengren, it was announced, would get a basic pay rise from 7 million kronor ($811,000) to 9 million kronor per annum. As the financial crisis continues to rage this was too much for many to accept.
On Saturday morning Falkengren appeared on TV 4 to apologise.
“It feels very easy to apologize to our customers, but most of all I would like to apologize to my colleagues. We were wrong. The intentions were good but it all went very wrong.”
In response to a question as to whether the episode indicated that the bank had lost contact with reality, Falkengren replied:
“Yes. In the sense that we were unable to explain that the total remuneration actually declined.”
Falkengren was referring to the fact that SEB had elected to replace performance-related bonuses for its senior executives to meet government conditions for the banking sector support programme.
But the pay rises, basically an in-built bonus according to many critics, would have again disqualified SEB from the programme.
SEB board chairman Marcus Wallenberg initially defended the pay raises, arguing on Thursday that the bank’s top managers were actually looking at a significant drop in their overall compensation when taking the loss of bonuses into account.
“The background is that we have, for various 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.
Prime Minister Fredrik Reinfeldt was however unmoved by Wallenberg’s argument and called the move “provocative” at a time when unions and employers elsewhere are agreeing to lower pay and other measures to ensure their future.
But despite the professed apology Falkengren continued to defend the pay rises on Saturday, underlining that SEB returned its third best result ever for 2008.
“Our employees have made me understand that we have lost a lot of goodwill from our customers this week. We can now focus on working to rebuild that confidence,” Falkengren said to TV 4 adding that the financial crisis has even made her reconsider her position in the bank.