Outrage over ‘US-style’ pay for Electrolux CEO

Union representatives for workers at Swedish appliance manufacturer Electrolux have railed against the generous pay package for incoming American CEO Keith McLoughlin.

Outrage over 'US-style' pay for Electrolux CEO

McLoughlin, who starts his new job on January 1st, 2011, is set to receive up to 74.5 million kronor ($10.63 million) in compensation next year, newspaper Svenska Dagbladet (SvD) wrote on Friday.

The labour group Unionen, whose members had to settle for a 0.7 percent wage increase this year given current economic conditions, are angered by the news.

McLoughlin’s monthly salary amounts to just over 800,000 kronor alone. In addition, he is also entitled to a 45 million kronor bonus.

Unionen’s chairwoman at Electrolux, Gunilla Brandt, is shocked that there is plenty of money for McLoughlin while the vast majority of employees were forced to settle for modest salary increase this year.

“The management was very reluctant to provide anything beyond the agreement with reference to how things are going at the company,” she said.

Given the sizeable salary in McLoughlin’s back pocket, Brandt expects a higher pay increase following the next round of wage negotiations.

“My hope is that he opens up his wallet a little more next time,” she said.

The company’s owners justified the bonus McLoughlin will receiving by pointing to the fact that he is from the US, where pension benefits are higher.

However, Brandt refused to accept the argument that a Swedish company must pay higher wages in line with overseas firms to attract directors to Swedish companies.

Financial Markets Minister Peter Norman also spoke out against the sizeable compensation package.

“This is a private company and it is up to the owners to determine the terms for its CEO. However, generally it is obviously not good if the tensions become too great between high and low wages in society and this to me seems a little too high,” he told news agency TT.

Norman did not have an opinion on whether it may have a negative influence on wage negotiations in Sweden.

“The compensation reflects what one has to pay to recruit American managers,” Electrolux Chairman and Investor owner representative Marcus Wallenberg told on Friday.

He said he understands that the compensation can be perceived as high.

“It is important to point out that the pension payment of $6.3 million is a one-time payment and is not distributed to Keith until he retires,” Wallenberg told the newspaper.

However, Electrolux shareholders also reacted negatively to the news.

“It is clearly ridiculous to see how some CEOs are glorified and overrated,” Carina Lundberg Markow, who represents Electrolux shareholders Folksam, told SvD.

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Sweden’s Electrolux sees big US deal stopped

UPDATED: Shares in Swedish white goods giant Electrolux plummeted on Monday morning after US firm General Electric, which was poised to sell its appliance division to the Nordic firm, cancelled the agreement.

Sweden's Electrolux sees big US deal stopped
Electrolux's office in Kungsholmen, Stockholm. Photo: Fredrik Persson/TT
Electrolux, which sells brands including Frigidaire, AEG and Zanussi as well as its own name, is already the world's second-largest home appliance maker after Whirlpool.
It announced a year ago that it wanted to buy part of General Electric (GE).
But the US firm said on Monday that it has decided to cancel the agreement to sell its appliance division to the Swedish group which had offered last year to buy it for $3.3 billion.
The US Department of Justice had threatened to sue Electrolux and GE over concerns the deal would create a duopoly and hand Electrolux a US market share of some 40 percent.
Electrolux said it had made extensive efforts to obtain regulatory approval, and said it “regrets” that GE had terminated the agreement while the court procedure was still pending.
“Although we are disappointed that the acquisition will not be completed, Electrolux is confident that the Group has strong capabilities to continue to grow and develop its position as a global appliances manufacturer”, said Keith McLoughlin, President and CEO of Electrolux in a statement.
Shares in Electrolux — one of Sweden's most famous brands — initially dropped by 14 percent after the decision was announced, and remained 12 percent lower by mid-morning.
The failed deal has already cost the company millions of kronor in preparatory work and General Electric has requested a termination fee of $175 million.
GE revealed in a statement that it was still interested in selling the appliance division.
Monday's announcement took some analysts by surprise.
“I was surprised this deal was contested by the Justice Department, but then when we saw what their concern, which was the creation of duopoly in a part of the appliance market, it began not to look so good,” said Karri Rinta, an analyst with Handelsbanken Capital Markets.
“It's back to square one for Electrolux in North America. This is a deal that would have made them much stronger in the US especially against Samsung and LG,” he said.