Crisis? What crisis? Bonuses are still on the rise
The words 'bonus' and 'bank' should not be used in the same sentence, Dutch finance minister Bos has said. But outside the financial sector nobody is talking about capping bonuses. A look at who earns what.
The minister feels powerless. Members of parliament are outraged. The bonuses in the financial sector are fair game. In the Netherlands (ING) and in the US (AIG). But what about the bonuses for top management in the 'ordinary' economy?
Paul Polman, the new ceo of the Anglo-Dutch food, beverages and cleaning agents company Unilever, received a 438.000 euros bonus on top of his salary last year after only three months on the job. At Unilever bonuses are tied to results. But not this one. Unilever and Polman had agreed on the bonus when they signed the contract on August 29, 2008.
Polman also got 970.000 euros upon signing and stock awards worth 1.8 million euros. That's almost four times as much as ING's new chief financial officer, Patrick Flynn, is getting.
Top managers in the banking and insurance sector have dropped their bonuses over 2008 as a condition for government bailouts. But bonuses for lower-level staff, even if they are tied to results or performance, have come under fire too.
"Bonus and bank in the same sentence... I just don't like the sound of that," Dutch finance minister Wouter Bos said two weeks ago when it was revealed that ING had paid out 300 million euros in bonuses to its staff.
Outside the financial world little has changed since the global financial crisis. Only TNT, the worldwide courier, has capped its ceo Peter Bakker's bonus at 460,000 euros - 21 percent less than in 2008.
Elsewhere, bonuses are up. This is due to two trends. One is the rise of fixed salaries. Bonuses are a percentage of fixed salaries so higher salaries naturally result in higher bonuses even if performance remains the same.
Feike Sijbesma, ceo of chemical giant DSM, saw his fixed salary go up 13 percent last year to 766,000 euros.
At Imtech, a technical services provider, ceo René van der Bruggen's salary (594.000 euros) went up ten percent, while the cfo's salary went up seven percent.
Management at Philips gained 8 percent, with the exception of chairman Gerard Kleisterlee (1.100.000 euros) who only got a 0,1 percent rise.
Shell ceo Jeroen van der Veer (2.000.000 euros) got 8 percent extra, the highest at Shell.
The ceo of paints and chemicals company Akzo Nobel, Hans Wijers (760.000 euro) got 7.7 percent extra, his colleagues 13 percent.
Management at Randstad, the temporary employment provider, got a 5 percent raise.
Most companies have frozen salaries for 2009. But this usually doesn't apply to cash or stock bonuses, which just happen to be the most lucrative.
If a shareholder revolt is in the making it has been discreet so far. But next week will see shareholders meetings at several large companies like Philips, semi-conductor producer ASML and DSM. Randstad and DSM have already taken the precaution of removing the proposed bonus raises from the agenda for their shareholders meetings.
A second trend that's pushing up actual payments is the higher percentage of the (increased) salary that can be paid out as a bonus. The cash bonus is usually tied to profits and personal performance. Stock bonuses are tied to performance compared to a group of competitors - usually over a three- to five-year period.
ASML raised the percentages for the cash bonus last year, as Wolter Kluwers did the year before. Philips this year raised the maximum percentage for stock bonuses from 160 to 200 percent of the salary while scrapping bonuses for minimum performance.
Shell has raised percentages for stock rewards to maximum four times the fixed salary. Last year, the three top managers who were in the race to succeed Van der Veer all got special stock packages with the value of an annual salary (around 1 million euros) to keep them from leaving.
Shell's commissioners, who include former prime minister Wim Kok, are pretty flexible when it comes to the standards they set themselves. In 2007 and again in 2008 they risked missing out on a stock reward because of weak performance. Twice the commissioners decide to pay out the stock rewards anyway. In Van der Veer's case this earned him a stock package worth some 3 million euros.