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Saturday, April 20, 2024

Executive pay ‘low’ in Norway

Statoil Chief Executive Helge Lund is among top business leaders in Norway who regularly catch criticism over their compensation packages. Multi-million-kroner salaries aren’t popular among the egalitarian-minded Norwegians, but new figures confirm that executive pay in Norway is modest, even low, compared to other countries.

Statoil's Helge Lund only earns a tenth of the salary commanded by the chief executive of Chevron, for example, and much less than other CEOs as well. PHOTO: Statoil/Ole Jørgen Bratland
Statoil’s Helge Lund only earns a tenth of the salary commanded by the chief executive of Chevron, for example, and much less than other CEOs as well. PHOTO: Statoil/Ole Jørgen Bratland

Lund, for example, earns around NOK 14 million (USD 2.4 million) a year to run the country’s biggest stocklisted company that’s also consistently profitable. He’s ultimately responsible for the work of 21,000 employees in 36 countries and, as newspaper Aftenposten reported last fall, hasn’t had a completely free weekend since he took over his post in 2004.

His pay package nonetheless generated critical headlines again this spring when new annual reports showed an increase tied to profit incentives. Executive pay at Norwegian companies, many of which have the state as a major shareholder, is also debated at the highest level of politics and often deemed an issue that demands government review.

Much narrower pay gap in Norway
Aftenposten reported that new figures from pension, finance and life insurance agency KLP along with academic estimates show that Norwegian chief executives earn roughly 16 times the incomes of “average” workers. Executive pay has increased more than the average raises granted to Norwegian workers over the past 20 years, but executive salaries are still small compared to CEOs in other countries.

In Germany, for example, a chief executive earns on average 90 times the pay of his or her company’s average employee. In Great Britain, a CEO earns 185 times the pay level of workers and in the US, a chief executive earns the same amount as 324 of his or her average employees.

In money terms, Lund’s paychecks are small compared to his counterparts get within the oil industry. Lund only earns a tenth of what Chevron pays its CEO, John Watson, according to Aftenposten. Lund’s compensation of NOK 13.8 million compares to Watson’s equivalent of NOK 129.8 million, and to the NOK 112.3 million paid to ConocoPhillips CEO Ryan Lance, NOK 90.6 million paid to ExxonMobil CEO Rex Tillerson and NOK 38.1 million paid to Royal Dutch Shell CEO Peter Voser. Salaries at European oil companies were in general much less than at US companies, while Lund’s ranked lowest.

‘Social democratic culture’
The size of a company influences pay and Statoil is smaller than the other oil firms listed, but Norway also has a notoriously high cost of living given its price levels and taxes on most goods and services. At the same time, Norwegians don’t need to pay a small fortune for such items as health insurance or college tuition like Americans do, since they’re covered through taxes paid.

Iver Braglien, a professor at Norwegian business school NHH (Norges Handelshøyskole) in Bergen, attributed the lower executive pay levels in Norway to the country’s “social democratic culture and egalitarian thinking,” which attempts to narrow differences in wealth within the population.

“We also have a culture of centralized labour negotiations, with (labour federation) LO on the one side and (employers’ organization) NHO on the other,” Braglien told Aftenposten. “Market forces can’t run as freely, and that influences executive pay indirectly.”

Mantra of moderation
Executive compensation is expected, Braglien said, to show the same type of moderation demanded in labour negotiations. It’s highly unpopular in Norway if workers get at 3 percent pay raise and executives get double-digit increases. Even though executives have received higher raises than workers in recent years, the gap between executive pay and workers’ pay hasn’t come anywhere near the levels seen in the US and the UK.

Tor Grenness, an assistant professor at Norwegian Business School BI, said the narrower gap between executive pay and workers’ pay in Norway is mostly a product of what the public will accept.

“Surveys of students in the US think top executives should earn 30-50 times average workers’ pay,” Grenness told Aftenposten. “If you ask a Norwegian student, the answer would likely be a maximum of 10-15 times average pay.” And with the state as a major shareholder in many companies, he noted, politicians can also influence pay levels. “You don’t have that situation in many other countries,” Grenness said.

Views and News from Norway/Nina Berglund

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