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Monday, July 22, 2024

DNB’s troubles cut into CEO’s bonus

Rune Bjerke, chief executive of Norway’s largest bank DNB, has had his annual bonus trimmed by more than 10 percent after a year of controversies that hurt the bank’s reputation. Bjerke still received nearly NOK 2 million on top of his annual salary and benefits, but that was NOK 322,000 less than in 2015.

DNB’s chief executive Rune Bjerke had a “tough” year last year, as the bank wound up at the center of lots of negative publicity. Now he’s paying for it, in terms of a smaller bonus. PHOTO: DNB

Newspaper Dagens Næringsliv (DN) reported just before the weekend that Bjerke’s total compensation in 2016 amounted to NOK 8.1 million (USD 941,000 at current exchange rates). That was down from NOK 8.3 million the year before. Bjerke had earlier seemed immune to the cost-cutting and staff reductions that have affected many other DNB employees the past few years. Now his compensation has been affected for the first time since the finance crisis in 2008-2009.

“The CEO’s bonus was reduced by around NOK 300,000,” confirmed DNB board leader Anne Carine Tanum in a statement sent to DN. “The reason is a return on capital that was below the board’s goal and a fall in DNB’s reputation.” Tanum noted that bonuses “shall rise and fall” in connection with achievement of goals. “And for the board,” she added, “all goals are important when we evaluate the CEO’s variable pay.”

‘Demanding’ year
Last year was described as “demanding” by Bjerke himself in DNB’s newly published annual report for 2016. He noted how the news media “was characterized by tough issues” that involved DNB, not least the revelations in the so-called “Panama Papers” released last spring that showed how DNB had helped wealthy customers set up shell companies in the tax haven of the Seychelles, to hide assets and cut their tax liability. That was especially embarrassing for a bank that still has the Norwegian state itself as among its biggest shareholders, more than 25 years after taxpayers had to bail out two of Norway’s major banks that were then forced to merge into what became DNB.

In the autumn, news broke that DNB is also among banks financing the highly controversial Dakota Access Pipeline in the US, which the Sioux Nation claims will disturb sacred burial grounds and contaminate their water supply. Norway’s own Sami Nation has actively joined protests against the project, which was suspended by US President Barack Obama but resumed by new US President Donald Trump. Now the Sami Parliament is joining many other DNB customers in threatening to sever banking ties with DNB.

Thousands of DNB customers were also angry that the bank, which has a history of charging high fees on various bank transactions, was raising fees on the use of DNB’s “minibanks” (automated teller machines, or ATMs). Not only were the minibanks set up themselves as means of cutting DNB’s personnel costs many years ago, the higher fees came just as DNB has been closing branches all over Norway in another push to force customers over to online banking. That has made life difficult for some of DNB’s most long-time and asset-rich customers: retirees and the elderly who aren’t comfortable with online banking and may not even own a personal computer or smart phone.

DNB has also been a proponent of electronic transactions in the retail world as well, and wants customers to stop using cash. Many of DNB’s remaining bank branches don’t even deal in cash, which also creates difficulties for retailers who still need it.

‘Breakdown in confidence’
In short, several of DNB’s management decisions have made the bank unpopular and damaged its reputation, and its executives are among those personally paying for it. “We experienced a breakdown in confidence last year,” admitted DNB’s communications director Thomas Midteide to DN. “That’s something we all have to acknowledge.”

Midteide’s own bonus was cut as well, but he claimed the cut nonetheless “felt OK, and gives us motivation to work on the issues we struggled with last year.” He declined to quantify the bonus cuts for others.

Bjerke, meanwhile, claimed that he and other DNB executives have “learned a lot” and taken steps to rectify their mistakes. “We have gone through all our products and services in the entire firm, to make sure we live up to expectations.” DN noted that Bjerke has, meanwhile, collected a total of NOK 66.8 million in compensation from DNB since he took over as CEO in 2007.

Bjerke is not, however, DNB’s highest-paid employee. That distinction goes to Ottar Ertzeid, head of investment banking unit DNB Markets, who was paid total compensation last year of NOK 13.2 million including base salary of NOK 8.8 million. That means he receives around NOK 367,000 a month, with a tax rate of 50 percent. Even though that ranks as a high salary in Norway, it pales to the salaries and bonuses claimed by executives abroad, especially in the US and the UK, where pay gaps between executives and employees are much wider. Berglund



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