After weeks of arguing in the media, Norway’s largest trade union confederation LO and the national employers’ organization NHO formally launched wage negotiations this week. At issue now are the huge profits of some of the country’s biggest companies, and how they’re divvied up.
This year’s annual labour talks involve only pay, not all the other workplace issues that also need to be settled every other year. The talks are expected to be “extremely demanding,” warned both LO and NHO before they began: Labour organizations and many others are provoked, even angry, over how top executives and their representatives at NHO constantly call for “moderation” in pay increases for workers while enjoying generous compensation themselves.
This year it’s been revealed before negotiations began that executive compensation has skyrocketed, especially through a bonus bonanza that’s setting records. In addition to multi-million-kroner salaries that now regularly extend into double-digits, senior management officials are pocketing bonuses fueled largely by the war in Ukraine. The energy crisis made worse when Russia invaded Ukraine in February of last year sent oil and gas prices soaring, resulting in huge profits within Norway’s energy sector that quickly raised “a moral dilemma” and don’t always trickle down to the rank and file. Executives with results-based job contracts, however, have ended up with some of their biggest bonuses ever.
“Our goal is to even out differences and increase purchasing power (for employees), especially for those with low pay,” says LO leader Peggy Hessen Følsvik. She and her team of negotiators representing major trade union federations want “fair sharing” of the war profits and other earnings that have soared over the past year. Not only has Norway’s oil and gas industry reported record earnings, so have many other businesses, especially those tied to the energy sector. At the same time, many of their employees are struggling with record high costs in the form of extraordinary utility bills, skyrocketing prices at the grocery store and an overall cost of living hike in Norway that economists set at an average 5.8 percent last year.
Workers, meanwhile, saw their pay rise by just 4.4 percent, according to state statistics bureau SSB (Statistics Norway). It was an historically weak year for employees’ income and the latest in a series of annual wage settlements with pay raises that were lower than the rise in the cost of living.
War profits made it an historically lucrative year, however, for business executives and their management teams. Chief executives in the private sector saw their pay rise by an average 6.9 percent, their counterparts at industrial firms enjoyed average hikes of 9.6 percent in compensation, and CEOs in the oil and gas industry ended up with average raises of 21.3 percent. That’s nearly five times what they think workers should receive.
“Our negotiators will of course take this with them into the talks,” Følsvik told news bureau NTB this week, after earlier denouncing the huge bonuses management has received. Norway has been through a period of the rich getting richer and the poor getting poorer, and that’s what LO wants to end.
“Folks are understandably provoked,” she added, over the salary increases and bonuses that swelled state-controlled Equinor’s CEO Anders Opedal pay package to NOK 19.6 million last year, even though the company stresses that his salary increase amounted to 4 percent. “At a time when most people are having to tighten their belts because purchasing power has declined, we have leaders (and their boards) who give themselves many times the averge annual wage,” Følsvik continued. “That’s extremely upsetting, and it will influence our negotiations.”
Equinor and state electricity supplier Statkraft are among companies that also paid out bonuses to all company employees last year. They amounted to a set percentage of income that made for some profit-sharing but left executive pay far ahead. Newspaper Dagens Næringsliv (DN) reported that at oil company Aker BP, controlled by industrialist Kjell Inge Røkke, CEO Karl Johnny Hersvik received compensation that amounted to NOK 41.9 million in 2022. That included, however, results of a long-term incentive program involving stock options.
The bonus bonanza is by no means limited to the energy sector. One bonus in particular raised eyebrows, when DN reported last week how grocery and wholesale giant NorgesGruppen increased payouts to its top management. CEO Runar Hollevik received total compensation of around NOK 16.7 million, including a bonus alone of NOK 3.6 million at a time when food prices have soared. That irritated goverment minister Sandra Borch, in charge of agriculture and food, who had urged retailers and wholesalers “to show some responsibility” when consumers feel gouged.
“The big price increases we’ve seen (at the grocery stores) are a big problem for most ordinary people,” Borch told DN. “This has happened at the same time that the grocery chains, which set consumer prices, give their own top management higher, million-kroner bonuses. Even though profits declined at NorgesGruppen (which owns major chains including Meny, Kiwi and Joker), they could afford to increases bonuses. People don’t understand this.”
The LO federation representing many grocery employees, Handel og Kontor, doesn’t understand it either: “Our members have had a real income decline during the past few years,” Handel og Kontor‘s leader Christopher Beckham, told DN. “It strikes a sour note when the same branch pays its leaders sky-high income.” NorgesGruppen responded that it’s important to offer “competitive” pay for top management.
NHO, meanwhile, has acknowledged that negotiations will be especially demanding this year. Even though many of its member companies have reported huge profits, NHO leader Ole Erik Almlid stresses that some sectors (such as construction, travel, entertainment and restaurants) are still struggling after the Corona crisis. Not all can afford to offer wage increases higher than the inflation- or cost-of-living rate. Still others, Almlid said, have profited on “unique” developments with various and unclear future prospects. If the war in Ukraine ends, oil and gas prices may also tumble and Norway’s petro-krone can further weaken.
Both Almlid and the heads of other employer organizations including Virke and Norsk Industri point to economic uncertainty in the years ahead. They don’t want to lock in higher pay across the board that can hurt competitiveness or lead to layoffs, while some economists fear that higher pay can contribute to spiraling inflation.
“We have said that the ability to offer higher pay must be part of this year’s wage talks,” Almlid told newspaper Klassekampen earlier this month. “We need to strengthen job security, strengthen the companies and be sure they can tolerate a wage settlement. Those struggling now must set the tone. As we’ve said before, we need to strengthen competitiveness. That means we must have a wage settlement that can increase competitiveness against foreign competition.”
Almlid also warns that Norway’s low unemployment rate will rise, but hopefully not by much. He was vague in addressing how executive pay has risen at a much higher rate than workers’ pay: “I understand that this is a topic of debate,” he told Klassekampen. “We have said that pay development for leaders, functionaries and others must be in line with the companies’ other employees over time.” The same should apply to the public sector as well, Almlid said.
Virke chief Bernt G Apeland has also called for moderation in the ongoing wage negotiations this spring, telling NTB that “this is not the year for a big pay raises.” Stein Lier-Hansen, head of Norsk Industri that represents industrial employers, rejects some labour leaders’ claims that top executives should be ashamed of their high pay and bonuses. “That’s natural,” Lier-Hansen told newspaper Dagsavisen. “It’s part of (labour leaders’) DNA that they always express that kind of frustration.” He excuses high executive pay by also claiming that there are “very big differences” among companies. “We urge moderation in executive pay,” Lier-Hansen added, “but we accept that boards of directors of big companies with international owners have programs for executive pay that are different than what we have in Norway. That’s part of the game.”
Setting the trend for further wage talks
State commission TBU (Teknisk beregningsutvalg), charged with setting numbers that both labour and business can use during their negotiations, and SSB think the cost of living will decline to around 5 percent year. Labour leaders thus want to secure raises higher than 5 percent in what Følsvik calls the classic conflict between labour and capital. The talks will also affect all other wage negotiations between workers and employers in the public sector as well, where nurses and teachers have been the biggest losers for years. LO, as an umbrella organization for various labour union federations, wants the vast majority to end this year “with a real increase” in their income.
“We need to secure that wage growth follows price growth and that workers get their share of value creation, not that steadily more of it goes to the owners,” Følsvik told newspaper Dagens Næringsliv (DN) over the weekend. She stressed how not only the executives have been personally profiting from their companies’ profits, so have shareholders who’ve been receiving large dividends. That’s important, too, she concedes, but employees shouldn’t lag behind.
If no agreement is reached by Thursday, the two sides will head into further negotiations with the state mediator. If those talks also collapse, major strikes in a variety of sectors can be launched from mid- to late April. LO represents around 185,000 employees of NHO member companies plus thousands of others in industry and other branches.