“Enronitis” arrives in Switzerland

Goran Lindahl (left) and Percy Barnevik have been crucified by the media swissinfo.ch

The revelation that two former executives of ABB received massive payoffs on retirement has brought shades of "Enronitis" to Switzerland.

The affliction refers to the impact of the world’s largest bankruptcy, Enron, and the responsibility big business has not only toward investors and staff but also to society in general.

Wednesday’s news that former ABB chief executive officer Percy Barnevik received SFr148 million ($87 million) when he stepped down, and his successor Göran Lindahl received SFr85 million when he left has fuelled growing concern that all is not well at the top of many big companies.

ABB has asked for an undisclosed amount to be paid back by the two Swedes, preferably in an “amicable” way.

The company, headquartered in Zurich, was born from the merger of Sweden’s Asea and Switzerland’s Brown Boveri in 1988.

Media response

The media had a field day with the ABB story, expressing disgust with the huge figures involved.

In an interview with swissinfo, Swiss businesswoman Carol Franklin said her first reaction to the ABB news was one of shock.

“What do you do with SFr148 million or SFr85 million and why do you need it?” were questions that immediately sprang to her mind.

Franklin, who spent 20 years in managerial positions at the Swiss Reinsurance Company and three as chief executive of the Swiss section of the Worldwide Fund for Nature, said she believed there had been a “dramatic lack of control” in the case of ABB.

Corporate governance

“The whole thing seems to point in the direction of a lack of corporate governance, something that’s been talked about for the past ten years or so,” she said.

“The good news is that finally this has come out and something has to be done about controlling these large companies.

“‘Enronitis’ is a word that has been born overnight and it shows a lack of trust that people have in big business and it’s a very deep feeling,” she added.

Franklin told swissinfo she believed that companies had to work on building trust in the wake of scandals surrounding the corporate world.

Expecting credibility

“People expect responsibility from corporations and their leaders. We expect credibility and a sustainable way of doing business. You cannot preach water and drink wine at the same time. People won’t accept that,” she said.

Part of the debate has centred on exactly how salaries and benefits at the top should be calculated.

Swiss newspapers have asked exactly how the reported SFr12 million salary of UBS chairman Marcel Ospel is worked out. They have also begged the question of whether Rolf Hüppi, chairman and CEO at Zurich Financial Services deserves a reported SFr5.2 million a year when the company’s performance is anything but glowing.

“I think it’s a question of proportion. If we take the example of the new chairman of the “swiss” airline, Pieter Bouw, I don’t understand why he is reported to be receiving a salary of SFr1 million a year, whereas the CEO, who is doing most of the work, will only get less than half of that. That just doesn’t make sense to me,” Franklin commented.

Pay should match performance

“The salary should relate to the level of responsibility and also be coupled to the success of the company,” she added.

On the subject of success, Franklin mentioned the case of Mario Corti, head of the collapsed Swissair group, who reportedly received an advance payment of SFr12 ½ million for a five-year contract.

“You should not be paid SFr12.5 million before you even sharpen a pencil,” Franklin told swissinfo.

“I think transparency is one of the things that builds credibility and builds trust and therefore it should be openly stated who earns how much. I also think that that should have happened a long time ago,” she added.

by Robert Brookes