Energy company Fortum to scale back lucrative perks to management

The Board of Directors majority state-owned energy company Fortum has decided to scale back some of the financial perks for the company’s management.
      The change was implemented behind the scenes after the Ministry of Trade and Industry indicated to Peter Fagernäs, Fortum’s Chairman of the Board, that such a change would be welcome.
      The matter is expected to come up during a shareholder’s meeting on Thursday, where one of the items will be the lucrative stock option programme and other financial incentives enjoyed by Fortum’s managers.
     
Markku Tapio, the head of the State Shareholdings Unit of the Ministry of Trade and Industry, confirms that the message to Fortum’s Board of Directors came from him.
      "I made reference to policy lines drafted by the Ministerial Committee of Economic Policy and to discussions last autumn concerning payments to the Fortum management", Tapio said.
      In the Autumn, Tapio did not feel that the management perks went against the will of the main shareholder.
      Chairman of the Board Fagernäs does not want to say exactly where the call for moderation originated. He says that the board "considered the actions to be correct".
      "We wanted to show that the board is taking some action", Fagernäs explains.
     
Under the new setup, Fortum managers who have been granted stock options will not get any new stock incentives. However, between 2003 and 2005, such perks have been enjoyed each year by between 130 and 190 people in leading positions at Fortum.
      This year, stock incentives covering the years 2006-2011 are to be distributed only to those managers who have not been given stock options. Under the terms of the new guidelines, the value of the shares must not exceed the person’s annual salary.
      Stock option profits have no set upper limit, which led to massive windfall profits for many Fortum managers - and a public outcry when they made the headlines.


Previously in HS International Edition:
  Fortum Board has powers to alter stock options procedures (20.10.2005)
  Fortum management to keep stock options; no action in Parliament (14.10.2005)
  Intense debate in Parliament over Fortum stock options during question time (30.9.2005)
  Political controversy over Fortum stock option perks escalates (29.9.2005)
  Fortum options spark row between Centre Party and Social Democrats (28.9.2005)
  State-owned Fortum's stock option incentives worth half a billion euros (23.9.2005)
  Generous Fortum stock options cause indignation in Sweden (2.2.2005)