Fortum management to keep stock options; no action in Parliament

Value of energy company declines nearly EUR half million in recent weeks

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Fortum's CEO Mikael Lilius and the other top managers of Fortum have reiterated their unwillingness to give up or reduce their stock option benefits or other perks.
      At the same time the Commerce Committee's chairman Jouko Skinnari (SDP) made it clear that the committee would take no action on the matter, beyond issuing a statement.
      The majority state-owned energy company Fortum has seen its total share value drop by almost EUR 500 million in the past two weeks, after the Commerce Committee began its inquiry into the generous stock option benefits enjoyed by the company’s top executives.
      At a Commerce Committee hearing on Thursday, Lilius suggested that the reason for the trend was the public debate over the stock options, which have been denounced as excessive.
      The decline in Fortum’s fortunes has also erased about EUR 1.2 million from Lilius’ personal stock option account of about EUR 12 million.
     
Lilius spent about an hour before the committee. After the hearing he was visibly in good spirits. He described the discussions as constructive, saying that most of his testimony had involved explaining Fortum’s chosen strategy to the members of the committee, and reviewing events of the past five years.
      The discussions also touched upon the company’s future.
      Skinnari had previously expressed the wish that the company's managers might voluntarily give up some of their benefits, and he had tried to guide the discussion into that direction on Thursday as well.
      However, Lilius would not go into the matter. He announced that he would discuss his benefits only with the company’s board of directors, if the board wished to do so. The present chairman of Fortum’s board, Peter Fagernäs, has said that he does not want to take issue with the stock option question.
      Mikael Lilius also said that the recent controversy over the stock options has not affected his own work motivation, although he does see a link between the row and the decline in the company’s share prices.
      "At the same time the Helsinki stock market index has come down by about two percent, other companies in our field have remained unchanged, but Fortum has declined by ten percent. Everyone can evaluate the reason."
     
Lilius also said that he understands that large sums of money spark emotions and debate, but he nevertheless feels that stock options are appropriate for listed companies.
      Speaking before the same committee on Wednesday, Minister of Trade and Industry Mauri Pekkarinen (Centre) said that stock options are not appropriate in the electricity business, because the utilities operate in a geographically limited area, with limited competition, and they have a monopoly position in both distribution of electricity and the sale of district heat.
      One of the members of the Commerce Committee, Antti Rantakangas, sharply criticised the committee’s chairman, Jouko Skinnari, saying that he had moved on the issue with excessive haste.
      He said that Skinnari’s move had raised unfounded hopes among the public, giving the impression that something could be done about the matter, even though no legal means existed.


Previously in HS International Edition:
  Intense debate in Parliament over Fortum stock options during question time (30.9.2005)
  The poor always envy stock option millionaires but not shareholders (29.9.2005)
  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)

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