More monetary incentives for pension insurance bosses
New bonus system for managers of Varma and Ilmarinen
The top executives of Finland’s two largest pension insurance companies, Varma and Ilmarinen, are getting a new bonus system on top of the old one that they already have.
Helsingin Sanomat has learned that the boards of both companies have given their approval to a system which offers new bonuses in addition to the present monetary incentives.
The old system of bonuses can already raise the basic salary of the CEO of Varma by 75 per cent. At Ilmarinen, meanwhile, the annual salary of the CEO could rise by 50 per cent, while the annual pay of other executives could even double.
The new bonus system at Ilmarinen promises pension directors a maximum 15 to 30 per cent of the basic salary, which adds up to between 65 and 130 per cent more pay in a year, when combined with the old bonuses.
Varma has not disclosed the details of its new system, although the company’s board approved it already last spring. The old annual bonuses on their own can nevertheless give the CEO a 75 per cent incentive bonus on top of the basic salary.
Both companies say that their new incentive system is for the long term. At Ilmarinen this mainly means that the recipient will have to wait longer for the bonus than in the old system, in which the bonuses were paid in the spring of the following year, after the corporate result for the previous year has been calculated.
The new system, which comes on top of the old one, was drawn up at Ilmarinen at least by the Alexander Group, which drew up the stock option system of the energy utility Fortum.
An investigation by Helsingin Sanomat reveals that CEOs have been given bonuses even in years when investments have failed.
In 2008 both Varma and Ilmarinen had the worst investment year on record, with the value of their pension funds falling by 15 and 18 per cent respectively.
Nevertheless, Varma’s CEO Matti Vuoria got a 47 per cent bonus, and Ilmarinen’s Harri Sailas got an additional 25 per cent for good business management.
Vuoria’s bonus in 2008 was worth EUR 228,000, and Sailas got EUR 100,000.
The total annual pay that an Ilmarinen top executive gets would seem to have very little to do with the yield on pension funds. The salary and bonuses of Varma’s CEO declined slightly after the disastrous year 2008, but remained significantly higher than that of the top boss at Ilmarinen.
Previously in HS International Edition:
Finnish pension insurance companies have planned to join forces (9.9.2010)
Government to re-examine incentive programmes for state-owned companies (1.4.2009)
State-owned companies tight-lipped about executive bonuses (21.5.2007)