Pensions still high for executives in state-owned companies

Six CEOs still receive pensions worth 66% of salary

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The CEOs of companies that are either partially or fully owned by the state continue to enjoy bigger pensions than normal - both in monetary, and in relative terms.
      An investigation by Helsingin Sanomat revealed that three out of four CEOs of such companies have better terms for their pensions than ordinary Finns enjoy, even though the State Ownership Steering Department has sought to reduce the benefits.
     Pension payments to retired executives of state-owned companies tend to be higher than average - as much as 66 per cent of salary, instead of the normal 60 per cent. The retirement age is often lower than usual - 60 years, instead of the usual 63.
     
An additional advantage is that the amount of pension paid is usually determined by the salary level of the very last years of work, when salaries are generally higher. The record is held by Outokumpu CEO Juha Rantanen, whose pension is based on the average salary of his last calendar year on the job, plus performance bonuses.
      Work-based pensions for ordinary Finns are determined by the average earnings for the whole working career.
     
The survey is based on analysis of 37 companies in which the state owns shares. In at least six of these, pension benefits were even better than with the top executives of listed companies, with CEOs accruing pensions of 66 per cent of pre-retirement pay.
      Among listed companies without state ownership, the retail chain Kesko offers its top managers a pension amounting to 66 per cent of salary.
      The state has sought to reduce the pensions of the management of the companies in which it has ownership, as the total costs of the additional pensions have risen to the level of the CEOs’ basic salaries, and even above it.
      A likely record is for former Kemira CEO Lasse Kurkilahti. In 2006 Kemira’s payments to Kurkilahti grew by EUR 3.1 million in 2006.
     
It is becoming increasingly difficult for politicians to justify the low retirement age of the managers in question, as pressures grow to raise the pension age for the public at large from the current 63.
      Most recently on the chopping block was the pension of Tapio Kuula, CEO of the energy company Fortum. His pension benefits are much weaker than those of his predecessor Mikael Lilius. Kuula’s retirement age was raised to 63, and the highest level of his pension benefits are to be paid out only until the pension savings run out. Lilius, on the other hand, is entitled to his full pension for the rest of his life.
      For instance, Jouko Karvinen, CEO of the pulp and paper manufacturer Stora Enso, has a pension contract which aims at a pension level of 60 per cent of salary, but it is not guaranteed. His predecessor Jukka Härmälä has a guaranteed lifetime pension of 66 per cent of earnings amounting to EUR 57,000 a month.
      Similar changes are in store for TeliaSonera, Altia, Solidium, and Finnfund.


Previously in HS International Edition:
  Government to re-examine incentive programmes for state-owned companies (1.4.2009)
  Need for cap on occupational pensions to be examined by ministry (15.4.2009)
  Golden years of Finland’s executive pensioners (11.4.2009)
  Chairman Fagernäs and CEO Lilius to leave energy utility Fortum (2.4.2009)

Helsingin Sanomat