Lower CEO Pay and Better Results in Europe?

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Executive excess need not be etched in stone. Just look at the Nordic region, where an egalitarian tradition and a high quality of life leave top managers content with lower paychecks.

Though corporate pay scandals do occur and the gap between executive and average salaries has risen, company bosses in Sweden, Denmark, Finland and Norway earn lower wages on average than in the United States and elsewhere in Europe, data show.

Yet there is little sign of Nordic executives and top talent manning the long-boats in search of better pay abroad.

"There's more to life than money," said Leif Borge, chief financial officer at Aker Solutions, Norway's biggest oil services company, who made about $862,000 in 2011.

"I'm happy with my salary, it covers my needs. I have a cabin in the mountains and that is a quality of life I wouldn't have in Houston."

Total pay for top executives in Sweden and Denmark is about 75 percent of the European average, and lower in Norway and Finland, data from management consultancy Hay Group show, a gap compounded by some of the world's highest taxes.

Moreover, Oslo, Stockholm and Copenhagen often figure among the top 10 most expensive cities, although luxury homes there are cheaper than in London, Zurich or Geneva.

Borge's opposite number as CFO of FMC Technologies, a U.S. counterpart, earns $2 million a year, Reuters data show.

Nordic pay is even further below that of big economies like Germany, Britain and Switzerland, which this month voted to impose strict controls on executive rewards.

The Swiss vote was part of a general attack on corporate largesse in Europe, where government austerity has fed a desire to limit Wall Street-style excess in corporate boardrooms.

Borge at Aker is not an isolated example.

A Novus poll of about 1,300 managers and executives in Sweden last year showed only 4 percent wanted to move abroad. In Denmark, only 2 percent of people aged 25-49 with bachelors degrees emigrated in 2012, mostly for brief studies.

Novo Nordisk, the Danish company which is the world's biggest insulin maker, sees no brain drain.

"We have a goal that we will not have a staff turnover of more than five percent among our best-performing employees and we are far below that," said Human Resources Executive Lars Christian Lassen.


Among those who venture abroad for a career, the benefits of quality state-funded education, good public services and health care, and a comprehensive social safety net exert a strong homeward pull.

Anssi Rantanen, a 23-year-old student at Helsinki's top-flight Hanken business school, is hoping to get his masters degree in London and work a few years abroad before going home.

"Once you get used to the standard of living here, I find it hard to see myself working for the rest of my life in the United States," he said.

In the Better Life Index of living standards calculated by the Organisation for Economic Cooperation and Development (OECD), Nordic countries clinch three of the top five spots.

"There is fantastic quality of living in the Nordic areas, there are many parameters stacking up to why you want to work, so we are very competitive," said Christian Clausen, chief executive of Nordea, the region's biggest bank.

Clausen received in total 1.9 million euros ($2.49 million)in 2012, making him one of the best paid people in the region.

That was still only a third of the pay of Brady Dougan, CEO of Credit Suisse, with a market capitalisation well below Nordea's, and that only after Dougan took a more than 50 percent pay cut as the bank's earnings and share price fell.

Don't Mention the Pay

A long history of egalitarian Social Democratic rule and a dose of "Jante Law", a term coined by Danish author Aksel Sandemose in 1933 to signify group behaviour that treats individual success and achievement as unworthy and inappropriate, have left a legacy.

"If Dutchmen or a German calls, the first question I get is 'what is the salary?'," said Rikard Soderberg at headhunting firm Alumni AB.

For Swedes, the discussion is different. "The person I talk to nearly always cringes in discomfort. You just don't talk about salary in Sweden. It is taboo."

The model of relatively modest salaries can present problems when Nordic firms look abroad for talent.

"If I compare with the Anglo-Saxon countries and Germany, Swedish levels are definitely lower," said Bo Annvik, chief executive at Haldex, a Swedish automotive supplier with production in Europe, North and South America, and Asia.

"I wouldn't say it is a huge problem. But what might happen is that you look less at German or U.S. managers on account of this and instead look in other countries so as to keep the (wage) levels down a bit."

Some Nordic executives develop a taste for higher pay when posted abroad that can become a problem.

"If we want to broaden people's knowledge by letting them work in different places, most firms have a policy of setting competitive wages in the places they come to," said Mikael Norman, CFO at Sweden's Nobia, Europe's biggest kitchen maker.

"This can result in huge wage increases when moving from Sweden to Britain and make it difficult to come back. This is a distortion and makes mobility harder to accomplish."

More Inequality Less Evil?

Still, trends from elsewhere have crept into Sweden, ruled by a centre-right government since 2006.

Annika Elias, head of the Swedish managers' union Ledarnas and president of the pan-European managers federation, CEC, said the traditional view that wage differences were a social evil was losing ground.

"We are seeing a strong change right now, whereby it is now acceptable to discuss the idea that salary should reflect people's own contribution," she said, in contrast to earlier views that pay should be more level across an organisation.

Sweden has seen the steepest increase in inequality over 15 years in the OECD, data showed last year, even though it remains on average more equal than other countries.

Swedish Trade Union Confederation data show that average income for top executives had risen to 46 times the mean industrial wage in 2010, from a low of 9 times in 1980.

The Nordic region has also had its pay scandals.

Financial group Skandia was rocked by revelations of huge bonuses to executives more than a decade ago, while telecom group Ericsson faced shareholder protests in 2007.

In Denmark, state-owned DONG Energy last year fired its top executive for being too generous to key staff.

Nevertheless, the Nordic region remains a place where top dogs appear content to forgo the bigger payouts abroad.

"Why would I leave?" said Jan Hammer, chief executive of Norwegian shipping firm Odfjell. "I love Norway."