Danske executive bonuses at stake as bank explores all options

COPENHAGEN: Danske Bank A/S is under pressure to quickly get rid of chief executive officer Thomas Borgen as a growing number of shareholders voice dismay at his continued presence, given his role in one of Europe’s worst money laundering scandals.

The 54-year-old resigned last week after acknowledging his bank may have helped launder much of about 200bil, or US$235bil, that flowed through a tiny Estonian unit between 2007 and 2015. Borgen has said that he, as CEO, was responsible.

But the board has asked Borgen to stay on until a replacement is found, for which no date has been given. He is also set to receive 12 months’ pay when he leaves.

At the Danish Shareholders’ Association, the Danske board’s decision is seen as both “strange” and “far from ideal”.

“Bonuses should reflect a situation where management has done an extraordinarily good job,” said Leonhardt Pihl, co-CEO of the association. “I don’t think you can say that that happened here.”

At MP Pension, a Danske shareholder with US$20bil in assets under management, director Jens Munch Holst says he “doesn’t understand” why Borgen hasn’t already been escorted out the door. “He needs to stop immediately – anything else is impossible to understand and unsatisfactory,” he said.

Danske won’t say how much Borgen is set to get in his 2018 remuneration package. In 2017, he was paid 15.4 million kroner (US$2.4mil). Roughly a quarter of that was in the form of variable pay, which may now be clawed back.

Borgen was promoted to CEO at Denmark’s biggest bank at the end of 2013, and was feted as a success for turning around a lender that for years had struggled to compete with its Swedish peers.

With Borgen at the helm, profits grew and shares in the bank soared about 130% through to a peak in May last year. But as news of the laundering scandal spread, the stock started to suffer. This year, Danske has lost a third of its market value, making it the worst performing European financial firm after Deutsche Bank AG.

Pihl says that, even taking Borgen’s previous triumphs into account, “there’s no place for bonuses here.”

Henriette Fenger Ellekrog, the head of human resources at Danske, says management is now “looking into claw-back possibilities”.

“We cannot comment on expected amount, numbers or individuals, but claw back will be investigated for all relevant employees in relevant markets and in all levels of the organisation,” she said.

It’s worth noting that Borgen’s bonus makes up a relatively small portion of his total compensation in large part because of European Union rules designed to curb variable pay (Danish rules impose even stricter limits). — Bloomberg