Huge Executive Payouts Draw a Grim Warning From Denmark’s Elite

(Bloomberg) -- In Bernie Sanders’s favorite country, excessive executive pay is getting another look.

Roughly half a year after a Social Democrat government took office, pay equality has become the topic of the day, and even some of Denmark’s most prominent business leaders are now warning of the dangers of a growing wage gap.

Vagn Sorensen, who chairs some of Denmark’s biggest companies including cement plant maker FLSmidth & Co., says extreme remuneration packages hurt a company’s relationship with its lower-level staff and shareholders.

Speaking in an interview with Denmark’s biggest newspaper, Jyllands-Posten, the 60-year-old titan of Danish industry said fat CEO pay checks are “highly negative for the morale” of average workers and investors.

The Social Democrats won last June’s election after pledging to fight pay inequality as part of a package of goals focused on welfare. More recently, the Socialist People’s Party -- a member of the government bloc -- proposed curbing wage gaps and limiting to 20-fold the difference between the salary of CEO and the lowest-paid worker at a company.

Equality Dynamics

U.S. Senator Bernie Sanders, who’s in the race to become the Democratic nominee for U.S. president, has repeatedly pointed to Denmark as a bastion of the kind of equality he says America should emulate. In particular, he’s pointed to Danes’ access to free health care and education, as well as unemployment insurance, as pillars of economic stability.

While Denmark has long stood out as one of the world’s most equal societies on the income scale, the income gap has grown in the past decade. That’s prompted Prime Minister Mette Frederiksen to warn that she won’t tolerate what she’s characterized as corporate greed.

In a study focusing on ethical investing that was published this week, Carnegie Investment Bank AB detailed pay levels across of Denmark’s biggest companies. Some of the most extreme wage gaps were found at Carlsberg A/S and facility services provider ISS A/S, which is backed by the Lego family. At these firms, the CEOs make more than 200 times as much as their average employee, according to Jyllands-Posten.

Sorensen’s FLSmidth, which unveiled roughly 500 job cuts this month, pays its CEO, Thomas Schulz, 44 times as much as it gives its average employee.

Sorensen, who says the pay gap in Denmark remains far from the alarming extremes seen in some other countries, encourages any company pushing through cost cuts not to shield its C-suite.

The advice follows a decision by digital payments firm Nets A/S to cut about 565 jobs, not long after its top executives received record remuneration packages.

(Disclaimer: Michael Bloomberg is also seeking the Democratic presidential nomination. He is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)

To contact the reporter on this story: Morten Buttler in Copenhagen at mbuttler@bloomberg.net

To contact the editors responsible for this story: Christian Wienberg at cwienberg@bloomberg.net, Tasneem Hanfi Brögger

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