One Man’s $75 Million Perk Triggers Indignation in Denmark

(Bloomberg) -- Bo Nilsson is a name forever associated in Denmark with an income that sparked national indignation after he made $75 million. As chief executive officer of a digital payments firm, Nets A/S, he took home roughly 1,500 times what the average Dane earns a year and well over 300 times what the Danish prime minister is paid.

Inequality is emerging as a key theme ahead of Denmark’s general election on June 5. According to the OECD, income disparities in Denmark have grown 22% since 1995, one of the highest increases in the rich world. A recent report from Deloitte and Kraka, a Danish think tank, estimated that the share of total income owned by the richest 1% of Danes has risen from around 7% in the 1990s to roughly 11% today. That’s more in line with countries like the U.K. than with Scandinavian norms.

Deepening social and economic divides pose a threat to capitalism and to democracy itself, Britain’s Institute for Fiscal Studies recently warned. In Denmark, a wider income gap has coincided with growing support for populist right-wing extremists like Rasmus Paludan, a convicted racist who in April passed the threshold to become an official candidate in the election. Meanwhile, anti-capitalist movements on the far left have also grown in popularity.

As Danes see the results of populism play out in Britain and the U.S., there’s a growing movement to ensure nothing similar happens in their corner of the globe. Politicians have been quick to zero in on income inequality, but anger over corporate greed is also spreading to other arenas. At several shareholder meetings in March, Denmark’s biggest pension fund, ATP, lambasted executives for taking home outsized pay packages.

Investors’ Warning

Bent Greve, a professor at the department of social sciences and business at Roskilde University, says “It’s an indicator that also investors are saying: Be careful.”

Mette Frederiksen, the head of the Social Democrats and the woman who most polls show will become the next prime minister, has railed against extreme bonuses paid to the corporate elite in Denmark. She wants banks to contribute more in taxes to help finance Danish welfare.

Henrik Sass Larsen, a fellow Social Democrat and a candidate to become Denmark’s next finance minister, has said he will target executive pay if he gets into office. A poll of polls as of May 30 published by Berlingske gives the group of parties that Frederiksen leads about 55% of the votes, compared with 45% for the government bloc.

“As a Social Democrat I can’t understand how, at a time when inequality is growing and the top of society is getting ahead of the rest, huge bonuses are still paid while regular salaried workers are wondering what’s going on,” Frederiksen said.

Frederiksen’s election promises include stricter caps on executive bonuses, the mandatory disclosure of management incentive programs, and a doubling of tax on inheritances worth more than $450,000.

Path to Fortune

Nilsson, the Nets CEO, joined the company as chief financial officer in 2013, when it was already well established in the Nordic region. He became CEO a year later, and soon after that started working toward an initial public offering.

Danish media noted at the time that the Nets IPO was particularly costly, with its investment bankers getting over three times as much as was paid to those doing the IPO of utility Dong Energy A/S, which also took place in 2016. The roughly 500 million kroner, or $75 million, Nilsson made doesn’t include extra awards he received for his work overseeing the IPO. Nets’s share price initially sank after its IPO, before the company was taken private by Hellman & Friedman.

Last week, the Borsen newspaper reported that Nets has introduced a new stock program for its top managers worth as much as $1 billion, which could add a further $280 million to Nilsson’s personal rewards.

Read more on the Social Democrats’ tax proposals

Lars Lokke Rasmussen, Denmark’s center-right prime minister, says trying to regulate how companies pay their employees would be “a mistake that hurts growth and welfare.” But his is a message that risks being out of step with the times and even he described Nilsson’s latest remuneration package as “pretty wild.” When it comes to corporate excesses and white-collar crime, 2018 was Denmark’s annus horribilis.

A $230 billion laundering scandal at Danske Bank will go down in history as one of the worst dirty-money sagas ever, prompting plenty of soul searching in a society once thought to be among the world’s least corrupt. Trust in Denmark’s institutions also suffered a blow after Danes learned that roughly $2 billion in state revenue was stolen by financiers who exploited a loophole in dividend tax-rebate rules. According to a recent PwC survey, Danish voters now trust bankers even less than they do politicians and tax collectors.

Read more on the Danske money laundering scandal

Frederiksen says a failure to respond to voter disaffection risks undermining confidence in the institutions that underpin a well-functioning society.

For the most part, the political blocs agree when it comes to cracking down on financial crime. Rasmussen’s government has significantly tightened anti-money laundering laws, including raising fines by 700% and making it easier to put executives behind bars. The question now is whether the next government will want to take an even harder stance.

“For too many years, inequality has just been allowed to rise,” Frederiksen said during this year’s May 1 rally in Copenhagen. “Now we need a new path.”

To contact the reporter on this story: Nick Rigillo in Copenhagen at nrigillo@bloomberg.net

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

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