Bank CEO Salaries to be Reduced

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The salaries of the CEOs of both Landsbankinn and Íslandsbanki will be reduced in accordance with a formal request from the Minister for Finance and Economic Affairs, Kjarninn reports. The decision comes in the wake of considerable criticism from both sides of the political spectrum, with critics variously characterizing the salaries of Landsbankinn CEO Lilja Björk Einarsdóttir and Íslandsbanki CEO Birna Einarsdóttir as “excessive” and “tone deaf” in light of ongoing wage disputes for some of Iceland’s lowest-paid workers. Up until now, however, the CEOs’ salaries had been defended by the board of directors for both banks.

This decision was announced in a letter written by Lárus Blöndal, the Chairman of the Board of the Icelandic State Financial Investments office (ISFI), which “manages the state’s holdings in financial undertakings,” and ISFI director Jón Gunnar Gunnarsson.

As previously reported, Landsbankinn CEO Lilja Björk Einarsdóttir received significant pay raises twice in one year. She received her first raise of ISK 1.2 million [$10,045; €8,831] in July 2017, and then another increase of ISK 550,000 [$4,604; €4,047] in early 2018, making her total salary ISK 3.8 million [$31,809; €27,966] a month. Meanwhile, as of January 2017, Íslandsbanki CEO Birna Einarsdóttir was making ISK 4.2 million [$35,162; €30,912] a month, on top of which she also received ISK 200,000 [$1,674; €1,472] in perks and additional benefits.

RÚV reports that per the reductions, the board of Íslandsbanki decided to lower Birna Einarsdóttir’s salary, after which, the board of Landsbankinn decided to follow suit. As of April 1, Íslandsbanki’s Birna will receive ISK 3.65 million [$30,906; €27,338], before additional benefits and perks; ISK 3.85 million [$32,599; €28,836] after. Meanwhile, one of Lilja Björk’s pay raises will be reversed, bringing her monthly salary down to ISK 3.3 million [$27,942; €24,716], before additional perks and benefits; her final monthly salary, including benefits, will be ISK 3.5 million [$29,635; €26,214].

The Icelandic government owns 100% of Íslandsbanki and 98.2% of Landsbankinn.

Minister of Finance Calls for Immediate Review of Bank CEO Salaries

Bjarni Benediktsson

Minister of Finance and Economic Affairs Bjarni Benediktsson has requested an immediate review of CEO salaries at state-owned banks, Kjarninn reports. In a letter sent to the office of Icelandic State Financial Investments (BR) on Thursday, Bjarni stated that the decision of Landsbankinn and Íslandsbanki to raise their CEOs’ salaries “has already had a considerably negative impact on their reputations…as well as sending unacceptable messages” to those union members—specifically hotel cleaning staff—currently involved in ongoing wage disputes.

Bank CEO salaries have come under fire from many quarters after it was learned that Landsbankinn CEO Lilja Björk Einarsdóttir received significant pay raises twice in one year. She received her first raise of ISK 1.2 million [$10,045; €8,831] in July 2017, and then another increase of ISK 550,000 [$4,604; €4,047] in early 2018, making her total salary ISK 3.8 million [$31,809; €27,966] a month. Meanwhile, as of January 2017, Íslandsbanki CEO Birna Einarsdóttir was making ISK 4.2 million [$35,162; €30,912] a month, on top of which she also received ISK 200,000 [$1,674; €1,472] in perks and additional benefits.

In response, Már Guðmundsson, governor of the Central Bank of Iceland, warned against excessive pay raises in a recent video, saying they would inevitably lead to increased interest rates and unemployment in the country. The Confederation of Icelandic Enterprise (SA) also weighed in, with director Halldór Benjamín calling the Landsbankinn bank council’s decision to raise Lilja Björk’s pay twice in one year “tone deaf.”

In his letter to BR, Bjarni stated that this current state of affairs requires “…a prompt review of salary decisions and preparation for changes in current wage policies, which will be submitted at the upcoming general meeting of the banks.” The letter continues by saying that the banks have not respected the state’s requests as far back as January 2017 that restraint and prudence be exercised in respect to all salary decisions.

Both Landsbankinn and Íslandsbanki’s board of directors have responded on their salary decisions in recent weeks. In a letter published on their website, Landsbankinn’s board noted that the criticism they’d received was “understandable,” given that they are owned by the state, but that the decision to raise Lilja Björk’s salary twice was due to the fact that “it was clear that [her salary] was lower than that of the highest executives at other large financial institutions.” They asserted that their CEO salaries had been much lower than those of their counterparts for “many years,” and thus the recent wages were more about establishing wage parity. In its own letter, Íslandsbanki noted that Birna’s salary has decreased ISK 600,000 [$5,025; €4,414] since 2016, but commended her abilities as a CEO, calling her a “strong leader” and similarly stating that the bank’s wage policy requires that CEO salaries be competitive with those of other banks.

Bjarni stated that both banks’ interpretation of the standards for salary increases is “narrow and one-sided” and hasn’t been put into the necessary context. “Trust and confidence must be able to prevail between those who’ve been entrusted with the management of important corporations and those authorities who are responsible for their management as owners.”

This current letter is Bjarni’s second on the matter; he first sent a letter to the two banks about their salary decisions on February 12.

Salaries of Government CEOs Under Scrutiny

Bjarni Benediktsson

Bjarni Benediktsson, Minister of Finance and Economic Affairs, echoes statements made by other officials concerning the excessive pay raises of Lilja Björk Einarsdóttir, CEO of Landsbankinn, Kjarninn reports. “As far as I can tell, instructions made in early 2017 have not been heeded,” a disappointed Bjarni says.

The instructions Bjarni refers to were made by then Minister of Finance and Economic Affairs, Benedikt Jóhannesson, after it was decided in early 2017 to exempt government officials from decisions made by parliament’s salary council. At the time Benedikt urged all CEOs of government entities to show modesty in pay raises in the future. Instead, many have run amok.

Salaries of CEOs became a hot topic in Iceland this week after it was revealed that Lilja Björk Einarsdóttir, CEO of government owned bank Landsbankinn had managed to raise her monthly salary to 3.800.000 ISK, meaning that her pay increased by 82% in two years.

Lilja, however, is not the only one to have received a hefty pay raise. After being freed from parliament’s control, salaries of the head of The Icelandic National Broadcasting Service were raised by 16% to 1.8 million ISK a month, the salary of Isavia’s CEO were raised by 20% to 2.1 million ISK and the salary of the National Power Company of Iceland’s CEO were raised by 32% to 2.7 million ISK.

Bjarni Benediktsson says he has now sent a letter to all government CEOs, asking them to explain just exactly how they have followed Benedikt Jóhannesson’s instructions. He has said he will give everyone a chance to explain themselves, but does not exclude the possibility of parliament intervention in the future.