Public outcry over bankers’ bonuses is pretty common, but the anger sweeping the Netherlands, over nationalised ABN Amro’s executive pay packets, is on a completely different level.
Over the last week, Dutch newspapers Financieele Dagblad and NOS (Holland’s version of the BBC), and other media outlets were awash with debates over the justification of how ABN Amro’s high ranking executives were getting huge bonuses ahead of the bank being re-privatised.
In fact, the outcry was, and continues to be, so bad that Dutch finance minister Jeroen Dijsselbloem delayed the IPO of the nationalised bank at the end of March because the row over giving six executives a €100,000 (£73,000) bonus, on top of their salaries, escalated so greatly.
He even went to parliament on Thursday to answer questions over how the government is “allowing” the bank to pay hefty bonuses, compared what the average Dutch person receives in a year, even though it is still yet to be privatised, after being taken over by the state in 2008.
The Dutch government initially hoped to make €15 billion from the IPO. This is still less than half the total amount the state paid to rescue the bank in the wake of the credit crisis. Meanwhile, the bank only posted an underlying profit of €1.5 billion in 2014.
Meanwhile, ABN Amro said in a statement last week that s
“Now that our remuneration is the subject of discussion and threatens to affect the future of ABN Amro, we are putting the interests of the bank and the public first – as we always do – and have decided to renounce the allowance. We hope this will bring the bank in calmer waters.”
Only a day later, the non-executive head of ABN Amro’s remuneration committee Peter Wakkie
stepped down. He said he considered himself “particularly responsible for the decision regarding the now cancelled salary increase for six Managing Board members and the commotion that ensued over that decision.”
In the Netherlands the outcry is also leading to people potentially pulling out their money and leaving the bank.
According to a survey conducted for the Dutch television show Kassa, 40% of people said they are thinking of changing their banks because of hiked executive pay. This was out of 12,000 participants.
“The outcry is because the man in the street is losing his job, we have not [decent] growth since 2008 (well up a quarter now). We as a nation are one of the slowest to get out of the crisis,” said Josefine Hekstra, an economics lecturer at Rotterdam University, to Business Insider.
Hekstra also used to work at ABN Amro in the insurance division between 1993 and 1994, just after ABN and Amro Bank agreed to merge to in 1991.
“I understand and realise that the salaries of our top bank executives are not what the rest of the global market pays, but they are in comparison huge for the average person. We have rules in the Netherlands that all the ministers and civil servants and other employees paid by the government (paid by the taxpayer) cannot be above the ‘balkenendenorm’.”
Hekstra, 50, said that she is moving her funds to Triodos, an ethical and sustainable bank in the Netherlands.
When the taxpayer coughs up for bankers’ wages
Balkenendenorm was formalised in January 2013 to make sure that civil servants can’t be paid more than 130% of salary of the Prime Minister. The standard was named after the former Dutch PM Jan Peter Balkenende (2002-2010).
The current PM Mark Rutte is paid around €144,000 a year. Critics, like Hekstra, say that since ABN Amro is publicly owned, its employees should adhere to the standard and that if bonuses, when combined with salary, exceed this amount, then it should be stopped.
Hekstra pointed out that many employees are also upset over the bonus hikes amid thousands of job cuts.
“One of my friends has worked there for 20 years and is being laid off, because the department they work in is closing,” said Hekstra. “She also mentioned that the bonuses did not go down well with the bank employees. There are still thousands of layoffs happening at ABN Amro.”
Around 4,000 jobs have already been cut since 2010.
So what’s next for ABN Amro pay row?
Last month, Dijsselbloem said to Dutch media outlet NU Now, he would not appeal to the ABN Amro board to reject their pay rises.
“I spoke to them about this last year and they made it clear they are not prepared to. It is up to them to reach their own conclusions about the criticism,” he said. But he added that “it is a question of morality. Do they think it is responsible when bank workers have had their pay frozen for years and thousands have lost or are losing their jobs?”
During Thursday’s parliamentary grilling, Dijsselbloem said he considered firing ABN Amro CEO Gerrit Zalm for asking for the pay increases. However, after brushing off criticism over the handling of the executive pay, he added that ABN Amro’s IPO will be back on the government’s agenda “soon” and “when it’s up to me.”
Until then, he has to abate the public before he can press ahead.