ABB Ltd. yesterday said former chief executive officers Percy Barnevik and Goeran Lindahl received too much retirement pay and demanded some of the money be returned after Europe's No. 1 electrical-engineering company reported its first loss.
Mr. Barnevik and Mr. Lindahl received a combined 233 million Swiss francs ($138-million U.S.) in retirement compensation. ABB's board "has now determined that approval procedures for these benefits were unsatisfactory," chairman Juergen Dormann said.
Mr. Barnevik said ABB agreed to the payments.
ABB, burdened by $691-million in losses last year and mounting claims related to asbestos lawsuits, is dismantling Mr. Barnevik's strategy of trying to compete with General Electric Co. He made 200 acquisitions over two decades and quit as chairman in November, saying he needed to take "his share of the blame" after the stock fell almost two-thirds last year.
"Companies are making executives more accountable," said Horst Zirener, chief investment officer at Deka Investment in Frankfurt, which has 135 billion euros ($118-billion U.S.) of stocks and bonds under management and owns ABB shares. "It's rare for something like this to happen in Europe."
ABB shares fell 80 centimes, or 5.7 per cent, to 13.30 francs in trading yesterday, bringing the 12-month drop to 62 per cent. ABB won't pay a dividend for 2001 and expects sales to stagnate at around 23.7 billion francs this year after orders dropped.
Mr. Dormann and billionaire Swiss financier Martin Ebner, the company's biggest single shareholder, now sit on ABB's executive compensation committee. The third committee member, Robert Jeker, said yesterday he's leaving the board.
"The [compensation]wasn't reasonable, rational or justified," said Kurt Schiltknecht, a spokesman for Mr. Ebner's BZ Group. "The board is doing what it has to do to make things more transparent."
BZ Group, which has about 10.10 per cent of ABB's shares, has seen the value of its holding decline by more than 750 million Swiss francs in six months.
Mr. Barnevik, who turned 61 yesterday, received about 148 million Swiss francs in pension benefits after resigning as CEO in 1996. Mr. Lindahl's compensation was about 85 million francs, ABB said.
"The compensation in terms of salary and pension capital for my term as CEO was predominantly based on results and in accordance with entered agreements," said Mr. Barnevik in a statement through Investor AB spokesman Nils Ingvar Lundin.
Mr. Lindahl, 56, stepped down as ABB CEO at the start of last year and was replaced by Joergen Centerman, a 50-year-old Swedish engineer and 25-year company veteran. A slowing European economy and recession in the United States prompted Mr. Centerman in July to cut a target for profitability he inherited from Mr. Lindahl.
Mr. Lindahl, now deputy chairman of Anglo American PLC, is travelling and couldn't immediately be reached for comment, said a spokeswoman for the mining company.
ABB lost $980-million, or 88 cents a share, in the fourth quarter compared with a profit of $219-million, or 18 cents, in the year-ago period. It nearly doubled asbestos provisions to $940-million and took $231-million in charges to cut jobs as orders fell, resulting in the first annual loss since ABB was formed.