One of Europe’s biggest pension funds is adding its voice to the list of investors shaming executives they think earn too much. ATP of Denmark has about $112 billion in assets under management. Its latest public target was Carlsberg A/S. At the annual general meeting in March, the fund said the 36 million kroner ($5.4 million) paid to Chief Executive Officer Cees ’t Hart in 2016 was excessive, and fought a proposal to raise the variable portion. The pay package was ultimately approved by a board dominated by the Carlsberg Foundation, but ATP had sent a clear signal. Christian Hyldahl, the 52-year-old Dane who has been running ATP from its headquarters north of Copenhagen since January, says he wants to use his job to shine a torch on what he characterizes as an unsustainable pay culture. He says greedy CEOs put democracy and capitalism at risk.
“Why should employees have very modest or no salary rises if the CEO gets more and more and more?” Hyldahl said in an interview. “There is a big leadership problem in that. You have to take your own medicine.” U.S. companies in particular are feeling the fund’s ire. So far this year, ATP has voted against 54 percent of the compensation packages proposed by U.S. companies in which it holds a stake. In total, it’s given a thumbs-down to 30 percent of roughly 650 proposals.
ATP, which first decided to go public with its views on executive pay last year, is adding its voice to a long list of influential funds trying to curb excessive remuneration policies. Norway’s $960 billion sovereign-wealth fund, the world’s biggest, in April suggested locking up share-based pay for as long as a decade before allowing a CEO to get at the money. In the U.K., the Institute of Directors wants the government to give investors more power to curb executive pay. Hyldahl says the U.S. and the U.K. could learn from the Nordic pay culture. The region, famous for generous welfare, high taxes and stable economies, boasts some of the world’s most equal societies when it comes to income distribution. An OECD ranking shows Denmark, Norway and Iceland have the smallest pay gaps in the rich world. Meanwhile, the U.S. has the third-biggest income gap of the 36 countries in the OECD, outdone only by Mexico and Chile.
ATP wants to use its clout as an investor to drive home its point, and will stick around as long as it takes to influence pay. Just exiting a shareholding because you disagree is less powerful than staying and fighting, Hyldahl says. “The alternative is that we don’t do it,” he said. “And then we don’t have any influence at all.”
The top 1%
Since the global financial crisis, the widening pay gap between the top 1 percent and the bottom 99 percent has left voters desperate for ways to show their indignation. In the U.S., CEOs make roughly 300 times as much as the average worker, according to data compiled by Bloomberg. In Denmark, the figure is around 82 times. Such excesses have led to a “disintegration, a lack of trust in institutions, people are questioning the business world,” Hyldahl said. Big differences between what executives and average workers make “puts gas on the fire.” Hyldahl’s own pay has been set at 6.6 million kroner for 2017. His predecessor, Carsten Stendevad, made 6.9 million kroner last year, or roughly $1 million, of which about $150,000 was in pension benefits. “We’re not talking about CEOs not getting paid,” Hyldahl said. “We’re talking about millions of dollars still. I’d say they will still be able to afford a house and a car and maybe even a boat.”