Former ABB boss under fire

February 26, 2002 Posted: 1707 GMT

LONDON (CNN) -- Percy Barnevik was revered as a world-class corporate manager, on par with the likes of former General Electric's boss Jack Welch.

But now, at the end of a long and successful career, Barnevik's reputation has been tarnished by controversy.

He is accused of improperly receiving 148 million Swiss francs ($87.2 million) in retirement benefits from Swiss industrial giant ABB Ltd., the company he ran for eight years.

The huge payout from ABB, Europe's biggest electrical engineering group, has sparked calls for new guidelines on how big companies reward their top executives and how -- if at all -- those financial perks appear in financial statements.

Last week, ABB's board of directors bowed to shareholder pressure and demanded that Barnevik repay some of the money.

The controversy comes at a time when fears of financial scandals have been fanned by the collapse of U.S. energy giant Enron, and accounting irregularities that have cropped up at other major corporations.

For his part, Barnevik maintains he has done nothing wrong. In a recent interview with a Swedish newspaper, he spoke out for the first time about the controversy.

He said the issue was not the amount of money involved but the way the payment was handled.

"One can say that it was an American payment system in a European environment," he told the daily Dagens Nyheter. "I know that I did an honest and straightforward job, and I followed the contract... so I have my pride intact."

Barnevik, who stepped down late last year after criticism over the company's poor earnings and falling stock price, added that his biggest regret was that the conditions of his pension payout were not stated in ABB's annual report.

While shareholders are demanding that Barnevik agree to the ABB board's request that he return some of the money, they are also calling for changes to regulations to avoid a similar situation happening again.

"I think Swedish shareholders are very adept at seeing somebody who can build," said Howard Wheeldon, an analyst at Prudential-Bache. "Once they've stopped building, and they are seen to being paid too much then they spare no lives at all."

However, not everyone views the issue in black or white.

"Barnevik was considered the Welch of Europe. But I guarantee you he never made anything near close to what Welch made," said Rik Kirkland, managing editor of Fortune magazine.

"And this pension, while it's not small change, $87 million, it's still relatively small compared to the performance he delivered over the years to ABB compared to U.S. scale."

Welch's last pay cheque from GE, for example, was estimated to be about $123 million.

ABB, which makes products like systems to power factories, electricity transmitters and pipelines and plant for the oil and petrochemical industries, has seen its shares come under pressure amid concerns that an economic slowdown would hurt earnings and its exposure to U.S. asbestos claims.

The company reported a bigger-than-expected loss for 2001 of $691 million after setting aside $952 million to pay for asbestos-related legal cases and insurance losses.