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Denmark

Denmark

Ex Dong boss "broke pay rules"

DENMARK: Former Dong chief executive Andres Eldrup broke company pay rules by awarding several employees bonuses worth 90% of their salaries and concealing the arrangements from the board of directors, a legal investigation has found.

Former Dong CEO Anders Eldrup
Former Dong CEO Anders Eldrup

Eldrup resigned his position as CEO earlier this month by "mutual consent". At the same time, Dong commissioned law firm Norrbom Vinding to conduct a legal investigation in to whether he had breached his duties by agreeing unusual payment terms for several employees.

Dong today published a report covering the findings of the Norrbom Vinding investigation, which claims Eldrup did in fact neglect his duties.

The investigation centred on four current and former employees and the "variable pay elements" of their contracts, which between 2009 and 2011 corresponded to more than 90% of their base salaries.

Under Dong's general remuneration policies, performance rewards are generally only permitted to constitute an amount equivalent to 25% of the base salary (30% of the base salary with effect from 1 January 2011).

In addition to these mega-bonuses, Eldrup also agreed "unusually large" severance packages for several employees and, in the case of five employees, offered them 12-months paid leave, although this was never taken up by the individuals, described as "key employees" to the firm.

The Norrbom Vinding report also claims that Eldrup sought to conceal these unusual pay arrangements from Dong's board of directors' Remuneration Committee, as well as ignoring advice from Dong HR against the pay deals.

Specifically, the report claims: "It would have been obvious in at least five situations for Mr Eldrup to have initiated a discussion with the Remuneration Committee of the board of directors or at least with the chairman of the board of directors. But no such discussion was initiated. At the same time, it has been established that the contractual basis underlying the grants of variable pay elements is not found in the contracts of employment, but in addenda or letters of confirmation. As a result, the grants of variable pay elements did not become immediately visible."

In addition, after Dong HR warned Eldrup against the pay deals, the report claims that he removed a paragraph from a memo drafted by HR describing the pay deals as "extraordinarily high" and replaced it with "a reference to the general performance reward system without any mention of the existing special arrangements" before passing it on to the Remuneration Committee.

"If the wording in question had not been removed, it would have given the board of directors or the Remuneration Committee a basis for asking questions about the arrangements," says the report.

Norrbom Vinding has concluded that Eldrup breached his contract by awarding these deals and as a result is no longer entitled to any severance pay, although he will still receive 12 months paid notice.

The law firm also says there is no evidence to suggest Eldrup gained financially from any of the pay deals.

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