An independent government board charged with setting the pay of elected state officials, high civil servants and the CEOs of state owned enterprises has ruled that the pay of Birna Einarsdóttir, the CEO of Íslandsbanki bank, should be cut by 40%. Íslandsbanki is owned by the Icelandic State.
Yesterday afternoon the board published the ruling which took effect on January 31. According to the ruling the annual pay of Birna should be 25 million ISK (226,000 USD/215,000 EUR). Figures on Birna's pay in 2016 have not been made public, but according to the 2015 annual report of Íslandsbanki, the most recent available, her pay was 43.7 million ISK (395,000 USD/376,000 EUR). Compared to 2015 Birna would therefore receive a 43% pay cut.
A controversial board
The board has been reviewing the salary of Birna since June of 2016, a year after the bank passed into state ownership. According to law the board is to set the pay of the CEOs of all firms which the state holds a larger than 50% stake.
The board's rulings have frequently been the focus of controversies, most recently in November of 2016 when it published a ruling which handed large pay increases to MPs, government ministers and the President of Iceland. The salary increases were far in excess of anything seen in the labour market and came on the heels of what many felt were excessive increases in the pay of many CEOs.
Read more: Iceland’s president turns down a monthly pay increase of 5,300 USD
When the board published its ruling the President of Iceland, Guðni Th. Jóhannesson, announced that he would turn down the pay increase, donating it to charities instead.
A ruling which is unlikely to stand for long
The ruling will not take effect immediately, as it effectively represents a termination of her current contract with the bank. The Icelandic National Broadcasting Service reports that Birna's contract includes a 12 month notice, during which time she will continue to receive her former pay. The pay cut would therefore not become effective until January 2018.
Read more: Bankers Behind Bars: A guided walking tour through the collapse of Iceland's banking system in 2008
In the meantime, however, the power to set her salary will have passed to the board of the bank. On July 1 a new law on the pay of the CEOs of state owned banks takes effect, transferring the power to set their pay to the boards of the banks. The board of Íslandsbanki will therefore have the opportunity to re-negotiate the salary of the bank's CEO before the pay cut takes effect.
One of two state owned banks
Íslandsbanki is one of the three large banks in Iceland. The bank was created after the domestic assets of failed Glitnir were moved into a new bank in October 2008. At the same time the domestic assets of Kaupþing were moved into a new bank Arion, and those of failed Landsbankinn into a new bank with the same name. Initially only Landsbankinn was government owned, as the estates of failed Glitnir and Kaupþing owned the majority of Íslandsbanki and Arion, respectively.
Read more: A 40% exit tax to be imposed on foreign investors
In 2015 the state acquired Íslandsbanki as a part of a deal struck with the estates of the fallen banks on the lifting of capital controls which were imposed following the 2008 financial crash. The estate of Glitnir handed over ownership in Íslandsbanki to the state as part of the payment of an exit tax imposed on foreign investors who owned claims on the failed Icelandic banks.
Read more: Iceland’s president turns down a monthly pay increase of 5,300 USD
An independent government board charged with setting the pay of elected state officials, high civil servants and the CEOs of state owned enterprises has ruled that the pay of Birna Einarsdóttir, the CEO of Íslandsbanki bank, should be cut by 40%. Íslandsbanki is owned by the Icelandic State.
Yesterday afternoon the board published the ruling which took effect on January 31. According to the ruling the annual pay of Birna should be 25 million ISK (226,000 USD/215,000 EUR). Figures on Birna's pay in 2016 have not been made public, but according to the 2015 annual report of Íslandsbanki, the most recent available, her pay was 43.7 million ISK (395,000 USD/376,000 EUR). Compared to 2015 Birna would therefore receive a 43% pay cut.
A controversial board
The board has been reviewing the salary of Birna since June of 2016, a year after the bank passed into state ownership. According to law the board is to set the pay of the CEOs of all firms which the state holds a larger than 50% stake.
The board's rulings have frequently been the focus of controversies, most recently in November of 2016 when it published a ruling which handed large pay increases to MPs, government ministers and the President of Iceland. The salary increases were far in excess of anything seen in the labour market and came on the heels of what many felt were excessive increases in the pay of many CEOs.
Read more: Iceland’s president turns down a monthly pay increase of 5,300 USD
When the board published its ruling the President of Iceland, Guðni Th. Jóhannesson, announced that he would turn down the pay increase, donating it to charities instead.
A ruling which is unlikely to stand for long
The ruling will not take effect immediately, as it effectively represents a termination of her current contract with the bank. The Icelandic National Broadcasting Service reports that Birna's contract includes a 12 month notice, during which time she will continue to receive her former pay. The pay cut would therefore not become effective until January 2018.
Read more: Bankers Behind Bars: A guided walking tour through the collapse of Iceland's banking system in 2008
In the meantime, however, the power to set her salary will have passed to the board of the bank. On July 1 a new law on the pay of the CEOs of state owned banks takes effect, transferring the power to set their pay to the boards of the banks. The board of Íslandsbanki will therefore have the opportunity to re-negotiate the salary of the bank's CEO before the pay cut takes effect.
One of two state owned banks
Íslandsbanki is one of the three large banks in Iceland. The bank was created after the domestic assets of failed Glitnir were moved into a new bank in October 2008. At the same time the domestic assets of Kaupþing were moved into a new bank Arion, and those of failed Landsbankinn into a new bank with the same name. Initially only Landsbankinn was government owned, as the estates of failed Glitnir and Kaupþing owned the majority of Íslandsbanki and Arion, respectively.
Read more: A 40% exit tax to be imposed on foreign investors
In 2015 the state acquired Íslandsbanki as a part of a deal struck with the estates of the fallen banks on the lifting of capital controls which were imposed following the 2008 financial crash. The estate of Glitnir handed over ownership in Íslandsbanki to the state as part of the payment of an exit tax imposed on foreign investors who owned claims on the failed Icelandic banks.
Read more: Iceland’s president turns down a monthly pay increase of 5,300 USD
