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October 2nd, 2012

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Banks are facing criticism for giving their CEOs million-kroner ‘golden handshakes’, despite poor performances.

Last week it was reported that former CEO of Vestjysk Bank, Frank Kristensen, received a 10.3 million kroner ‘golden-handshake’ for retiring after the bank’s board of directors lost faith in his leadership.

The bank expects to lose about 800 million kroner this year, despite recent accounts predicting the bank would break even this year.

The Danish shareholders association, Dansk Aktionærforening, is now considering whether or not to sue the bank’s former leadership, with Kristensen at the helm, for providing inaccurate accounts.

“We are following the case with interest to see if there is the foundation for a case,” Niels Mengel, chairman of Dansk Aktionærforening, told Børsen. “We can’t have a bank system that works this way.”

Chairman of Vestjysk Bank’s board of directors, Carsten Søndergaard, has been a vocal critic of Kristensen after the shock announcement. This was considered extraordinary, as it was Søndergaard’s responsibility to sign off on the accounts provided by Kristensen that turned out to be wildly inaccurate.

The Socialdemokraterne have questioned Søndergaard’s statements that Kristensen alone was responsible for the bank’s troubles

“The responsibility has been firmly focused on certain individuals and, while it may turn out to be right, it may also be the case that the division of responsibility may be more nuanced,” the party’s business spokesperson, Benny Engelbrecht, told Jyllands-Posten. “There is also the question of the responsibility of the board.”

In another recent case, Henning Barsøe, CEO of Svendborg Sparekasse, was given a one million kroner golden handshake after choosing to leave the bank 19 days after he joined.

According to Fyens Stiftidende newspaper, Barsøe was entitled to a minimum of six months pay for taking the job and was actually entitled to about 1.5 million kroner, a sum that was negotiated down by the bank.

TV2 Finans reported that 13 CEOs of banks in crisis have been given golden handshakes as they left their posts. The severance packages are worth a total of about 90 million kroner.

According to Anders Drejer, a professor in leadership at Aalborg University, the CEOs are entitled to these vast sums even though they left the banks in deep disarray.

“All CEOs run the risk of being fired which is why they write in compensation [into their contracts],” Drejer told TV2, adding that it is quite difficult to understand the case when seen through the eyes of an ordinary citizen. “When you leave a bank in a crisis and leave with millions in your pocket, it can seem morally wrong.”