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Golden parachutes rain down on KDH

AFTER severance payments of €100,000 and €90,000 were given to two executives leaving TEKO, the Košice-based state-owned central heating plant, after they had held their posts for just a matter of weeks in 2011, the government of Iveta Radičová denounced these so-called golden parachutes and promised to narrow the opportunity for bosses at state-run companies to leave with piles of cash.

Most ZSSK employees do not get big parachutes. (Source: SME)

AFTER severance payments of €100,000 and €90,000 were given to two executives leaving TEKO, the Košice-based state-owned central heating plant, after they had held their posts for just a matter of weeks in 2011, the government of Iveta Radičová denounced these so-called golden parachutes and promised to narrow the opportunity for bosses at state-run companies to leave with piles of cash.

But the €178,000 in severance and bonus payments going to Marcela Hrdá, the outgoing head of state-owned Slovenská Pošta, shows that the era of golden parachutes over Slovakia’s skies has yet to end.

Pavol Kravec, who was terminated as the head of Slovakia’s ZSSK passenger railway company in April, is entitled to a departure package worth as much as €205,000, reportedly including a €35,000 bonus for achieving specific financial results at the loss-making firm. But Kravec is not the only departing executive entitled to leave with his pockets full after a short stint at a state-controlled company.

Transport Minister Ján Počiatek said on June 12 that managers of various ranks at ZSSK, Cargo – the state-owned freight railway operator – and postal operator Slovenská Pošta could receive a grand total of €1.46 million in severance pay or bonuses. All the firms are loss-making and most of the managers have been in post for less than two years.

Počiatek called on his predecessor, Ján Figeľ, whose ministry had responsibility for these companies, to see to it that the individuals return the money to the state, the SITA newswire reported.

Počiatek said he holds Figeľ responsible for the fat payments.

“We have calculated [there are] golden parachutes worth almost €1.5 million, which equals 160 years of work for an average Slovak,” Počiatek said.

Figeľ, the chairman of the Christian Democratic Movement (KDH), faced criticism from political ethics watchdogs as well as from MPs and other members of his party. Figeľ admitted that employment contracts with executives were signed at state-run companies under the control of the Transport Ministry that made it possible for former employees to receive large severance payments. But Figeľ argued that this was because these companies failed to observe the new rules for golden parachutes introduced by the cabinet he served in.

“My findings have shocked me,” stated Figeľ, as quoted by SITA, adding that his ministry – as the primary shareholder in these companies – did not intervene into employment contracts of executives and thus he had no knowledge of what he called “super-standard conditions”. He added that these provisions were carried over from the first government of Robert Fico. “The amount of the severance payments is unacceptable,” Figeľ stated, as quoted by SITA.

The severance payments for sacked managers at ZSSK reportedly come to a total of €856,470; the payments at Cargo apparently reach €420,000; and it has been reported that Slovenská pošta severance payments will total €178,000. Jaroslav Paulický, the deputy chairman of the board of directors of ZSSK, will reportedly be comforted by €167,000 in severance and another member of the board, Pavol Tarcala, will receive more than €114,000. The severance payments for the 12 former board members will add up to €370,000. When Pavol Ďuriník was terminated from his post as director general of Cargo he became eligible for €96,500 in payments and Martin Štochmaľ, a sacked member of the board is expected to get €80,000. SITA reported that the other former directors of Cargo will receive a cumulative sum of €244,000.

In a letter to friends, Kravec said that he intended to give part of his severance to charity, the Sme daily reported. Then, shortly before The Slovak Spectator went to print on June 14, Kravec, a member of the KDH, pledged to return his severance package and resign his party membership.

Počiatek told the media that the employment contracts for these executives were written in such a way that most of Figeľ’s nominees would get the backing of a court of law if the state filed lawsuits seeking return of the severance or bonus payments.

The transport minister charged that if Figeľ’s nominations had been professional then it would not have been necessary to remove the executives or board directors at all, adding that the actual performance of these executives did not justify their large bonuses or severance payments. Počiatek also stated that the situation at Slovenská Pošta called for instant changes, saying “what we are learning now is only proof that the management kept its own benefits in mind rather than work results”. Počiatek added that the cabinet he serves in will take the necessary steps so that the situation is never repeated.


"Platinum" postal parachute


Figeľ admitted he had signed the Hrdá’s employment contract when she became chief executive at Slovenská Pošta, but said he was surprised by the amount of the severance payment. Nonetheless, he stated that the principles in the contract he signed were “correct and healthy” and refused to call it a golden parachute because the severance received by Hrdá was based on three monthly salaries and the remaining amount was a bonus based on better financial performance by the state-run postal service.

“The former director [Hrdá] will get nothing as a past director of the board but only a three-month severance as general director,” Figeľ stated, as quoted by SITA, reporting that the severance amount comes to €7,000.

Počiatek called the amount paid to Hrdá a “platinum parachute” rather than a golden one and stated that the amount is among the highest ever paid to a former government employee in Slovakia. The minister did agree with Figeľ that nearly all of the total payment was based on supposed improvement in the company’s performance, while adding that the previous leadership of Slovenská Pošta only “pretended to improve the economic performance and in reality it meant only a reduction of the planned losses”.

The minister stated Hrdá’s bonus, based on the postal service’s financial results, was based on cutting the planned losses in 2011 from €12 million to €8 million but added that this was done only because of an accounting procedure in which a liability was written off because a plaintiff in a court trial had died, SITA reported.


Figeľ should have known


Gabriel Šípoš, the director of Transparency International Slovensko, told The Slovak Spectator that Figeľ, as transport minister, should have known about the employment contract that resulted in Kravec being entitled to €170,000.

“They [the ministry] should have tuned the rules for defining wages, bonuses or severance payments for managers and what these sums depended on,” Šípoš said, adding that the parameters of contracts with executives at state-controlled companies should be automatically published on the internet.

Šípoš said he views the amount that Kravec received as quite high, calculating that even if a monthly salary of €10,000 is assumed for Kravec, which Šípoš emphasised would be quite good at a state-owned firm, then the severance going to Kravec is about 17-18 times his monthly salary, far above the standard amount of severance in Slovakia.

Zuzana Wienk, director of Fair-Play Alliance, told the Týždeň weekly that what bothers her the most is that after taking power every government replaces a huge number of political and partisan nominees and that severance would not need to be paid by the state if these positions had been occupied by people with professionals skills who would stay in their positions on a long-term basis.


KDH MPs object to parachutes


Several members of the KDH have said that their political party should be discussing the large severance payments, with MP Martin Fronc calling them inappropriate. Peter Belinský, a member of the KDH’s presidium, said that the executives appointed by Figeľ should return their severance payments and bonuses and KDH deputy chairman Július Brocka seconded the idea, asking that the individuals act morally and return the money.

“When people continue in practices that we witnessed under Mečiar, Slota and Fico, I am calling on them to act morally,” Brocka stated, as quoted by SITA.

Nevertheless, Sme reported that Figeľ, the sole candidate for the position of KDH leader, is not expected to see his re-election, at a party congress scheduled for June 23 in Ružomberok, endangered.

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