Swedish private jet scandal claims seventh scalp

SCA loses seven executives after revelations that it used corporate planes to fly board members’ relatives to hunting lodge and sporting events

The Guardian, David Crouch in Gothenburg, 11 February 2015

Jan Johansson has stepped down from his role as chief executive
of SCA. Photograph: TT News Agency/Reuters

A corruption scandal in Sweden centred on extravagant corporate perks and private jets has now cost the jobs of seven senior executives.

Jan Johansson, chief executive of SCA, a forestry group and the world’s largest maker of incontinence products, resigned on Tuesday after coming under increasing pressure after reports that wives, children and even pets of board members had traveled on corporate jets. The flights included trips to a company hunting lodge, Formula One races, the World Cup and the Olympics. On one occasion, Svenska Dagbladet reported, a plane had flown empty from Sweden’s far north to pick up a wallet that an executive had forgotten.

The revelations have demonstrated an extravagance at the top of a country that still prides itself on egalitarian values. It has also lifted the lid on a secretive world of corporate perks in a society that has embraced globalisation but is still uncomfortable with ostentatious displays of wealth and privilege. It has sucked in one of the country’s largest investors, two large banks and accountants PwC, while attracting the attention of prosecutors and financial regulators.

Johansson is seen in business circles as a CEO who “lays golden eggs” – SCA reported record profits only last month. He resigned on Tuesday night, saying investigations into the use of corporate jets were diverting his attention from managing the company. He leaves with two years’ salary, worth 22m krona (£1.7m).

SCA’s commercial success appears to have been accompanied by an increasingly extravagant corporate culture at odds with its stated ethics. In 2013 the company said it had “zero tolerance for all forms of corruption and unethical business practices”.

Attention has focused on a hunting lodge built by the company at a cost of 100m krona (£7.7m), according to media estimates, on prime elk-hunting land in a remote and beautiful part of central Sweden. According to business daily Dagens Industri, the lodge was “worth its weight in gold” as a venue for entertaining potential business partners.

But the leader of the trade union for SCA’s employees has viewed it rather differently, comparing management’s behavior to Vladimir Putin’s Russia. The company has said is considering selling the hunting lodge.

SCA also announced the resignation of its vice-president, who had come under fire for flying with his wife on a company jet, while chairman Sverker Martin-Löf resigned last month after it emerged that his son had been used as a financial adviser on business deals.

Martin-Löf was also forced to step down from all his other board positions on major Swedish companies, including the chairmanship of Industrivärden, a vast investment house that, together with the Wallenberg family, controls more than half the Stockholm stock exchange.

Industrivärden owns controlling stakes in companies such as Volvo, Ericsson and Handelsbanken, one of Sweden’s biggest banks.

In total, the four big companies implicated in the private jets scandal – SCA, Industrivärden, Handelsbanken and steel firm SSAB – have now lost their chairmen. Three of of the companies have lost their chief executives, although some have been reshuffled, rather than sacked.

The scale of the scandal has raised questions about Sweden’s distinctive model of corporate ownership, with large and active shareholders, and an emphasis on long-term investment rather than short-term share price gains. But cross-holdings between SCA and Industrivärden meant that executives were also signing off on each other’s expenses.

Sweden’s national anti-corruption unit last month began an investigation into SCA’s use of corporate jets. Sweden’s financial supervisory authority is also investigating whether the chief executive of Nordea Bank acted improperly by flying to the SCA hunting lodge. SCA banks with Nordea.

The company’s auditors, PwC, are also facing scrutiny for taking part in the hunting trips. Sweden’s accountancy association said in a statement: “It is very inappropriate that the auditor participates in an elk hunt that the client company organises and hosts.”

The behavior by SCA executives and their associates would be at the limits of corruption law in other countries, said Carl Rosen, head of Sweden’s Shareholder’s Association. He condemned an “unholy alliance” between large shareholders and company executives, insisting that companies should not be free to spend unlimited sums on corporate travel and entertainment. He added: “If the message is that you have to go to a hunting lodge in a corporate jet to do business in Sweden, that’s bad.”

Swedish steel company SSAB, whose executives also traveled on board SCA’s jets, defended the practice of inviting clients on hunting trips. “Our customer hunts are a tradition. I have chosen to continue with them,” CEO Martin Lindqvist told Swedish media this week.

Sweden’s main business daily last month called on the country’s capitalists to think about their legitimacy in the eyes of the wider population. In an editorial, Dagens Industri said: “Royalty that celebrates its privileges in unsuitable company is living dangerously, but a monarch who clearly contributes to the development of society can bridge the gap between a culture of democracy and the right to inherit the throne.”

SCA said it had now changed its policy in regards to relatives using business aviation travel, even when there is no extra cost to the company. It also said that business aviation would no longer be used for corporate hospitality.

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