The Bekaert Folly

The Bekaert Group, a fairly large company here in Belgium that primarily produces steel wire has been all over the news the last couple of days. The company recently found itself in quite the pickle. They have to lay off around 600 people this year.

Now, that in itself is not very rare in this day and age, it’s on the news almost daily now. There is something else to this particular story that absolutely baffled me though: Even though the company has to lay off hundreds of people the CEO, Bert De Graeve, will receive a 1,5 million Euro bonus on top of his not so inconsiderable ‘base salary’. The irony here is that Bert De Graeve won the award for ‘Manager of the year 2010′.

This also is common practice nowadays so I’ve heard of this before, but it’s still astounding to hear stories like that. Personally, I think that the CEO should relinquish his bonus, regardless of why he received it in the first place, in favor of the employees the company is planning to make redundant. For one, I doubt he really needs this money to keep up his current living standards (he has always been a wealthy man to my knowledge).

I believe that 1,5 million Euros (which is 1 960 000 USD at today’s exchange rate) would go a long way to financing extra training to prepare the people they’re firing for their re-entrance onto the job market.

But the preposterous part of this story doesn’t end there. As you may know, here in Belgium we work considerably less than in other European countries. The average age of people going in retirement is 55. Obviously, this is costing our social security truckloads of money (the system is based on a solidarity principle). The lower amount of new entrants in the job market and the higher amount of people retiring (the whole baby-boomer problem) is putting a lot of stress on our current social security system. In any case, we’ll all have to work longer and perhaps even pay more taxes to keep the system running (as if personnel costs aren’t high enough in Belgium already).

Our new government decided that we’ll all have to work longer than we do now (there are some exceptions) and the ‘early retirement’ system will be discouraged and partly dismantled. I believe this is only natural, I will want to retire at some point and receive my pension just like everyone else so we have to keep the system running. Now, this ‘early retirement’ is a measure where ‘older’ employees who get laid off receive an extra compensation on top of the usual unemployment pay. This extra allowance is paid by their last employer.

The unions at Bekaert, however, are now asking for an early retirement for all employees that get fired from ages 50 and up. That’s more than a decade before the normal, legal retirement age. The secretary of work has already rejected this motion and requested a complete plan for the lay-offs and says that early retirement will only be allowed as a last resort. I can only agree with her, it would be quite hypocritical of the government to increase the retirement age and discourage an early retirement only to consent to it for the Bekaert Group.

The ironic part here is that CEO Bert De Graeve said in an interview with ‘Humo‘ in 2010 that “even a small increase in the legal retirement age can’t even be discussed in this country. As soon as something goes wrong in a company, they immediately reach for the early retirement system – Godiva at age 52, Opel (2 companies that made a lot of employees redundant) at age 48. That shouldn’t be possible!”

Furthermore, I have no doubt that there are sufficient measures in place to help guide these people to a new job. We have an extensive outplacement policy that is compulsory for employees at or above the age of 45 if I’m not mistaken). This measure helps guide people to a new job through training and coaching by professionals.

And quite frankly, I see no reason to give these particular employees an early retirement. Most people getting laid off are hard-working, highly skilled technical workers which is something our job market is desperate for. And yes, it will require some effort and investment to organize education and training to get every worker up-to-date and ready to tackle new challenges in a new position at a new company. The cost will be so much lower than having them drift off into unemployment and early retirement. Think about it, the average life span of men in Belgium is around 78 years, so the people retiring at age 50 will cost the government and the active population (through taxes) 28 years of pension. That’s a huge sum of money that will no doubt exceed the investment and return-on-investment to get these people back to work.

Furthermore, we should all strive to get rid of this image Belgium has where people of ages 50 and up are considered old from a job market perspective. 50 isn’t old at all anymore, these people still have a lot to contribute to an organization.

As you can see, the whole Bekaert story is riddled with insane notions and it is beginning to look like quite the folly. I just wanted to direct your attention to some issues I have with this whole Bekaert issue. First of all, the preposterous notion that CEO’s should receive astronomical bonuses for the work they do. I’m not denying they don’t work hard, but they really shouldn’t receive such huge amounts of money as if they are the prophets of business, especially when the company is in such a bad position.

Secondly, the fact that when people get laid off they’re almost automatically driven into retirement which is costing every single one of us a lot of money. And lastly, the notion that people above 50 are just a hindrance and that they should make room for a younger, more flexible (and cheaper) workforce even though they still have so much to add to our society

In any case, it will be very interesting to see how this tale ends.

Niels Van Hellemont

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