Courting Controversy

ABN Amro is still gathering headlines — even as its buyers pull the bank apart.
Janet KersnarJuly 7, 2008

Some companies have a knack for finding themselves in the eye of a storm. Consider ABN Amro. Even after succumbing to rivals after last year’s tumultuous takeover battle, the now-dismembered Dutch bank is still never far from controversy.

As the dust settles on its €70 billion three-way takeover — the biggest cross-border banking M&A in history — the markets are wondering whether its acquirers have overpaid. Before the takeover talks, ABN executives had been under increasingly heavy fire — particularly from activist shareholder TCI — for poor management. With hindsight, it’s hard not to question the three-bank bidding consortium’s decision to close the deal as the subprime crisis was escalating. “In the Hot Seat” looks ahead, dissecting the challenge of digesting such a massive acquisition from the vantage point of Gilbert Mittler, CFO of Fortis, the Dutch-Belgian bank that paid €24 billion for its share of ABN. A veteran acquirer, Mittler is confident that the deal’s critics will be proven wrong. But ABN is not going away quietly. In late June, Mittler surprised investors when he unveiled an €8 billion capital-raising plan to help shore up Fortis’s post-deal balance sheet.

And as its break-up begins, ABN is in the spotlight for other dubious reasons. Public anger over “excessive” executive compensation is sweeping across Europe, sparked by a handful of cases where there appears to be a weak correlation between pay and performance. One of the most talked about examples is the estimated €32m salary awarded last year to ABN’s former chief executive, Rijkman Groenink. In “Runaway Pay,” we report on where regulators stand on the matter, and also hear the views of CFOs. More regulation? More taxation? Leave it to the board? Executive pay is yet another issue that can land companies like ABN in the headlines, and not always for the right reasons.