Fabulous retirement packages at Hungarian public companies

There is nothing that fuels media frenzy more than dirt. And it is not terribly difficult to find dirt in Hungary. The latest is the fabulous retirement package paid to Eleonóra Szilágyi neé Szalai who headed the personnel department at the ailing Budapest Transit Authority (BKV). Ailing? Actually it is on life support thanks to the central government that year after year doles out billions to keep it going. Apparently the fares are not cheap, perhaps in part because about one-third of the people who use the transit system simply don't pay for it, as I noted a few weeks back. Then there are all those over the age of sixty-five who can legally use the transit system for free. The central government is supposed to compensate BKV, but how can they when they don't have the foggiest idea how many retirees take advantage of the free service? The central government compensates with an amount that according to the Transit Authority is inadequate.

I also noted that lately Magyar Nemzet has been coming up with juicy stories that are actually based on fact. On July 23 Magyar Nemzet reported that Ms. Szalai received a retirement package of one hundred million forints. That is a lot of money. More than half a million US dollars or more than 360,000 euros. Admittedly, the lady was a faithful employee. She started her career at BKV in 1972, stayed with the firm throughout, and ended up as head of the personnel deparment. Still, that's a mighty generous pension. But, wait, the story becomes even more bizarre. She officially retired on December 31, 2008, and received her 100 million but was kept on for another year. So, in addition to the "retirement" bonanza, she started collecting the standard untaxed government pension of 200,000 a month because, after all, she had retired. And her post-"retirement" pay according to Magyar Nemzet was 4 million forints a month. According to BKV her monthly salary was only 1.2 million although she was entitled to a 120% bonus (keep reading; she might have been entitled to two hefty bonuses). Once one starts counting, Magyar Nemzet's 4 million a month is pretty accurate. So in a single year she could have added about fifty percent to her retirement nest egg.

One must keep in mind that BKV has a new CEO every few months. I'm only half kidding. They come and go. Right now the CEO is István Kocsis who until very recently also served on the board of directors of MÁV. A few days ago he decided to quit that post because of a possible conflict of interest. Once the story broke, everybody clamored for Kocsis's dismissal, but it turned out that he had no role to play in drafting the contract between BKV and Ms Szalai. The culprits were his predecessors, Botond Aba and Zsolt Balogh. Why was she worth so much money? According to the "communications director" of BKV, Szilágyi was deemed indispensable in handling "strike conflicts." The accounting firm of Deloitte and Touche questioned the item, but management somehow managed to convince them that all was in order. 

Since Magyar Nemzet broke the story, a good three weeks have gone by and at least 500 articles and reports have appeared about the case. There was a lot of misinformation, but in the end an investigation has been launched into the case of Eleonóra Szalai. The charge: fraudulent misuse of funds. The police began questioning witnesses. Meanwhile Szalai left BKV, obviously in disgrace. Although at first blush it looks as if Ms Szalai is not really guilty of anything. She simply managed to extract a very favorable contract. Her remaining with the company after retirement seems to have been at BKV's behest. And despite newspaper reports that Ms Szalai  was doing something illegal when she also took advantage of her pension, I'm not at all sure that this is the case. At least it happens all the time in Hungary that an employed person reaches the age of eligibility for a state pension and that, after "retiring," gets hired again by the same company and still collects the pension.

More details of BKV's pay packages have come to light lately. Before Kocsis became CEO, BKV spent 2.6 billion forints on retirement packages and severance pay in 2007 and 600 million in 2008. Kocsis, according to his own account of events, when confronted with these huge amounts tried to convince people to forgo some of the money. I'm most surprised that he actually succeeded in some cases. Moreover, he claims that since he took over almost a year ago he has spent only 168 million on retirement packages and/or severance pay. Kocsis initiated an internal investigation into the whole situation, the findings of which were supposed to be secret but by today all of Hungary knows about them. They found 12 cases where the retirement package or severance pay was over 20 million and where "for other considerations" everyone received many more millions. Among the 12 cases there were several instances where the favored person was employed for only a few years. It is not clear whether they quit or were terminated.

Meanwhile details of the contracts between Ms Szalai and the BKV CEOs have been leaked to the media. Her first management contract was signed on December 1, 2005. At that point Botond Aba was the CEO. According to that contract Szalai's monthly pay was 500,000 Ft. plus a 150% "basic bonus" and a 150%  premium based on performance. Please don't ask too many questions. I have no idea what this bonus structure is. In case she was let go, she was to receive a golden parachute of fourteen months' salary plus four extra months' salary for "keeping company secrets." I don't know what kind of company secrets could she possibly sell to a nonexistent competitor of BKV! Two years later Attila Antal, the new CEO, sweetened the contract. She received a higher salary, was given an all-expense paid company car, and if she was let go she could keep the car. After Antal left in March 2008, the contract was amended once again under the stewardship of Zsolt Balogh. Ms Szalai's employment contract was extended to April 9, 2010. She received her retirement package in addition to the money she was supposed to get for keeping company secrets. Her monthly salary was set on July 1, 2008, at 1,182,000 ft. plus 120% bonus and from 2009 on at 1,241,00 plus 120% bonus. In 2008 she received in bonuses alone 24,693,200 ft. This year she has already received 8,935,200 ft. just in bonus payments. The lady must have lived well. Unless the courts try to nullify the contracts and invoke some kind of claw back provision, I don't think she has to worry about providing for her old age.

The Hungarian public is outraged and I don't blame them. And one has the sneaking suspicion that this is just the tip of the iceberg.

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Odin's lost eye

This does not surprise me in the least. ALL nationalised industries around the world, although they are not supposed to be, are run for the exclusive benefit of their top brass and senior management, mainly the latter as they actually control the cash.
As to the transit system I think it is only busses. I think there is a subsidy from the E.U. for this

Alice Byrne

Anomalies, anomalies. It didn’t surprise me, too. There are some companies that spend millions on retirement packages. But, unfortunately, retirees weren’t able to get them. Hhhm.. What should the higher-ups do about this issue?