Shamed by the publicity, Barnevik, who stepped down as chairman late last year, has agreed to return $53 million. There are plenty of lessons to be learned from this episode. Until recently, ABB's board apparently functioned as the sort of rubber stamp that Barnevik often criticized. Along with failing to scrutinize executive pay, the board also sanctioned opaque accounting practices that, while not illegal, gave a far-too-rosy picture of the company's performance.
While the board snoozed, Barnevik and his handpicked successor, Goran Lindahl, came close to wrecking ABB. For investors, who have seen ABB's market cap drop by about 70% from its peak in 2000, the executives' poor management and questionable strategy have been far more damaging than their lush remuneration. Let's hope this sorry tale will be a wake-up call for everyone. Europe needs tougher, more skeptical boards. Financial journalists and analysts need to examine their role in creating the Barnevik myth, too. The lesson of ABB and other overrated companies is that the biggest talkers often have feet of clay.