German Execs Criticized for Salary Jumps

In Germany, executive salaries are a touchy subject given the consistently high unemployment rate and high number of layoffs. Still, lackluster economic performance does not necessarily affect the bottom line when it comes to management salaries.

Top earner among Germany's 30 largest public companies in 2004 was Deutsche Bank chief Josef Ackermann, who took home 6.2 million euros ($7.58 million), according to the German Association for Equity Protection. Swiss-born Ackermann came under heavy fire earlier this year for cutting or relocating around 6,400 jobs at a time when Germany's biggest bank was enjoying rising profits.

In second place was the head of German-US automaker DaimlerChrysler, Jürgen Schrempp, whose 2004 pay packet totaled 4.5 million euros. Board members at sportswear maker Adidas received the biggest pay rises, with salaries jumping by 89 percent to an average 1.8 million euros.

ThyssenKrupp executives received a 60 percent wage hike to an average 1.5 million euros. Among the lowest earners was Germany's flag carrier Lufthansa whose executives took home an average 851,000 euros in 2004.

Keeping and eye on the cookie jar

Some monitoring agencies point out that these figures are even a low ballpark figure given the fact that managers often receive special pay incentives and bonuses that are kept secret.

Christiane Holz from Equity Protection, stressed that the current debate is not about envy, but rather that shareholders have a right to know what the employees of their company earn -- that includes managers.

"In some companies, the success of a manager is measured in as many as five different variables and the spectrum is broad," she said. "Unfortunately, these positions are not very well defined or based on any hard facts and figures. There is also no publication of the previous year’s figures which would make it easier to make a comparison. "

Transparency difficult to achieve

One possible solution would be an orientation toward concrete financial figures, but, according to Holz, there are other performance yardsticks.

"For shareholders, figures based on soft factors instead of hard numbers are completely nebulous," she said. "Managers of the German Stock Exchange, for example, can increase their salaries with analyses and social skills."

At Adidas, she added, personal performance plays a role, and the variable salary components for managers at TUI, the travel company, depend on personal yardstick factors that are not very quantifiable.

Many companies in Germany don’t even bother with these kinds of smokescreen tactics. At automobile manufacturer, Porsche, the board simply refuses to reveal management salaries.

Likewise, the Equity Protection Association has also leveled criticism against German lawmakers, for giving managers a rather large loophole. Strictly speaking, public companies are required to make their salaries public. But if 75 percent of shareholders vote against it, they don’t have to. Critics say that amounts to the end of transparency and amounts to open season for another round of salary hikes.