Massive Pay Drop for German CEOs
In recent months, the debate has raged globally about the payment of bonuses to executives of banks, insurance and other companies that are the recipients of government bailouts. In the US, there has been criticism of millions-strong bonus payments at insurer AIG and banking giant Citigroup, and in Germany payments to managers at Dresdner Bank despite losses in the high millions have outraged voters.
The system in place at most corporations is aimed at rewarding executives during boom times, but critics say it has been insufficient to curb excesses during leaner, crisis times like the present.
A new study of companies on Germany's blue chip DAX index conducted by the consulting firm Kienbaum and published by the Financial Times Deutschland newspaper on Wednesday appears to counter that view, though. The study, which looked at 24 of 30 companies listed on Germany's DAX blue chip stock index, found that salaries of top executives at these firms fell by around one-quarter in 2008. Six DAX companies were omitted from the study because they had not yet released their annual reports. Still, the paper argued that the firms included were representative because they included German blue chips like Siemens, Allianz and BASF. The trend reflected a fall in revenues for 2008 at many of the companies surveyed.
Leading the pack in losses was Deutsche Bank CEO Joseph Ackermann who, according to the Frankfurt-based consulting firm, saw his salary fall by 90 percent to €1.4 million—after foregoing his bonus for 2008. Bankers like Ackermann were particularly hard hit, but captains of industry also took blows, especially in the automotive sector. At BMW, for example, CEO Norbert Reithofer's compensation fell by 40 percent to €2.3 million, while at Daimler, CEO Dieter Zetsche's income dropped by 55 percent to €5 million. Meanwhile, at insurer Allianz, chairman Michael Diekmann has seen his earnings decline by 40 percent.
As in the United States, the debate about swollen executive salaries has simmered in Europe as a result of the financial crisis. It's long been a subject of dispute, but the economic downturn and credit crunch has brought a new sense of urgency to the discussion.
Many politicians and executives have reacted to such public pressure, and a number of executives are voluntarily giving up the bonuses that are part of their contracts. The chief executive at Postbank in Germany, which is partially owned by the government, announced recently that he would work this year for a token salary of €1. Meanwhile, on Tuesday, the CEO of German media giant Bertelsmann said he would give up half his salary. According to the Financial Times Deutschland, it's a development that was spearheaded by Ackermann, who forewent his bonus for 2008.
Elsewhere in Europe, the paper reports that French government politicians pressured Thierry Morin, the outgoing chief of automobile parts supplier Valeo, to give up his €3 million severance package. The government recently came to the company's rescue by providing fresh capital, and French Industry Minister Luc Chatel called the planned payment to Morin "shocking."
Meanwhile, in Sweden, the government said Tuesday that it wanted to eliminate performance-based bonuses altogether in the future.