Germany Says Pay Caps Would Harm Push to Woo U.K. CompaniesBy
Deputy finance minister doesn’t see need for salary clampdown
Must be good reason for more regulation, Meister says
A German deputy finance minister resisted calls for a clampdown on executive compensation, arguing that doing so would send the wrong message as the country seeks to woo companies away from Britain in the wake of the vote to leave the European Union.
“In the context of Brexit, we are campaigning to be an attractive location, and I don’t know that the suggestion of regulation contributes to that attractiveness,” Michael Meister, who is responsible for financial market regulation in the finance ministry, said in parliament on Friday. “There must be a good reason for regulatory intervention.”
Britain is moving toward formal negotiations to leave the EU after a majority of voters in a referendum last year cast their ballots in favor of leaving the bloc. At least half a dozen European cities are already jostling to present themselves as the best location for banks to set up new headquarters with the EU.
In a gesture to simplify potential moves, German banking supervisor BaFin said this week it would take into account the view of U.K. banking supervisors when deciding whether lenders coming ahead of Brexit had adequate risk models. Lobby group Frankfurt Main Finance expects as many as 10,000 workers from Britain’s financial services industry to relocate to Germany’s banking capital because of Brexit.
Meister was speaking on the behalf of the government in parliament during a debate over pay limits being pushed by the opposition. Germany’s Green party has proposed a cap on deductions on executive payments from companies’ tax bills.
Volkswagen AG, which is partially state owned, is due to vote next Friday on a cap for top executive pay in reaction to criticism of payouts to managers following the diesel-cheating scandal, people familiar with the matter said earlier this month.
VW’s payouts have prompted calls for change from the country’s politicians as Germany heads for a federal election in September. Merkel’s coalition has also taken aim at former Deutsche Bank AG head Josef Ackermann in a dispute over bonuses, distancing her government from the bank’s legacy.
New rules from Germany’s financial regulator will take effect next month that allow for the clawback of executive bonuses in the case of losses from mismanagement.
Meister downplayed recent scandals, however, saying that there were only a few bonus scandals and that “this is not an overall phenomenon.”