Merkel's Party Blocks Executive-Bonus Curbs as Campaign Heats Up

  • Germany’s Social Democrats denied ahead of September election
  • Schaeuble said to cite legal concerns about SPD proposal

German Chancellor Angela Merkel’s party blocked a proposal to curb executive bonuses, turning managers’ pay into a campaign issue six months before national elections.

Leaders of Merkel’s three-party governing coalition failed to agree on legislation put forward by the Social Democratic Party, which is both part of the government and trying to unseat Merkel in the Sept. 24 election. The SPD wants to cap executive pay in relation to average employee pay and limit tax deductions to the first 500,000 euros ($537,000) of total compensation.

“We couldn’t reach an agreement,” Volker Kauder, parliamentary leader of Merkel’s Christian Democratic-led bloc, told reporters in Berlin after a six-hour meeting of coalition leaders that ended in the early hours of Thursday. “I don’t see how we can get there” before the election, he said.

The dispute reflects pre-election positioning by both sides as the SPD’s candidate for the chancellery, Martin Schulz, buoys his party with a campaign that includes pledges to reduce income inequality. Polls suggest the Social Democrats have closed the gap with Merkel’s bloc after Schulz’s candidacy in January gave the party a boost.

German Finance Minister Wolfgang Schaeuble, a member of Merkel’s Christian Democratic Union, has legal and constitutional reservations about limiting tax deductions on executive pay, Kauder said. Merkel’s bloc would prefer a requirement for companies to provide full public disclosure about executive pay to shareholders, he said.

“Many people find it extremely unfair that managers get such exorbitant salaries,” Thomas Oppermann, the SPD’s parliamentary chief, told reporters. “The CDU doesn’t want effective limits.”

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