Bull and bear on Euro bills.
Companies listed in the German stock index have made large profits in 2016 – salaries of their management board members have risen only slightly. (image: chairman / fotolia.com)
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Earnings of DAX managers tied more closely to long-term successManagement board salaries rising at a slower pace than corporate profits

The salaries of DAX management board members rose by only 1 percent last year, although the profits earned by their companies increased by 25 percent. One reason: The trend towards linking compensation more closely to long-term success continued in 2016. This was confirmed in the annual joint study conducted by the German investor protection association DSW (Deutsche Schutzvereinigung Wertpapierbesitz) and the Technical University of Munich (TUM) and presented today in Frankfurt.

The top managers at companies listed in the German stock index DAX (Deutscher Aktienindex) earned an average of € 3.376 million in 2016, 1 percent more than in the previous year. In 2015 top management salaries had dropped slightly, while at the same time companies earned less. As in the past, managing board members of DAX companies earn 50 times as much as their employees. In Germany as a whole, gross wages rose by 2.5 percent.

"We were surprised to see the relatively moderate salary development for top managers, since the operative profits of the DAX companies have essentially exploded," said Prof. Gunther Friedl of the Chair for Controlling at the TUM. The head of the study sees the reason for these results in the redeployment of individual compensation components: Management board members received less in the form of variable cash compensation components, which are for the most part tied to annual balance sheet results (down 8 percent).

In contrast to the previous year, non-variable basis salaries were not reduced, but rose by only 2 percent. However, the value of stocks, options and share rights granted to management board members rose by 17.6 percent. This type of compensation is seen as an incentive to orient corporate leadership towards long-term success, since the value of the top executives' own stocks increases as well. This component now accounts for approximately 27 percent of overall compensation. It had already risen in the previous year, while during the preceding period companies had primarily increased fixed compensation – regardless of performance.

"Additional laws would be a mistake"

"The debate in society about management salaries appears to be having an effect," says Friedl. "The Supervisory Board members are fulfilling their responsibility to ensure appropriate and performance-oriented management board compensation that society can accept. Accordingly I think additional legal regulations that interfere with the amount or structure of compensation would be a mistake."

"When we're talking about absolute numbers, we see a stronger and stronger manifestation of an upper limit of 10 million Euros for management board compensation," said DSW Managing Director Marc Tüngler. "Anything beyond that almost inevitably leads to public debate which can harm the reputation of the company and of the persons involved, while at the same time fueling the discussion in Berlin calling for a legally mandated upper limit. However, we see this as counterproductive; we also assume that supervisory board members and top executives don't want to subject themselves to legal restrictions. So the principle here is to attain some degree of moderation through self-regulation."

SAP management board members are the top earners

The management board members at SAP earned the most in 2016, with an average annual compensation of 5.77 million Euros, an increase in compensation of 163 percent. They were followed by their counterparts at Merck with 5.16 million Euros and BMW with 4.71 million Euros. Top managers at VW have often been earnings leaders in the past; however their compensation dropped by 33 percent to 4.68 million Euros.

And the top-earning CEO can also be found at SAP: Bill McDermott earned 13.77 million Euros, followed by VW boss Matthias Müller with 9.62 million Euros and Daimler CEO Dieter Zetsche with 7.72 million Euros. The average annual compensation received by the CEOs of DAX companies was 5.52 million Euros.


Prof. Dr. Gunther Friedl
Technical University of Munich
Chair of Controlling
Tel: +49 89 289 25801

Corporate Communications Center

Technical University of Munich

Article at tum.de

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