Germans were shocked and angry in 2007 when it was disclosed that Josef Ackermann, then CEO of Deutsche Bank, earned a staggering €13.2 million ($19.2 million) in compensation that year. Unions screamed and politicians denounced what they called a Brobdingnagian payout. Nonetheless, salaries for German top executives have soared to dizzying heights ever since, although in many cases they still lag behind their well-heeled American rivals.
The top package in Germany was earned by software firm SAP’s chief executive, Bill McDermott, who also happens to be an American. SAP just released his pay numbers: €21.8 million, determined by a complex formula of performance data and “retention share units,” in other words to prevent him being lured away by a fat Silicon Valley paycheck. If Mr. McDermott's pay sounds super-generous, consider that Microsoft’s CEO, Satya Nadella, was paid $84.3 million in 2014.
In addition to Mr. McDermott, at least four other German CEOs of publicly listed companies have breached the €10 million level in executive compensation, according to a Handelsblatt analysis of 19 earnings reports, done in cooperation with compensation adviser Heinz Evers at Baumgartner & Partner. They are Dieter Zetsche, CEO of Daimler, maker of luxury Mercedes-Benz cars; Kurt Bock, CEO of chemical giant BASF; Joe Kaeser, CEO of Siemens; and Volkswagen CEO Matthias Müller.
Nobody knows what is actually earned. Heinz Evers, compensation adviser, Baumgartner & Partner
In truth, Mr. Müller’s compensation was capped at €10 million by the VW board after the scandal of cheating on diesel emissions tests forced the resignation of his predecessor. As a consequence, Mr. Müller earned just below the €10 million cutoff, but VW pension and fringe benefits, which are not included in the total, added another €613,000 to his take-home pay.
Mr. Evers, the compensation expert, said one problem with Germany’s system is that there is an alphabet soup of payment acronyms reflecting short-term incentives, long-term incentives and other forms of compensation. “In the end, nobody knows what is actually earned,” he said. Which may be the point.
At the bottom end it becomes somewhat clearer: John Cryan, the head of struggling Deutsche Bank, which lost €497 million in 2017, was paid a measly €3.8 million after foregoing his bonuses. In contrast, the proxy statement for Bank of America released on Monday showed that CEO Brian Moynihan earned $23 million in 2017, or about 250 times what the average employee made. In fact, it’s hard to find any profitable German bank with which to compare Mr. Moynihan’s pay.
Mr. Zetsche, based on Daimler’s 2017 financial year, earned "only" about €8.8 million. But adding in bonuses and awards from previous years brought his total comp to €13 million. While that sounds like a lot, consider that Mark Fields earned $19.2 million in 2016 as Ford Motor’s boss, even though the company’s stock was slumping. He was fired last year.
One of the main reasons it is hard to get supersized pay packages through German supervisory boards is the country’s system of Mitbestimmung, or co-determination, in which companies with more than 500 employees are required to give half the supervisory board seats to workers. It’s tough to vote for a €10 million pay package when you are earning €60,000 a year.
Berthold Huber, a former chief of the IG Metall trade union, told Handelsblatt that when he was on Volkswagen’s board, he felt that €10 million should be a permanent upper limit, but no one listened to him. It took a scandal to change the board’s outlook.
Dieter Fockenbrock is Handelsblatt's chief companies and markets correspondent and Charles Wallace is an editor for Handelsblatt Global in New York. To contact the authors: [email protected] and [email protected]