Chamber of Labour calls for cap on managers’ pay

Managers in Austria’s top companies earn 48 times more than the average worker, according to a study by the Chamber of Labour. The findings show they earned, on average, €1.3 million in 2011 – 20% more than the previous year and 48 times average income. The Chamber is now demanding that managers’ wages are pegged to 20 times average income. The Federation of Austrian Industries rejects the figures and says pay for managers in Austria is relatively low compared to other bosses across Europe.

Introduction

According to recent research by the Austrian Chamber of Labour (AK), managers in leading companies listed on the Vienna Stock Exchange (ATX) earned 20% more on average in 2011 than in the previous year. The average wage per capita was €1.3 million, 48 times the average income of Austrian workers. This ratio has more than doubled over the past decade – in 2000, the average manager’s income was only 20 times that of the average worker. AK’s findings suggest bosses’ pay has returned to the all-time high of the pre-crisis year of 2008.

Impact of bonuses and severance pay

The top earning managers in Austria work in the oil and gas group OMV, taking home, on average, €2.5 million a year, followed by the plant engineering group Andritz and the textiles group Lenzing (€2.2 million), Raiffeisen Bank International (€1.7 million) and the mail shipping services provider Austrian Post (€1.2 million).

In the vast majority of the listed companies (80%), managers’ wages had increased compared to the previous year. In more than half of the companies, the growth rate lies at between 13.5 and 124 percentage points. The wages of managers at the brick manufacturer Wienerberger, Lenzing and the Vienna Insurance Group doubled compared to 2010.

The increase is said to be partly due to a disproportionately large increase in bonus payments. While the basic salaries for board members increased by 6% on average, bonus payments have grown by almost 10% and, in addition, very high severance payments were handed out.

Recommendations

Following its analysis, the AK has issued the following recommendations aimed at cutting what it sees as extortionate wages for managers:

• companies’ tax deductibility of management wages should be set at at €500,000 per capita;

• bonuses for board members should not depend on the increase in the price of shares, and legislation should be introduced to make sure bonuses are based on more sustainable criteria such as qualification measures or job creation;

• bonus payments should be limited to a maximum of 30% of the fixed basic salary;

• managers’ salaries should be capped at a maximum ratio of 1:20 in relation to the average wage;

• companies’ supervisory boards should be legally bound to set clear criteria for the remuneration of executive managers, and the possibility of reducing wages should be included in management contracts;

• the shareholders should be informed about managers’ wages by the supervisory board at a company’s annual general meeting;

• the publication of individual managers’ wages should be enforced by law.

Reaction to the study

The Federation of Austrian Industries (IV) has rejected the AK’s findings. It said that, when compared with managers in other European countries, the pay of managers in Austria was in the lower third of that list, and that the figures used in the AK study would not stand up to close scrutiny.

The federation also commented that the relatively strong economic situation in 2011 led to comparatively high wages because 70% of all managers would have received part of their wages as profit-related pay.

The President of the Federal Economic Chamber (WKO), Christoph Leitl, has asked for economic goals to be set in the employment contracts of managers of state-affiliated companies. If those objectives were not met, he said, managers’ wages should be cut.

Bernadette Allinger, FORBA (Working Life Research Centre)