Incomes of top managers increase by up to 20%

In 2006, the annual average income of Germany’s top managers increased on average by 16% to 20%, according to the company reports of Germany’s 30 leading public limited companies. Increases varied between 1.36% and 76.86%. While a new law requires companies to give precise information on an individual basis, experts criticise company reports for still concealing the total amount of top managers’ salaries by not revealing information about all financial arrangements.

According to the new Disclosure of Managing Directors’ Remuneration Act (in German, 66.5Kb PDF) passed in 2005, companies listed on the German stock market now have to provide precise information on fixed salaries and on performance-based payments in relation to each of their top managers (DE0402205N). In March 2007, when Germany’s 30 leading public limited companies listed on the German stock exchange index (Deutscher Aktienindex, DAX) published their reports on the 2006 financial year, newspapers such as the Süddeutsche Zeitung, Handelsblatt and Die Welt asked financial experts to analyse them.

The findings of these experts vary depending on how many reports were analysed, but they show that the annual average income of Germany’s top managers grew on average by 16.9% to 20% in 2006 compared with an increase of only 5% in 2005. The income growth is largely due to an increase of performance-based remunerations. However, it substantially exceeds the companies’ average growth in profits of 11% in 2006, according to the Süddeutsche Zeitung.

Top managers’ average annual salaries increased by the largest margin of 79.86% at the truck manufacturing and mechanical engineering company MAN. Top managers of retailer Metro come in second with an overall salary increase of 76.09%. By comparison, the insurance company Allianz raised the average annual income of its workers by only 1.36%.

The annual incomes of the chief executives of Deutsche Börse (the German stock exchange), the automobile parts supplier Continental and MAN more than doubled. The Chief Executive of Deutsche Bank, Josef Ackermann, kept his position as top earner, as his salary increased by 11% bringing his annual income to €13.2 million.

According to the Süddeutsche Zeitung and Handelsblatt, experts criticise the reports for still not providing all of the available information. In this regard, German law still leaves numerous loopholes and does not meet European standards, according to Professor Theodor Baums of the University of Frankfurt. The Süddeutsche Zeitung reveals that these reports can conceal information about the amount of real wage increases from the public. For example, compensations for loss of office are often not publicised at all. In other cases, particular arrangements for old-age provision such as single payments or contracts for consultancy services are not listed. Quite often, the given value of top managers’ stock options is outdated. The Süddeutsche Zeitung quotes Professor Michael Adams, who is a law expert at the University of Hamburg, saying that about 20% of the average annual income of top managers is not disclosed in the company reports.