Klaus-Peter Müller, board chairman of Commerzbank, the second biggest German bank, and chairman of the commission for good corporate governance, and Manfred Gentz, former financial head of auto giant Daimler, wrote a joint letter to the heads of the DAX-listed companies – Germany’s 30 biggest firms.
The letter, seen by the Handelsblatt daily, calls for a long-term change in the pay structures in response to growing public anger at excessive bonuses.
“We should always keep in mind, that even, and especially, market economic systems need the understanding and the acceptance of society,” Müller and Gentz wrote.
“We are suggesting that integrating limits or caps into the pay structures might be considered, though of course the scale and suitability of these should be decided by the boards.”
Such a move would break a business taboo in Germany, where any interference in pay structures has previously been considered an illegitimate violation of market freedoms. Apparently for that reason, Müller and Gentz carefully deny in the letter that they are “instruments of political pressure.”
But they warned, “It is to be feared that otherwise, if only out of a populist impulse, politicians will start thinking in terms of legislation.” The initiative seems to be designed to head off politicians considering popular legislation ahead of next year’s elections.
Germany’s top businesses have come under increasing pressure to justify high wages for top management in recent months. The most recent surveys, undertaken by pollsters Forsa, suggest that as many as 71 percent of Germans think CEOs get too much money.
The move by Müller and Gentz is likely to increase that pressure, and history suggests that their fears about government intervention are justified. In 2004, the German parliament passed a transparency law forcing managers to reveal their incomes after many had refused to do so.
Now the two businessmen fear that Germans will no longer tolerate incomes of upwards of €10 million. New figures released in March showed that the CEOs of Germany’s top 30 companies earned an average of €6.1 million in 2011, up nine percent from the year before.
The highest paid German businessman last year was Volkswagen boss Martin Winterkorn, who last year earned €17.5 million in salary and bonuses.