German pay row intensifies

A leading member of the government commission that helped draft the bill has accused its author of not going far enough to force companies to reveal directors' remuneration.

Christian Strenger, a director of DWS Investments, the mutual fund arm of Deutsche Bank, said Theodor Baums, head of the government commission, should have forced all top directors to disclose their pay rather than just chief executives.

Baums, a professor at Frankfurt University, drafted a bill forcing the disclosure of boardroom pay after the country's leading companies failed to comply with a voluntary system. Baums said his mandatory regime was closely modelled on the UK's code of governance.

Strenger, previously chief executive of DWS Investments, said Baums' timing was off because most of the constituents of the Dax 30, Germany's index of leading companies, were complying with the voluntary code. Many Dax 30 companies are understood to have decided to adhere to the voluntary code in the past two weeks, after dragging their heels for months. Strenger said companies might now prefer to wait for a law rather than comply with the voluntary code.

He told Financial News: 'Baums' bill was written with the best intentions but there is a danger that companies are going to relax with the new law in the making. We have been through a lot of pushing and shoving with Dax companies and this could now come undone.'

Strenger argued that all directors should be forced to reveal their pay.

Baums insisted it was only necessary for chief executives to make statutory pay disclosures. He said: 'The other executives are provided for by the voluntary code and I don't see it as necessary to force full disclosure.'

As a minimum standard for the mandatory code, companies will have to reveal remuneration paid to chief executives and aggregate remuneration paid to directors.

A supervisory board of independent directors will be appointed to examine company policy, pay structure, pay targets and long-term incentives.

Baums said Brigitte Zypries, the German justice minister, had indicated that the compulsory code would be introduced next year following another round of annual reports.

German insurance group Allianz said last week it would provide individual disclosure of remuneration for members of its management board.

BASF, the chemical group, and Volkswagen, the car manufacturer, are understood to be the two most reluctant to comply with the voluntary code.

Josef Ackermann, chief executive of Deutsche Bank, is Germany's highest paid executive and earned an overall pay package of €11m ($13.4m) last year.

Pressure for more disclosure in Germany has been building since details of bonus payments to executives of mobile phone company Mannesmann emerged after its takeover by Vodafone of the UK.

Klaus Esser, Mannesmann chief executive, received an extra bonus of 10m (€14.9m) that went beyond the severance pay specified in his contract. Directors of Mannesmann, including Ackermann, were cleared of any wrongdoing in making the payments in July.

Earlier this month DSW, the German small shareholders' association, named and shamed five of the country's top companies as it stepped up the pressure for transparency in the way managers' pay is linked to performance. Drugs groups Schering and Bayer, reinsurer Munich Re, utility RWE and car maker BMW had increased boardroom pay even as profits shrank or slipped into loss, DSW said.