DSW's Remuneration Survey 2006

DSW recently conducted a survey which analysed the average cash salary plus bonus payments of the Dax 30 executives in the financial years 2004 and 2005 and compared the development to that of the Earnings per Share (EpS) of the respective company.

As in the years before we had to deal with different levels of transparency. On the one hand the companies already individualising the pay of their top management. And on the other hand we still found seven blue chip companies, namely DaimlerChrysler, BMW, BASF, Henkel, MunichRe, Linde and FMC, that did not disclose individualised figures for 2005.

The results of the DSW survey show that directors of the Dax-30 companies earned an average of 1.7 millions of Euro in fiscal 2005. In 2004 they received 1.54 millions of Euro. This is an increase of about 11 percent.

A Dax-CEO on average earned 3 millions of Euro, likewise a plus of 11 percent compared to 2004.

Compared to the remuneration in Europe, German executives in 2005 found themselves in the upper range. In the Netherlands, for example, a CEO on average earned 1.7 millions of Euro in 2005 and with that far less than his German colleague. The ‘pole position’ in the Netherlands, by the way, was up to Don Shepard, head of Aegon insurance group. Mr Shepard earned 3.8 millions of Euro in 2005.

In the UK, the highest amount was paid to the head of Xstrata, Michael Davis (7.25 millions of Euro) follwed by Stanley Fink, CEO of MAN Group who received 5.6 millions of Euro in 2005. In the FTSE 100, an executive director is paid 1.4 millions of Euro on average.

Taking a look at the remuneration in the US an executive of a S&P 500 company on average earned 2.5 millions of Euro in 2005. Taking into account the size of this index the enormity of the spread in remuneration comes to no surprise: it varies from 0.24 millions of Euro to 18.8 millions of Euro. Share options included the remuneration may climb to astronomical 125 millions of Euro (see www.thecorporatelibrary.com for details).

Going back to Germany it is no surprise to find Deutsche Bank again heading our ranking. An executive of Germany’s largest financial institution received 3.83 millions of Euro, a pay rise of 26 percent compared to 2004. The Earnings per Share (EpS) at the same time increased by 52 percent. And the Deutsche Bank share rose in 2005 by 25 percent.

Executives at SAP came in second. 3.18 millions of Euro was the average remuneration for an executive of the software group. At DaimlerChrysler placed rank three, an executive still received 3 millions of Euro.

The strongest pay rise this time was up to Commerzbank with an increase of 175 percent. The EpS at the same time rose by 216 percent. The share price increased by 71 percent in 2005.

Metro managers had to face the biggest loss in pay: Almost 23 percent less the company transferred to its managers. With 35.6 percent, the EpS decreased far stronger. And the share price didn’t cause euphoria either.

Infineon’s executives had to face a similar reduction in their remuneration as did the Metro executives. But this seems to be bearable if one takes a look at the development of the company’s EpS: Infineon in one of the four companies in the Dax that did not manage to increase the EpS in 2005. Furthermore, Infineon is the only company having to disclose a loss in EpS for 2005. And the performance of the share price (-3.5%) ranked among the worst in the Dax. Against this background, the pay decrease was rather underdosed.

The pay range again is very wide. The 2005 top payer Deutsche Bank handed roughly 3 millions of Euro more to each of its top executives than number thirty (Postbank) did. But with regard to the share price Postbank clearly headed the field: DSW noted an increase of 50 percent for Postbank shares but only a 25 percent increase for Deutsche Bank shares.

A total of seven companies reduced their payments to their executives. RWE, Adidas, Allianz and Deutsche Börse paid less even though the EpS increased. Siemens, Metro and Infineon reduced the pay to their top executives in line with decreasing EpS. TUI managers could be happy about a 26.4 percent pay increase in 2005 notwithstanding a decrease in EpS of almost 23 percent compared to 2004.