Buhlmann's Corner
A few years ago people likened the idea of publishing individualized executive compensation to the end of Christianity – even though, in Caritas in Veritate, the Holy See itself addressed the responsibilities of the owner.
Now, little by little, the German legislature wants to set the level of executive compensation. So good and bad / large and small tasks / daily operations and strategy are to be made codifiable, absolute intelligence poured into Articles and put into international competition? Yet every Tom, Dick and Harry, with or without a PhD, knows from experience that responsibility cannot be defined legally! The fact that the same duties are rewarded differently is shown by the classic example of Gerhard Cromme with his remuneration at Siemens and at ThyssenKrupp – which is not based on the fact that there he was given discharge by only 15% of all free shareholders (excluding foundation and friends).
It is clear to every stakeholder that €10 million a year (in these times!) is too much; and yet even more is paid – in addition to a pension and other benefits in kind. It is absurd, then, if the discussion, as at Volkswagen, is “complicated by the election in Lower Saxony”. Didn’t the SPD win the elections? Would any discussion of compensation and investments thus be “complicated” in the same way by elections, weddings or flu attacks?
How absurd laws are instead of responsible (!) balancing of each individual case is also demonstrated by the bonus world focused around banks, because the annual bonus was out of control, and because on the one hand a way was sought to let that keep going, and on the other hand every Tom, Dick and Harry was to be reassured – so they developed the concept of an annual bonus to stretch/distribute over several years. Purely mathematically, however, a wave then builds up when the recipients consistently manage well – so the problem has been only postponed, not put behind us.
So today we complain over bankers' bonuses, which even in difficult times are higher than would correspond to the annual result. Perhaps the only reason why we are so blind is because the bonus is not broken up into its components: annual bonus, last year’s bonus, previous year’s bonus. Of course, in deteriorating times, then the mathematically correct bonus for the financial result is ethically excessive! So it is with the Deutsche Bank: only what is still missing here is social acceptability, and the basis for the bonus calculation.
No bonus can be socially acceptable (in terms of overall views in the workforce) if it goes up and up while the foot soldiers are left to starve - which can only mean that the bonus recipient one day moves on, because the foot soldiers won’t march any more. So far the basis for calculation includes the positive effect from transactions (which is proper) while the financial consequences of liability and damages are socialized among the owners. It cannot and must not be that the billions in fines and the trials find no purchase on the bonuses of those responsible. Whenever consequences are disconnected from actions, bubbles and distortions will result – again, and even more. Still, we can hope that Jürgen Hambrecht, the successful ex-head of BASF, and his four fellow commissioners set about fixing this shortcoming that “earnings are bonus-relevant, but expenditure is a shareholder matter.”
Clearly, the German Corporate Governance Code Commission is blind in that eye: after all its president, Klaus-Peter Müller, was responsible as Chairperson for the purchase of Eurohypo – bought back then in order to protect the bank, or rather the management, from takeovers, now as a bad bank it hangs around the Bank’s neck like an albatross.
And there we have it again: the State is heavily involved in the Commerzbank. It, the State, the legislature (!) does not get the problem in a particular case under control –but has the audacity to say it can fix it in statutory form for all its subjects? No, the responsibility is the shareholders’. They have to face up to the task and act. When are retirees finally going to ask their pension funds, fund clients their managers, the insured their life insurers, the self-employed their pension schemes, what they’re up to?
It is extremely second-rate when the pitiful Martin Winterkorn laments in Davos that he earns too much – he could take it and distribute it to his employees, customers and shareholders (as a gift, to save tax). The volume is big enough by now.