Campus

Businesses should limit managers' salaries - Kley throws in the towel

The Government Commission for good corporate governance (German Corporate Governance Code) around Klaus-Peter Müller on 5 February addressed the controversial issue of manager salaries. When Chairman Müller, as always at the beginning of the year, reported on the planned changes to the Corporate Governance Code, he ventured for the first time also on the limits on managers' salaries hotly contested by business. Although Commissioner Manfred Gentz stressed no one wanted to explicitly intervene in company compensation systems of or even lay down specific guidelines for the appropriateness of remuneration, the Commission's proposals to improve the transparency and accountability of executive remuneration do represent definite changes in content. Specifically, it proposes to recommend that individual compensation should be capped in aggregate amount and also in individual compensation components. The supervisory boards that set directors' salaries are, according to the will of the Commission, to ensure in future that board members’ salaries are not too far from those of the second tier nor from those of the total workforce. The systemic and individual limits shall, however, continue to be defined for the specific company by the Supervisory Board. The new compensation recommendations of the German Corporate Governance Code Commission have, finally, led to personnel changes in the body. Max Dietrich Kley will no longer endorse this line and has resigned from his position on the Code Commission. The longtime BASF executive and supervisory-board member felt increasingly in a minority position, he claims. At the legislative level, and especially in Brussels, so much is currently in motion regarding executive pay that Kley considers it wrong to expand the Code at such a time.