Bloomberg News

Germany to Study Swiss Bonus Cap Amid Pressure Over Pay

March 04, 2013

Germany's Chancellor Angela Merkel

Angela Merkel, Germany's chancellor. Manager pay has resonated before in Germany, where Merkel has criticized “fantasy compensation.” Photographer: Jason Alden/Bloomberg

German Chancellor Angela Merkel’s government will study a decision by voters in neighboring Switzerland to introduce fresh curbs on manager compensation, an election-year show of willingness to tackle “excessive” pay.

The German government is awaiting a European Commission proposal due by the end of the year that follows the Swiss line in giving shareholders a greater say over salaries for top managers, said Steffen Seibert, Merkel’s chief spokesman.

“It is definitely worthwhile to look closer at this Swiss proposition,” Seibert said at a regular government press conference in Berlin today. “It is clear that excessive salaries are able to spur a lot of people’s mistrust toward our economic system.”

Germany’s opposition hailed yesterday’s decision by Swiss voters to back a proposal to strengthen shareholder rights over compensation by a margin of 67.9 percent. The Swiss referendum took place days after the European Union agreed on a draft law capping bankers’ bonus payments, putting executive pay in focus in Germany as parties attempt to win over voters before Sept. 22 federal elections.

“The referendum is an important step in the right direction,” Joachim Poss, deputy parliamentary leader for the main opposition Social Democratic Party, was cited as saying in the Neue Osnabruecker Zeitung newspaper. “The result should be taken as encouragement for the introduction of a European directive” governing pay levels across the 27-nation EU.

‘Fantasy Compensation’

Manager pay has resonated before in Germany, where Merkel has criticized “fantasy compensation” for executives. Her first term coalition with the SPD passed a law in June 2009 -- three months before federal elections -- to curb manager pay at German public companies, after requiring financial institutions tapping its bank-rescue fund to cap manager pay at 500,000 euros ($650,000) a year.

In a January Forsa survey published by the German weekly Stern, 58 percent of respondents said they wanted the maximum level of executive compensation fixed by law. At least five of Europe’s 20 highest-paid chief executive officers work for Swiss companies, according to data compiled by Bloomberg.

“Yesterday was a good day, not only for Switzerland, but also for Europe and for Germany,” Berthold Huber, chairman of the IG Metall labor union, said on public broadcaster ZDF. “If we had some more direct democracy in Germany, which I would welcome, then the people would certainly approve such a law by more than 68 percent.”

IG Metall, Europe’s biggest manufacturing union, has been calling for limits on top managers’ pay since May 2012, when it was revealed that CEOs at German automakers, such as Volkswagen AG (VOW)’s Martin Winterkorn and Daimler AG (DAI)’s Dieter Zetsche, would earn record salaries.

Michael Fuchs, a deputy parliamentary leader of Merkel’s Christian Democratic Union, welcomed the Swiss vote because “it ensures that salary decisions are made by the companies’ owners, not by the state.”

“Shareholders have no interest in damaging their company,” he said. “They can decide themselves what they can afford.”

To contact the reporter on this story: Joseph de Weck in Berlin at jdeweck@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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