Greed, Greed, and Envy - Limiting Manager Salaries

Greed, Avarice, and Envy - Limitation of Manager Salaries - by Richard Schütze

"In Germany, vice is unknown; only greed, avarice, and envy have been known here for some time." With this saying, the emotionally charged debate on limiting manager salaries can be aptly summarized. Imagination and emotions are stirred when an employee receives a salary well over 10 million euros per year as a basic salary, along with luxurious company cars, allowances, stock options, and bonuses. While it is noticed that sports and entertainment stars, television personalities, star architects and conductors, as well as opera singers, also receive astronomical fees, it does not weigh as heavily. With stars and celebrities, it is graciously conceded that they fill stadiums and halls or generate revenue through ratings, user clicks, and sold copies, often earning back their salaries and occasionally risking life and limb as race car drivers, extreme athletes, and performers. It seems different for highly paid managers, who are perceived as privileged members of an exclusive caste. While the career of a celebrity may end tomorrow, a manager who is fired due to incompetence or worse often receives a gigantic severance package - so goes the prevailing opinion. Not to mention pensions and retirement benefits, which are said to amount to 12 million euros in the case of former constitutional judge and SPD Minister of Justice Christine Hohmann-Dennhardt. The pension entitlements of former VW CEO Martin Winterkorn, despite the Diesel scandal, are also considered a prime example of this type of self-service through colluding bodies. The fact that Hohmann-Dennhardt was also responsible for the executive department of "Integrity and Law" not only stirs up public outrage at Volkswagen but becomes an outrage topic par excellence. A Matter of Decency, Dignity, and Justice Ironically, the SPD and its new frontman Martin Schulz are now catching the Union parties off guard with their draft law to restrict high manager salaries. Including bonuses, the total compensation of a board member should only be tax-deductible as a business expense up to a maximum of 500,000 euros in the future. The Social Democrats cleverly pick up an old proposal from the Union and the "Bund Katholischer Unternehmer" (BKU) to strengthen the rights of shareholders and the general meeting in determining manager salaries. It is suggested to define a maximum ratio between the average earnings of employees in a company in relation to the remuneration of the board members. According to Ulrich Hocker, President of the German Shareholders' Association, a manager should not earn more than 50 times the salaries of their employees to maintain a "healthy relationship" and "social peace." The SPD seems to be even taking up a demand from the BKU in 2012 regarding the tightening of personal liability of executives in companies to restore the principle of liability. "The decoupling of ownership and responsibility" is "a central cause of why the financial crisis of recent years was so fundamental and so difficult to control," says BKU Chairwoman and CDU member of parliament Marie-Luise Dött, addressing a sore point. In publicly traded corporations with dispersed ownership, ownership and responsibility do not lie in the same hands. This favors risky and short-term decisions that may not be in the interest of the liable owners. Accordingly, the SPD demands a legal right to reduce or reclaim board member salaries and pensions in case of poor performance or misconduct. Indeed, a medium-sized family entrepreneur often risks their own existence and personal assets for their company. The decision-making powers and opportunities resulting from ownership are directly linked to the responsibility and liability for risks. Consequently, a successful owner-entrepreneur who lives in a luxurious villa and drives a large car encounters less envy and resentment. Even Uli Hoeneß, who dedicates himself to 'his' FC Bayern as well as to his own sausage factory, receives a second chance after serving his tax sins and is once again carried on the shoulders of Bayern fans. Legality versus Legitimacy However, those who predominantly wield power with other people's money, seemingly freed from personal risks and "only" as employees, face envy and resentment, even if they have to make complex decisions daily. Referring to the employment contract, contractual freedom, and the powers of bodies such as supervisory boards in determining salaries barely legitimizes. Also, the reference to market value and the fact that a top manager is usually appointed for only three to five years and only a few managers earn more than the newly defined ceiling of 10 million euros per year, does not help escape the image trap. Constitutional issues or possible double taxation also play a minor role. Parts of the Union desperately argue that international corporations would no longer establish their European headquarters in Germany. Chancellor Angela Merkel and Union parliamentary group leader Kauder, however, have given up the resistance. Successfully, Schulz has copied Merkel's style of governance: squeezing a few contents from the Union's depot into the SPD corset and the electorate overlooks that the SPD, through the unions in codetermined stock corporations, is also partly responsible for high manager salaries. Now, whoever can, is trying to escape the public anger. A glimmer of hope is solely the proposal of Deutsche Bank that the reputation of a company should also play a role in bonus payments in the future. Somewhere, rationality seems to be returning. (6,056 characters including spaces) The author is a lawyer, political consultant, and Chairman of the Bundes Katholischer Unternehmer (BKU) of the Diocesan Group Berlin-Brandenburg in the Archdiocese of Berlin For more information on manager salaries, visit:http://www.trainers-excellence.de/redner/ra-richard-schuetze.html