Supervisory board remuneration spikes for DAX companies' elites
In a recent analysis, it has been revealed that supervisory board members of listed German firms were handsomely rewarded last year, with DAX companies leading the pack. The study, published by the German Shareholders' Protection Association (DSW), found that chairmen of these DAX 40 companies took home an impressive 393,000 euros per year, on average, marking a 7.7% increase compared to 2021.
The payday for ordinary members of these boards was also up, recording a 4.4% rise to hover around 117,000 euros annually. It's important to note that the total remuneration for the supervisory board members in other indices of the DAX family also experienced an uptick.
"Corporations are grappling with numerous challenges due to new European regulations and a multitude of global crises," pointed out DSW Managing Director Marc Tüngler. "This situation only amplifies the responsibilities of the supervisory boards, making their work increasingly demanding."
The top earners among the chairmen from the DAX lineup were Norbert Reithofer from BMW (610,000 euros), followed closely by Jim Hagemann Snabe at Siemens (602,000 euros) and Kurt Bock at BASF (550,000 euros), according to the data. Conversely, Wolfgang Büchele from Merck recorded the lowest remuneration in the DAX elite, taking home a mere 112,000 euros.
The average salaries for CEOs in the midcap MDax and small SDax indices were lower than in the DAX. CEOs in the MDax ranked around 212,000 euros per annum (up by 4.0%) and 68,000 euros for ordinary members (a 2.7% bump). The supervisory board chairmen in the SDax received around 134,000 euros annually (a significant 6.7% surge) and members around 50,000 euros (up 3.9%).
The manager of a DAX company must often grapple with the intricacies of stock exchanges to ensure compliance with new European regulations. The latest study on various stock exchanges sheds light on the substantial salaries of supervisory board members, including the manager, and other board members.
Market influences and key factors contributing to remuneration hikes
The reasons behind the increase in remuneration for supervisory board members of DAX companies are multifaceted and interconnected. Some significant factors include:
- Legal requirements and gender quotas:
- Legal requirements, such as the minimum gender quota requirement in AktG (section 96, paragraph 2), shape the compensation structure for supervisory board members. Firms like Infineon Technologies are actively working towards meeting the gender quota requirement, as demonstrated by their proposal to elect two women and two men at the 2025 AGM [1].
- Competency profiles and objectives:
- The composition of the supervisory board relies on a competency profile and specific objectives set by the board itself. Companies like Infineon Technologies ensure their boards meet competency requirements and achieve their objectives [1].
- Variable remuneration structures:
- The structure of variable remuneration, such as the Short Term Incentive (STI) and Long Term Incentive (LTI), can affect overall remuneration. Companies like Infineon Technologies are modifying their LTI structures to align with financial performance indicators, such as Revenue Growth and Adjusted Free Cash Flow [1].
- Market standards and comparability:
- Remuneration levels can be influenced by market standards and how they stack up against competitors. For example, Siemens Energy's fixed compensation is lower than industry averages, posing a challenge for the Supervisory Board to find a fair solution amidst unfavorable contractual conditions [3].
- Performance-based incentives:
- Performance-based incentives, such as stock ownership and share-based compensation, can significantly impact remuneration. However, most CEOs hold only trivial fractions of their firm's stock, with ownership levels having declined over the past 50 years [2].
Cross-comparison across different DAX indices
Comparing salaries across different indices in the DAX family reveals significant variations due to varying market circumstances and company-specific strategies.
- Infineon Technologies: Infineon Technologies' remuneration system incorporates both fixed and variable components. The company is revising its LTI structure to align with financial performance indicators, while prioritizing performance-based remuneration [1].
- Siemens Energy: Siemens Energy faces a challenge due to its fixed compensation being below average market standards. The company has implemented a temporary compensation concept to retain its Executive Board and maintain continuity [3].
- Novartis: Novartis' financial performance has been strong, with notable growth in sales and operating income. The study focuses on the company's overall financial performance and strategic initiatives; however, specific information on supervisory board remuneration is not provided [4].
In summary, the remuneration hikes for supervisory board members of DAX companies are influenced by a myriad of factors, including legal requirements, competency profiles, variable remuneration structures, market standards, and performance-based incentives. Comparing remuneration across different DAX indices reveals distinct approaches among companies, tailored to their unique market conditions and strategic priorities.
