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You Gotta Have "Persoenlichkeitschutz"
Germany's top executives are scrambling to boost their pay
to US levels — and fend off an infuriated public

by Sam Pizzigati
October 9-10, 2004

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German corporate executives are breathing a little easier this fall. Excessive executive pay, a German court in Dusseldorf has ruled, may be immoral. But it’s not illegal, at least under existing German law.

That ruling came this past summer in a trial that drew Martha Stewart-type coverage all across Germany. Among the defendants: Germany’s most powerful banker, Josef Ackermann, the chief executive at Deutsche Bank.

Ackermann, as a corporate director of German mobile phone giant Mannesmann, had okayed a $31 million payout for Mannesmann's top exec, Klaus Esser, and over $40 million more for Esser's executive buddies.

That deal, German prosecutors charged, violated the fiduciary duty of the Mannesmann board of directors. Ackermann, if convicted, could have faced 10 years in jail.

But the Dusseldorf court where Ackermann and five fellow defendants were tried ruled that the board approval of the over $70 million executive windfall did not legally amount to a “breach of trust” and acquited the six.

"We're not here to take any moral or ethical decisions," the presiding magistrate, Brigitte Koppenhoefer, noted. "We don't judge German corporate culture, though the evidence that was heard provoked astonishment."

Why the astonishment? Germany’s corporations may be world-class, but German executive pay has, over recent decades, been anything but. German execs typically take home 70 to 80 percent less than their counterparts in the United States — and that’s the way the German public wants to keep it.

Many Germans had hoped the trial in Dusseldorf would put the brakes on steadily rising executive pay in their nation. Now Ackermann’s acquittal has sent public interest advocates scurrying for other solutions.

Some of these advocates are pushing for greater corporate “transparency.” They want to see full disclosure of all corporate payouts to individual executives. A new German corporate code of conduct calls for just this full disclosure.

But the new code has no force of law behind it, and many German companies, including Volkswagen, BMW, and Lufthansa, are resisting the new voluntary diclosure requirements. Their executives, they claim, have a right to “Persoenlichkeitschutz,” what Americans would call privacy.

In the face of this corporate foot-dragging, a growing number of Germans angry about executive pay are pushing for mandatory disclosure standards.

Still other activists want to go well beyond disclosure. In the United States, these activists explain, pay disclosure requirements have done next to nothing to slow the CEO march to megafortune.

And that march, these activists add, is on the fast track in Germany, too, threatening to overwhelm the cultural norms that have kept pay gaps in Germany at modest levels for the past half-century. In 2003, the Wall Street Journal reports, the average pay for German chief executives jumped 31 percent.

German executive pay, Klaus Brandner, the top economic analyst of the German Social-Democratic Party, recently told the Deutsche Welle broadcast network, is hurtling toward American CEO levels at the same time German worker wages are tumbling down to Eastern Europe's bargain basement.

"That doesn't fit together," says Brandner. "I call on companies to find a balance."

What might that balance be? The former leader of the Social-Democratic Party, Hans-Jochen Vogel, is suggesting that compensation at Germany's CEO summits be limited to 20 or 30 times the pay that workers receive.

Executive-worker pay differentials in the United States, according to Business Week, last year ran over 300 to 1.

Herr Vogel's call for what amounts to a "maximum wage" has so far won no support in top German government circles. But German public anger over CEO pay is continuing to build. Germany just may become the first country where that anger translates into real limits on corporate pay.

Sam Pizzigati is a labor journalist and the editor of Too Much, an online weekly on excessive income and wealth. His latest book, Greed and Good: Understanding and Overcoming the Inequality That Limits Our Lives, was published this summer.

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