Former Allianz CEO Michael Diekmann Earns €1.4 Million in Supervisory Board Roles | Corporate Governance Analysis
How much do Germany's top corporate overseers earn? The chairs of the supervisory boards at the 30 DAX companies received an average of €424,000 per year for their work in 2018: about four percent more than the previous year. This emerges from a study by the international management consultancy hkp Group.
The Top Earners Among DAX Supervisory Board Chairs
Looking at individual corporations, Paul Achleitner of Deutsche Bank is the top earner. He received €858,333 as chairman of the supervisory board of Germany's largest financial institution. Close behind are Gerd Krick of Fresenius and Norbert Reithofer of BMW with €640,000 each. Hans Dieter Pötsch of Volkswagen takes fourth place among the supervisory board heavyweights and is already significantly behind with an annual salary of €584,500.
The supervisory board chairman of Allianz, Michael Diekmann, places himself with €484,000 in the upper midfield of the DAX supervisory chiefs. For comparison: At the lower end of the ranking is Reinhard Pöllath, the supervisory board chairman of Beiersdorf, with €228,000.
Multiple Mandates: The Real Money Is in Accumulation
And yet, Diekmann is the leader in supervisory board salaries in Germany. The reason: He sits on several supervisory boards, as "Reuters" reports, including at BASF, Siemens, and Fresenius. Thus, his income from supervisory posts in 2018 totaled €1.4 million. In this ranking, Achleitner lands "only" in second place because his three supervisory board positions brought him €1.25 million. The Austrian is active at Daimler and Bayer in addition to Deutsche Bank.
Merck CEO Karl-Ludwig Kley achieves third place among supervisory board members with multiple mandates with €1.16 million solely for his supervisory board jobs. He is the chief overseer on the supervisory boards of E.ON and Lufthansa and also sits on the board at BMW.
Comparison with Executive Board Compensation
Comparing the income of supervisory board chairs with those of the company leaders shows clear differences. The CEOs of the DAX companies received an average of around €6.4 million transferred in 2018 (DCGK inflow without occupational pensions and ancillary benefits). This also resulted from an evaluation by the hkp Group.
The top earner among the executive boards is precisely the head of the corporation that forms the tail light in supervisory salaries. Beiersdorf executive board member Stefan Heidenreich was able to enjoy €23.4 million in 2018—also thanks to long-term remuneration. Multi-year bonuses that Heidenreich had accumulated during his seven years as group CEO were awarded to him in one go.
Otherwise, the remuneration of the CEOs in the DAX is not quite as high. Allianz CEO Oliver Bäte is the only DAX executive board member besides Heidenreich to break the ten-million mark with €10.33 million in 2018. Third place goes to SAP CEO Bill McDermott with a salary of €9.97 million.
The Debate: Are Supervisory Boards Underpaid?
Despite the lavish compensation, the study makers argue in a press release that supervisory boards are underpaid. They earn on average 15 times less than the CEOs. This makes it hardly possible for CEOs and supervisory boards to meet "at eye level."
"A supervisory board chairmanship today is more than ever also associated with strategy support and intensive sparring for the executive board. No significant investment or other decision of larger scale can be made today without involving the supervisory board chairman," summarizes hkp manager Nina Grochowitzki. "The remuneration for the office should therefore be designed to be able to meet at eye level. But we are far from that," says the economist.
What the increasing effort means was reported by compensation consultant Joachim Kayser to ARD-Börse half a year ago. In the past, one would have estimated the workload per mandate at about 50 working days, today it would already be 100 days per year, according to the expert. Here the trend is oriented towards Anglo-American states, where supervisory boards as chairmen often have more power and influence. Meanwhile, many investors would even rather address the supervisory board than the corporate management if they want to invest money in a company.
International Comparison and "Overboarding"
The remuneration levels for the DAX supervisory board chairmen are also below the European average (STOXX companies). This amounts to around €913,000 according to the current status of the statement—51 of 71 companies from the STOXX Europe 50 and Euro STOXX 50 indices have already reported their figures—reports the hkp Group. The ranking here is led by Swiss corporations: UBS (€4.9 million), Roche (€3.9 million), and Nestlé (€3.5 million). However, in Switzerland, the job of the supervisory board chairman is considered a full-time activity.
Anyone looking at the situations at German DAX corporations will quickly notice: It is rather the rule that supervisory board members do not only hold one mandate, but several. Often they also control companies that are not listed on the stock exchange and hold executive board positions. This allows the question of what the overseers actually do exactly and how they manage the activities time-wise.
"Overboarding" is the name for this accumulation of posts and mandates. According to the rules of the German Corporate Governance Code (DCGK), a voluntary code of conduct of the federal government for listed companies, no one should have more than five supervisory board mandates, chief posts counted double. The requirement is not binding: Those who violate it do not have to expect any consequences.
Governance Concerns: Networks of Power and Lack of Oversight
There is also the suspicion that there is a clique in the supervisory boards. Many current and former corporate leaders meet there to monitor themselves, so to speak: consequently, the "Süddeutsche Zeitung" describes supervisory board committees as "networks of power." Not a good starting point if the boards are supposed to intervene in corporate misconduct and exercise strict control.
The situation causes discomfort even among some corporate leaders. "Supervisory boards have often looked away, listened away, and remained silent for too long," criticized ex-railway CEO Rüdiger Grube in the "WirtschaftsWoche" a few months ago regarding the status quo in Germany. Grube identified glaring deficiencies precisely in future topics. "In only 40 percent of the control bodies in German corporations are there persons with sufficient digital expertise," said the manager and referred to a study by the consulting firm Russell Reynolds. There is also a lack of competence with regard to international markets: of all things in a leading export nation.
It almost seems like mockery that precisely the supervisory board of the scandal-ridden Deutsche Bank was repeatedly chosen by the management consultancy Russell Reynolds among the best supervisory boards of the DAX or even won the ranking. The committee could not prevent many scandals, but it is not an isolated case: Recently, there have been several examples where control in German companies did not function as desired. Whether Dieselgate, the luxury watch scandal at the DFB, or the controversial Monsanto takeover at Bayer: The supervisory boards often did not make a good impression.
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