March 24, 2017 Finan­ce-Maga­zi­ne — Are exe­cu­ti­ve boards of stock exchan­ge lis­ted com­pa­nies over­paid?

FINANCE Spe­cia­list Media Medi­um-Sized Enter­pri­ses of 24.03.2017

Are boards of lis­ted com­pa­nies over­paid?

Time and again, the pay of the top mana­gers of lis­ted com­pa­nies comes under cri­ti­cism. A new stu­dy pro­vi­des coun­ter-argu­ments.

The SPD can­di­da­te for chan­cellor, Mar­tin Schulz, has made the issue of inco­me jus­ti­ce a main­stay of his elec­tion cam­pai­gn. In doing so, it is pri­ma­ri­ly aimed at the remu­ne­ra­ti­on packa­ges of top mana­gers of lis­ted com­pa­nies. The Insti­tu­te of Audi­tors IDW has alrea­dy cri­ti­ci­zed the SPD pro­po­sals. Now ano­t­her recent stu­dy pro­vi­des argu­ments to tho­se who doubt Schulz’s state­ments.

The manager’s remu­ne­ra­ti­on regu­lar­ly employs the public, most recent­ly in the case of the Dax Group Deut­sche Post, which wants to cap sala­ries. The ques­ti­on of whe­ther the sala­ries and bonu­ses of direc­tors of lis­ted com­pa­nies are too high remains an abs­tract one. Alex­an­der Götz and Moritz Stahl from the cor­po­ra­te finan­ce con­sul­tancy Blätt­chen & Part­ner have ope­ra­tio­na­li­sed them by asking whe­ther the mana­gers of stock exchan­ge groups get more than tho­se of com­pa­nies in fami­ly hands (Götz is also a pro­fes­sor at the Dual Baden-Würt­tem­berg Uni­ver­si­ty of App­lied Sci­en­ces). The short ans­wer: No.

Mea­su­red by Ebit, stock exchan­ge boards no lon­ger earn

The duo inves­ti­ga­ted 155 com­pa­nies, about half of which are lis­ted on the stock exchan­ge. The com­pa­nies were divi­ded into four size clas­ses accord­ing to their pre-tax and inte­rest (Ebit) pro­fits: from 1 to 15 mil­li­on, from 15 to 40 mil­li­on, from 40 to 120 mil­li­on and from 120 to 500 mil­li­on euros. The­se are exclu­si­ve­ly com­pa­nies from the manu­fac­tu­ring indus­try, such as mecha­ni­cal engi­nee­ring, cars and che­mi­cals.

Sub­se­quent­ly, the two cor­po­ra­te finan­ce con­sul­tants in each of the four groups mea­su­red the remu­ne­ra­ti­on against the company’s ebit for the mana­gers of lis­ted and unlis­ted com­pa­nies. The result: In the three lar­gest Ebit clas­ses, the bos­ses of the stock exchan­ge groups get bet­ween 4 and 11 per­cent more than tho­se of fami­ly-owned com­pa­nies. Howe­ver, this incre­a­se is not sta­tis­ti­cal­ly signi­fi­cant, accord­ing to Götz and Stahl. Sur­pri­sing: In the group with the smal­lest com­pa­nies, the mana­gers of fami­ly-owned com­pa­nies earn around a quar­ter more in terms of ebit.

 

Abso­lute­ly, stock exchan­ge com­pa­nies pay more sala­ry and bonus

If one com­pa­res the sala­ries of the boards per group per se, ins­tead of put­ting them in rela­ti­on to the Ebit, the two groups of lar­ger com­pa­nies have a dif­fe­rent pic­tu­re: For stock exchan­ge groups with an ebit of 120 to 500 mil­li­on euros, a board of direc­tors gets an average of 1.42 Mil­li­ons of euros, for fami­ly-owned com­pa­nies it is 1.12 mil­li­on – thus the top mana­ger of the stock exchan­ge com­pa­ny earns 27 per­cent more. A size class below this is just under 889,000 euros for the boards of stock exchan­ge groups – 25 per­cent more than the 710,000 euros of their coun­ter­parts in fami­ly-owned com­pa­nies. For the two groups of smal­ler enter­pri­ses, the dif­fe­rence is not signi­fi­cant.

“In princip­le, the­re is a hig­her remu­ne­ra­ti­on for lis­ted com­pa­nies,” the rese­ar­chers com­ment on the result. “Howe­ver, the ratio remu­ne­ra­ti­on to Ebit is more mea­ning­ful.” And even the dif­fe­ren­ces in average sala­ry per se are, accord­ing to the rese­arch duo, wit­hin an “accep­ta­ble limit” area, becau­se the boards of stock exchan­ge com­pa­nies must be able to do more and bear hig­her risks. “This means that the­re is no mar­ket fail­u­re and, on average, no unre­a­son­ab­le remu­ne­ra­ti­on,” the aut­hors con­clu­de.

 

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