30.01.2017 - Studies

The black box of executive compensation

The remuneration practices of DAX companies are extremely intransparent. It is impossible to fully comprehend the origin of the salary from any single board member. Due to the high degree of intransparency, it remains unclear whether the members of the executive board are incentivized in a purposeful manner. A examination is impossible. The compensation report of HeidelbergCement is the most transparent, the reports of Adidas, SAP and ProSiebenSat1 the most intransparent.

While there is much discussion about the amount and appropriateness of executive compensation, the much more important question of the origin of salaries usually plays a secondary role. Above all, the origin of performance-related remuneration, which accounts for a about two thirds of the total remuneration of DAX companies, should be of interest to stakeholders, as it ensures that the executive board acts in their interest.

This study deals with the question of how transparent the origin of the performance-related compensation of the executive board of DAX companies is. The origin is transparent if sufficient information is available to enable an external party to reconstruct the level of salaries. This requires information in the following four dimensions: Observability of the performance criteria, disclosure of the agreed targets, weighting of the criteria and the relation of pay and performance (pay-for-performance).

Please note: this study is only available in German.

Legal notice

The information contained and opinions expressed in this document reflect the views of the author at the time of publication and are subject to change without prior notice. Forward-looking statements reflect the judgement and future expectations of the author. The opinions and expectations found in this document may differ from estimations found in other documents of Flossbach von Storch AG. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. This document does not constitute an offer to sell, purchase or subscribe to securities or other assets. The information and estimates contained herein do not constitute investment advice or any other form of recommendation. All information has been compiled with care. However, no guarantee is given as to the accuracy and completeness of information and no liability is accepted. Past performance is not a reliable indicator of future performance. All authorial rights and other rights, titles and claims (including copyrights, brands, patents, intellectual property rights and other rights) to, for and from all the information in this publication are subject, without restriction, to the applicable provisions and property rights of the registered owners. You do not acquire any rights to the contents. Copyright for contents created and published by Flossbach von Storch AG remains solely with Flossbach von Storch AG. Such content may not be reproduced or used in full or in part without the written approval of Flossbach von Storch AG.

Reprinting or making the content publicly available – in particular by including it in third-party websites – together with reproduction on data storage devices of any kind requires the prior written consent of Flossbach von Storch AG.

© 2020 Flossbach von Storch. All rights reserved.