• The average total compensation of Supervisory Board Chairpersons in the DAX increased in 2017 by around 6% to €408,000
  • The average compensation on a European level is €810,000
  • The focus on a purely fixed compensation decouples compensation and performance
  • hkp/// group analysis of “Supervisory Board Compensation DAX 2017”

Frankfurt am Main, April 26th, 2018. In 2017, the compensation for the Supervisory Board Chairmen of the leading listed companies in Germany (DAX companies) rose by 5.7% to an average of €408,000, thus exceeding the €400,000 mark for the first time. Just like in preceding years, Deutsche Bank’s Supervisory Board Chairman topped the list with €800,000. At the other end is the Chairman of the Supervisory Board at Volkswagen, who forewent his salary and bonuses for 2017.

Although the gap between the highest and lowest rates of compensation among DAX Supervisory Board Chairmen has closed somewhat over the past few years, the current ratio remains practically unchanged at a high level – 3.8 – even when excluding Volkswagen. Compensation is still not nearly on the same level as a Chairman of Management Board. The average direct compensation of a Management Board Chairman in the DAX is 14 times that of a Chairman of a Supervisory Board.

There continues to be a strong focus on fixed compensation for Supervisory Board Chairmen. Fixed compensation remains the only pay component at 19 DAX companies, while nine companies couple this with multi-year variable compensation, usually in the form of shares. Only two companies, Beiersdorf and Fresenius, earmarked an annual variable compensation for their Supervisory Board Chairmen in 2017. For fiscal year 2018, no DAX companies will grant annual variable compensation to their Supervisory Board Chairmen.

These are the key results of the “Supervisory Board Compensation DAX 2017” analysis, presented today by the hkp/// group.

“Compared to the average jump in consolidated net profit of over 35% recorded by DAX companies for 2017, we see a limited, under-proportional increase in Supervisory Board compensation. The compensation allocated for professional Supervisory Board work is still not at an appropriate level. It does not reflect the ever-increasing expenditure of time and effort, as well as the increasing levels of responsibility, and can therefore only be described as fair at the top”, explained hkp/// group Senior Partner Joachim Kayser.

hkp/// group Partner Regine Siepmann also sees the concentration on fixed compensation critically: “The development towards purely fixed salaries decouples compensation from the interests of shareholders and from company performance.” A counterweight is formed by just a small number of companies such as BMW or Continental, as their Supervisory Board compensation entails large portions long-term variable elements. Companies such as Bayer, BASF or Daimler also offer shares as a long-term variable component. “This is how compensation for Supervisory Boards will be done in the future”, according to Regine Siepmann.

Stability at the top, but no appropriate compensation levels at the bottom
The current increase in the average salaries and bonuses of DAX Supervisory Board Chairmen is based both on variable pay elements, which increased due to strong company performance, as well as increased fixed compensation. For 2017, the latter increased by 17.8% compared to the previous year.

For the third year in a row, the compensation ranking for the DAX Supervisory Board Chairmen in office for the full year was topped by Deutsche Bank. Salaries and bonuses for Deutsche Bank’s Chairman amounted to €800,000, identical to the previous year. Following in second and third places are BMW and Fresenius.

 Highest Compensation for Supervisory Board Chairpersons DAX  | Total compensation

  •  Deutsche Bank | 800,000 Euro (+/-0)
  •  BMW | 640,000 Euro (+5 %)
  •  Fresenius | 632,000 Euro (+19 %)

 Lowest Compensation for Supervisory Board Chairpersons in DAX  | Total compensation

  •  Beiersdorf | 224,000 Euro (+/-0)
  •  Infineon | 216,000 Euro (+1 %)
  •  thyssenkrupp | 212,000 Euro (+1 %)

Fig.: The highest and lowest compensation for Supervisory Board Chairpersons in DAX companies who were in office for the full fiscal year 2017 (value in brackets: change compared to previous year)

“Stability” can also be used to describe the compensation gap between the Chairmen of Supervisory Boards and Chairmen of the Management Board. “If the average compensation given to a Supervisory Board Chair is only 7% of the value of a Management Board Chairman’s compensation package, then we can certainly not talk about parity”, according to hkp/// group expert Joachim Kayser. In his opinion, however, this parity is necessary when taken against the background of the responsibilities with respect to corporate oversight and support for strategy.

Only average Internationally
When compared with the rest of Europe (STOXX companies), Board Chairmen/ Presidents from Switzerland top the compensation list. No. 1 among these is UBS (€5.1 million), Roche (€4 million), Novartis (€3.4 million) and Zurich Insurance (€1.4 million). However, a different governance model is practiced in Switzerland – the Chairman is regarded as a full-time position, in contrast to a Supervisory Board Chairperson in Germany.

The highest-ranking Supervisory Board Chairperson from a first Non-Swiss company in the STOXX is from AXA at number 5. The top DAX company, Deutsche Bank (€800,000), follows at number 15 and roughly corresponds with the European average of €810,000