Pay gap between top management and employees slightly narrowing

Further decrease in DAX executive pay

The lower payouts to board members reflects a 3.5 percent decrease in bonuses (variable cash compensation), which depend primarily on companies' profits. The earnings of DAX companies were down 15 percent in 2019. However, 22 of the 30 listed companies have also begun tying bonuses to non-financial factors such as sustainability targets.

There have been slight increases, too, in the agreed base salaries as well as payments linked to the long-term performance of a company's share price. The DAX index gained more than 25 percent in 2019. The three components each account for approximately one third of total compensation.

"In recent years, executive compensation has increasingly been geared to companies' long-term performance. That may prove very important in the current crisis, which is overshadowing every recession seen since the Second World War," says Prof. Gunther Friedl of the TUM Chair of Management Accounting, who headed the study. "The board members need to prepare their companies for an uncertain future. A good compensation system creates the right incentives for that kind of long-term outlook."

"The effects of the coronavirus crisis will be a real acid test for the true impact of compensation systems. It will become apparent whether they live up to the 'pay for performance' principle," says DSW Chief Managing Director Marc Tüngler: "We would take a dim view of any crisis-related adjustment to the performance targets leading to an upward correction in compensation. Nor do we believe that an increased weighting of fixed compensation is the right response to the coronavirus crisis. If companies are cancelling dividends and cutting employees' hours, executives have to make sacrifices, too."

Female board members had average earnings of 3 million euros and thus again lagged behind their male counterparts, who earned an average of 3.1 million euros, excluding CEOs. One reason for this is that female executives work more often for smaller companies and are assigned to areas that command less compensation. Following the departure of SAP Co-CEO Jennifer Morgan, it is again the case that not a single DAX company has a female CEO. Board members from other countries earned more than those from Germany in 2019 (3.6 million euros vs. 3.4 million euros).

As in the previous year, Volkswagen board members earned the most. Despite a decrease of 8 percent, with average compensation of 5.7 million euros, they have a slight edge over their counterparts at Germany's most valuable company, SAP, who received 5.6 million euros. In third place is Merck, which paid an average of 5.5 million euros.

CEOs earned 5.3 million euros on average. After the departure of SAP CEO Bill McDermott, who was the highest-paid executive in 2018, Herbert Diess of Volkswagen, with 9.9 million euros, now holds that distinction. Merck CEO Stefan Oschmann, with 8.5 million euros, ranks second, ahead of Joe Kaeser of Siemens, who earned 7.2 million euros last year.