The earnings of top managers at DAX-listed companies were around 8% lower than in the previous year. As a result, the gap between CEO compensation and that of ordinary employees has narrowed to a greater extent than in almost any previous year. In addition, the annual study by Professor Dr. Gunther Friedl, TUM School of Management, and DSW, a advocacy group for private investors, revealed that for the first time, more than half of the DAX companies link the compensation of top executives to environmental, social and governance (ESG) targets.
CEOs at the 40 DAX-listed companies earned an average of €3.3 million in 2022, 8.4% less than in 2021. In 2021, however, managers saw their compensation increase for the first time in four years (by 24%). The pay gap within DAX companies narrowed as a result of pay increases for regular employees: In 2022, CEOs earned on average 38 times as much as their employees, compared to a factor of 52 a year earlier.
The significant decline in executive salary is related to the fact that some companies were unable to meet their ambitious targets. The war in Ukraine, as well as energy and supply chain issues, contributed to this,” says study leader Prof. Gunther Friedl from the Chair of Management Accounting at TUM. This led to a decline in variable compensation, with bonuses linked to annual targets falling by 19%. Payments linked to longer-term criteria such as share price fell by 7.7%.
"The decline in executive pay is a consequence of multiple crises that have been with us for some time. The financial fallout has now reached corporate boardrooms," said DSW Managing Director Marc Tüngler. "With this development, we are obviously seeing the first signs of further economic turmoil. As a result, a challenging future has been priced into executive compensation. For 2023, a lot will depend on how ambitious supervisory boards will be in setting targets for top executives."
"Compensation System Works Well
Environmental, social and governance (ESG) objectives, such as reducing CO2 emissions, employee satisfaction or improving diversity, are increasingly being used as criteria for short- or long-term variable pay components. For the first time, more than 50% (22 out of 40) of all companies apply all three ESG components. Last year, only 15 DAX companies did so. Almost all companies linked the pay of their top executives to at least one ESG factor.
"The figures show that the compensation system is working well for the most part," says Gunther Friedl. "Even if CEO compensation is at a completely different level than that of the rank-and-file, it is now clear that the differences can be narrowed - and what matters today is performance, which includes ESG factors."
Relatively low compensation by international standards
The CEOs received an average of approximately 5.1 million euros in 2022. This is still relatively low by international standards. CEOs of non-German companies traded on the EuroStoxx 50 earned an average of €7.5 million, and Dow Jones companies paid their top bosses an average of €24.9 million. However, a much higher proportion of compensation in the US is tied to long-term targets (75% vs. 45% for DAX companies).
Significant differences between companies
When looking at individual companies, there are significant differences. In 2022, executive compensation was lower in 23 companies and higher in 16 others. The largest decrease was at Adidas (75%) and the largest increase was at Daimler Trucks (246%). The top earners were the senior executives at Deutsche Bank, who received an average of €6.8 million, followed by Merck (€6.7 million) and Qiagen (€5.8 million). The average compensation of six DAX members was less than 2 million euros: Covestro, Hannover Rück, Porsche Automobil Holding, Sartorius, Adidas and Zalando.
Gunther Friedl, Christiane Hölz, Frederik Beckendorff, Markus Frank, Hanna Scholta, Simon Allmeier, Patrick Knittl, Owen Mao, Jessica Weinmann: Studie zur Vergütung der Vorstände in den DAX-Unternehmen im Geschäftsjahr 2022. München 2023