Deutsche Bank’s co-chief executives are to have their pay capped in an attempt by Germany’s flagship lender to head off criticism of excessive corporate salaries.
Anshu Jain and Jürgen Fitschen will not be paid the maximum possible under the bank’s bonus scheme for 2013 even if they exceed all targets set for them. The curbs, put forward by the bank’s supervisory board for approval next month by shareholders, are likely to be replicated beyond this year.
Mr Jain and Mr Fitschen’s maximum capped payout of €9.85m for this year still means they could earn twice as much as in 2012. However, any bonus this year will be capped at €7.55m, whereas the maximum bonus could theoretically have reached €9.35m if the duo achieved all their targets in their first full year in charge.
The curbs follow a report by a panel that Deutsche set up to recommend changes to its pay structure, chaired by Jürgen Hambrecht, a former chief executive at BASF.
They also follow public criticism of the pay awarded to Martin Winterkorn, Volkswagen’s chief executive, when he earned €17.5m after the carmaker’s stellar year in 2011. VW this year placed limits on Mr Winterkorn’s pay.
Since Mr Hambrecht’s report Deutsche has revamped the benchmarks for its bonuses to top managers, linking them not just to earnings but to the bank’s capital adequacy and its cost structure as well as “softer” measures such as employee satisfaction.
The bank will also for the first time require its management board to invest Deutsche shares to the value of at least twice the €1.15m base annual salary. Mr Jain and Mr Fitschen, who earn a higher base salary, will have to hold almost €7m worth of shares.
Whether coincidentally or not, the maximum €9.85m payout to be sanctioned for Mr Jain and Mr Fitschen is just below the €10m that Werner Wenning, a Deutsche supervisory board member, said last year should be a limit for executive pay.
Deutsche’s cap on executive pay emulates similar schemes at French and UK banks.
The French banks are known to be particularly strict on bonuses, with Société Générale limiting the variable pay of Frédéric Oudéa, chairman and chief executive, at 1.5 times his €1m salary. In the UK, banks such as Barclays and HSBC tend to have much higher ceilings for executive directors’ variable pay.
ISS this month warned Switzerland’s largest lender that if it failed to introduce such a ceiling next year the influential shareholder advisory group would “strongly consider” a recommendation against the remuneration report.
ISS is supporting the Swiss bank’s pay structure this year.