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Spurred by a criminal trial over fat executive bonuses, Germans are debating whether it’s time for their biggest companies to break a long-standing taboo and reveal what they’re paying top executives. Advocates of disclosure have made slow progress in a tug of war with more tradition-minded firms: Nine of the 30 companies in the blue-chip DAX stock index are now heeding the call for openness in Germany’s voluntary code on corporate conduct. But more and more experts and politicians suggest it’s time to end the gradual earnings striptease and simply make everyone disclose. Theodor Baums, head of the government commission that came up with the corporate code of conduct, has been a leading voice for openness on executive pay. “It creates a stronger feeling among the persons responsible for dealing with these issues — the supervisory board members — that they are responsible to the investors,” Baums, a professor at Frankfurt’s Goethe University, told The Associated Press. The publicity, Baums contends, will pressure boards of directors, called supervisory boards in Germany, to keep executive pay firmly tied to performance and shareholder interest. Public pressure would be especially powerful in Europe, where expectations about social responsibility have helped keep executive pay lower than in the United States as it is. German President Horst Koehler added his voice in a recent interview with the mass-circulation Bild newspaper, calling for all blue-chip companies to disclose, and Justice Minister Brigitte Zypries has hinted that, if more don’t voluntarily disclose, the government might seek legislation to make it mandatory. Disclosures in this year’s annual reports — the first under the new code — have shown that top German executives make a lot of money, but generally not the spectacular sums that some U.S. CEOs can earn. As chief of Deutsche Bank, Josef Ackermann earned a 2003 salary and bonus of 7.72 million euros ($9.41 million) plus stock options whose value depends on future stock performance, while Deutsche Telekom’s Kai-Uwe Ricke got 2.62 million euros ($3.1 million) salary and bonus without options. The head of drug and chemical maker Bayer, Werner Wenning, made 1.6 million euros ($1.95 million), plus options. CEOs in the 500 biggest U.S. public companies got an average $4.43 million last year, according to the watchdog group The Corporate Library. But most German companies stuck with the traditional practice of giving just an overall figure for the management board, the handful of top executives running the company day to day. Among the resisters are automakers DaimlerChrysler, Volkswagen and BMW, airline Lufthansa and engineering group Siemens. Pressure for more disclosure in Germany has built up from the recent criminal trial over payouts to executives at mobile phone company Mannesmann during a merger with Britain’s Vodafone. Chief executive Klaus Esser got an extra bonus of 10 million British pounds that went beyond the severance pay specified in his contract. German prosecutors brought charges against six Mannesmann board members and executives — including Esser and Deutsche Bank’s Ackermann, who was an outside director — and said they had breached their duty to shareholders by making the payments. The six were acquitted July 22, but revelations of the big bonuses have helped fuel the executive salary debate. The argument against disclosure is that German management boards are collectively responsible for the company’s performance, so any look at incentives must target the board as a whole. Additionally, Metro and Volkswagen said executives were entitled to “Persoenlichkeitschutz,” which roughly translates to a right to privacy. Lufthansa said that it was a matter for executives “to decide for themselves in the exercise of their right to privacy.” University of Hamburg business professor Michael Adams, who has written extensively on executive pay, pointed out that full disclosure hasn’t stopped high salaries in the United States, and in fact appears to have helped drive them up as jealous executives see what others make. Still, the current round of disclosure is progress toward making executives more accountable, he said. “It’s a question of responsibility to shareholders, for them to say how much they cost,” Adams said. “If you have no transparency you can have a lot of ripping off the company in the dark.” Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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