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Business

Salary Secrecy Haunts German Business Leaders

Most companies listed on the German stock index violate Germany's corporate governance codex because they have a mutual agreement not to reveal salaries for top executives, according to the man who wrote the codex.

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Some executives receive more than 100 times as much as workers

The "gentleman's agreement" to keep salaries secret represents an abuse of the codex that could threaten the latter's survival, Theodor Baums, a Frankfurt law professor who originally headed the government's corporate governance commission, told Frankfurter Allgemeine Zeitung.

Payscales for German business leaders have come under criticism after several companies, including Siemens and DaimlerChrysler, threatened to move production elsewhere unless workers accepted large pay cuts.

In 2003, only 11 of the 30 companies listed on the German stock index (DAX) agreed to publish salaries for top executives. The codex, however, requires companies to do so.

Companies are not required by law to adhere to the document, but that might change soon, German Justice Minister Brigitte Zypries said.

"Unless a significant number of companies reveals salaries by summer of 2005, there will be a law requiring them to do so," Zypries told Der Tagesspiegel newspaper.

Brigitte Zypries

Brigitte Zypries

While saying that she didn't want to regulate top executives' salaries by law, Zypries added that a company's overall pay scale should be considered when deciding on the remuneration of those at the top. Zypries (photo) said such a recommendation could become part of the codex.

Unions vow to get more involved

Trade union leaders meanwhile said they would make better use of their voting rights as board of trustees members.

"For decades, salary recommendations have come from the employers' representatives," Berthold Huber, the deputy leader Germany's IG Metall union, told dpa news agency.

The German Trade Union Federation (DGB) is planning to make executive salaries a focus at a conference for board of trustees members in September.

"The gist of the problem isn't just the salary amount, but the fact, that remuneration is based on the wrong goals," Dietmar Hexe, a member of the DGB's executive board, told Handelsblatt newspaper.

Instead of linking salaries to share value, board members should look at executives' accomplishments to guarantee a company's well-being in the long term.

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