COMMENT: VW going public with salaries should be an example to other German automakers

COMMENT
Franz W. Rother is Editor-in-Chief of Automobilwoche

VW group will publish the salaries of its top executives. It's time for other German auto companies to follow.

Last year General Motors boss Rick Wagoner was paid at least $5 million. Wagoner also pocketed $7.6 million in bonuses and other incentives such as stocks and stock options.

Bob Lutz, GM's vice chairman, was paid around $8.2 million.

Bill Ford, head of the Ford Motor Co., earned around $14.6 million.

You can look all of this up at .

In Europe, executive salaries are significantly smaller than in the US. Renault chief executive Louis Schweitzer earns about 2 million euros a year. Thierry Morin, head of the French supplier Valeo, earns about 1.4 million euros.

Nearly all of the European auto industry's listed companies publish the salaries of their top executives.

Japanese companies go further. Many tell shareholders which perks their top managers receive, such as golf club memberships.

Germany is the only country where companies refuse to disclose the salaries of their executives. We can only make a rough guess.

DaimlerChrysler boss Juergen Schrempp's estimated income in 2003 was 5.2 million euros. BMW CEO Helmut Panke is said to have earned around 2.8 million euros. Volkswagen group Chairman Bernd Pischetsrieder earned about 2.7 million euros last year, according to the business magazine Wirtschaftwoche.

German companies publish only the total income of their management board members, split into basic wages and bonus payments.

However, this secrecy is starting to fall apart. After intense discussions, Volkswagen group's board of directors and supervisory board have decided to comply with the German Corporate Governance Codex, a recommendation by a German government commission encouraging companies to be more open about executive salaries.

The salaries of Pischetsrieder and Ferdinand Piech, head of VW's supervisory board, will be published for the first time for the 2004 financial year.

Next year VW will publish the salaries of the other members of its board of directors and supervisory board.

Their counterparts at DaimlerChrysler, Porsche and BMW have so far refused to disclose executive salaries. Porsche says doing so would infringe on managers' personal rights and D/C is worried about envious reactions from staff. However, VW's decision has put other companies in the German auto industry under a great deal of pressure.

My forecast is that these companies will bow to government and shareholder pressure by next year and publish details of the remuneration received by members of their supervisory boards.

Then workers at VW and D/C will be able to work out just how much executives at the two companies really gave up when they announced that they would take pay cuts during recent wage bargaining talks with employees.

And shareholders will be able to better judge whether the salaries of company directors really reflect their achievements.

The next step should be giving shareholders the right to vote on executive salaries during a company's annual meeting.

This would silence rumors of wheeling and dealing within supervisory boards over pay levels.

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