STUTTGART, Germany - Daimler-Benz AG Chairman Juergen Schrempp tried to be diplomatic on the question of executive compensation at the annual shareholders' meeting last week. But he stood his ground that top executives of top companies deserve top pay.
The expected birth of DaimlerChrysler AG this autumn will join Daimler-Benz AG, a bigger company with lower pay, to Chrysler Corp., a smaller, more profitable company whose executives make much more with options and bonuses.
Large American companies, such as Chrysler, typically reward executives with generous stock options as an incentive to boost the value of their companies' stock.
The practice is rare in Germany, however, complicating the task of devising a pay formula for American and German executives at DaimlerChrysler.
'In the U.S.A., stock options are normal,' said Schrempp. 'Stock option plans crank up the economy, and there should not be any limitations to them.'
Daimler-Benz has what amounts to a stock-option plan. But it is less generous than Chrysler's, and it is under legal attack from a German shareholder activist.
Ekkehard Wenger, shareholder and professor of economics at the University of Stuttgart, is suing for 'unlawful enrichment at the cost of the shareholders.' He already has won a similar case in a different court against Volkswagen AG.
Opposition to the current option plan continued at the Daimler-Benz annual meeting on Wednesday, May 27.
'We do understand that the board members and management executives deserve a certain fee,' said shareholder Christian Strenger, 'but the sky shouldn't be the limit.'
Strenger represents DWS, a financial advisory company that owns about 1 percent of Daimler-Benz.
Last year, Chrysler Chairman Robert Eaton received $5.3 million from exercised stock options in 1997. His salary was $1.6 million, and his annual bonus was $3 million. He also received other bonus money and benefits.
Daimler-Benz does not release its executives' pay. Automotive News estimates the top 10 Daimler executives received last year an average of $1.9 million in salary and benefits.
Aside from the compensation issue, shareholders welcomed the merger and congratulated Schrempp.
Bernd Kaufmann, representing an organization of small shareholders, said he expects positive results from the merger. Schrempp said dividends will tend to rise.
The name of company co-founder Karl Benz would live on in the car brand, said Schrempp. He added: 'Our biggest asset is the name Mercedes-Benz.'
Schrempp indicated that an early DaimlerChrysler project will be a new vehicle developed for emerging markets.
'Opportunities will open up for jointly developing motor vehicles that we need for the markets in Asia, Latin America and Eastern Europe,' he said.
Schrempp acknowledged that the cultural connection between Chrysler and Daimler will not be easy, 'but in the process of discussion a good chemistry between the two sides has developed.'