BERLIN -- Germany raised the pressure on companies to disclose their top executives' earnings, threatening legislative action after a newspaper reported that many leading firms collectively vowed to keep pay levels secret.
Although Germany adopted a voluntary corporate governance code last year urging firms to provide more public information on individual managers' pay, Theodor Baums, head of the Corporate Governance Commission, said this was not happening.
He told the Frankfurter Allgemeine Zeitung daily, in a story published on Monday, that most firms wanted to ignore the code's promptings on salary transparency.
"It's an abuse that casts the whole code into doubt," Baums said, accusing companies of making a cartel-like agreement.
A Justice Ministry spokesman said the report of the companies' plans was "highly regrettable".
He said the 30 firms listed on Germany's DAX index of leading shares had until summer 2005 to end the secrecy about how much top executives earn.
"If that doesn't change, and this (reported) agreement appears to go in the direction of things not changing, the government will take legislative action," the spokesman added.
A high-profile labor-management dispute over working hours at carmaker DaimlerChrysler and acquittals in the Mannesmann bonus trial last month have put corporate pay back under the spotlight in Germany, provoking a public debate.
A DaimlerChrysler spokesman said the firm did not provide details of individual managers' pay because the board operated as a group.
The company's latest annual report also suggested that disclosure could make it harder to reward executives for a good performance or for taking on difficult tasks.
The spokesman denied any collusion on the issue with other firms.
"We have a clear position on this and it is fully independent from other companies. We form our own opinion on this subject," he said.
GIVE AND TAKE
But opposition Christian Social Union leader Edmund Stoiber said transparency in management pay was central to efforts to make Germany more competitive by trimming labor costs.
"You can't want to earn an American-style salary and impose German-style secrecy at the same time, it doesn't work," he said in a statement on Monday, adding that managers could not expect workers to shoulder the burden of company cost-cutting alone.
Daimler bosses agreed to take a pay cut to resolve the stand-off with unions, but German managers who presided over steep falls in the value of their company's stock have come under heavy criticism for not taking similar steps in the past.
Justice Minister Brigitte Zypries told Der Tagesspiegel newspaper on Monday the corporate governance code could even be extended to linking executives' pay to workers' wages.
"It's definitely worth considering linking a board's salary not just with share price developments, but also with how wages in the respective companies develop," she said.
Juergen Kurz, a spokesman for Germany's DSW shareholders' association, said only around one-third of DAX-listed firms were in full compliance with the governance code.
"So long as there's no law, the companies will take the view: 'Well, why should we do it?'" said Kurz.
Jan Wulfetange, a spokesman for Germany's BDI industry federation, said domestic pressure and steps by the European Commission to improve corporate governance would eventually bring German companies into line with the code.
DSW's Kurz said full transparency would not only force companies to introduce a salary structure that lifts or lowers executive pay in line with profits, it would also pave the way for German companies to offer bigger remuneration.
"Germany would start getting used to the idea of bigger salaries," he said. "But they won't reach U.S. levels because that wouldn't be socially acceptable here."