Board Compensation—Highest Total Remuneration in the Automotive Industry
- 3.5% increase in executive board compensation
- Many companies work at simplifying their compensation systems
- Family-run companies offer attractive salaries
Cologne, February 26, 2018
Size and industry are major factors influencing salary
The study found that the size of the company continues to play a major role in the level and structure of board remuneration, with board members of larger companies having more complex management responsibilities and wider areas of influence. Prime standard companies paid their bosses an average annual salary of around 400,000 euros per year, while other board members took home an average of 342,000 euros per year in listed companies and 333,000 euros per year in non-listed companies. Clear differences were also noted between industries. The automotive industry paid its executives the highest salaries, averaging 1.1 million euros per year, while the construction and real estate industries saw the highest rates of salary growth, where board compensation was up by just above one-third, on average, when compared to the previous year.
High variable components in larger companies
In addition to the level of compensation, the size of a company also influences performance-based pay. “In general, the variable component of overall compensation is higher in larger organizations than in smaller organizations. Across all companies, the ratio between basic salary and variable components was around 70 to 30,” explains Alexander von Preen.
The lowest proportion of variable pay within the overall package, at around 25%, was found in small companies employing no more than 500 people. In larger companies with more than 10,000 employees, the variable component was 40% of the overall compensation package.
Many companies are now working on new structures to their variable pay. “In listed companies, simplification of compensation systems is quite high up on the agenda of supervisory boards for the coming year. Overall, it’s becoming ever more important for these structures to be transparent and comprehensible to outsiders. Complex compensation systems have little motivating effect on boards, so the trend towards simplification is likely to continue,” says Mr. von Preen.
Family-run companies offer attractive salaries to board members
This year is the first time that Kienbaum’s study has looked at board compensation in family-run companies separately. “Family-run companies have different governance structures, which manifest in differing approaches to board compensation,” explains Alexander von Preen. The Kienbaum study showed that board compensation in family-run companies was extremely competitive: “When all companies are taken into account, or when you analyze comparable size classes, family-run companies come out higher, on average, when it comes to board compensation,” concludes Mr. von Preen.
The “Board Study” can be obtained online at https://shop.kienbaum.com/verguetungsstudie-vorstand-2017 at a cost of €1,500 (plus VAT).
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