Managing Directors Earn 3.4% More

The salaries of German executive directors continue to increase, with companies raising executive directors’ salaries by an average of 3.4% this year—the figure for the previous year was 3.3%, according to a recent study by consultancy firm Kienbaum. On average, regular members of the executive management team earned 372,000 EUR per year, while CEOs earned 1.4 times that figure, at 526,000 EUR. Sole directors received a considerably lower salary of 255,000 EUR per year. For its executive director compensation report, HR and management consultancy Kienbaum analyzed 1,928 managerial positions in 1,553 companies.

Executive directors’ salaries are heavily dependent on company size

In the analysis, the salary levels of executive directors appeared heavily dependent on the size of the company. In small companies with no more than 25 employees, executive directors typically earned an average of 205,000 EUR per year, while corporate groups employing more than 5,000 paid their executive directors as much as 821,000 EUR.
The level of salary also appeared to depend on the executive director’s involvement in the company. Shareholder-executive directors earned 333,000 EUR on average while employed executive directors typically took home 380,000 EUR per year. “Salaries of employed executive directors were higher, as to a certain extent companies need to retain them through higher compensation,” explains Sebastian Pacher, compensation expert at Kienbaum.

The chemicals industry and pharmaceuticals pay the highest salaries

Executive directors in the chemicals and pharmaceuticals industries and in mineral oil processing earned the most in industry comparisons, averaging 551,000 EUR per year. Companies in the automotive industry, paying on average 507,000 EUR, and in mechanical and plant engineering, at 453,000 EUR, also paid their executive directors considerably more than the average.
The lowest salaries were paid to executive directors of associations, institutes, and non-profit organizations, at 229,000 EUR, in transportation and logistics companies, at 286,000 EUR, and in printing firms, publishing houses, and media, at 316,000 EUR on average.

Almost all executive directors receive variable pay

At 94%, virtually all executive directors of German companies were entitled to receive a portion of their salary as a variable component. For chief executives, bonuses averaged 189,000 EUR, accounting for 35% of the overall compensation package. Regular board members typically received variable pay of 124,000 EUR, equivalent to 30% of their annual salary, while sole directors received 28% of their annual salary as a variable component, totaling 79,000 EUR on average.

In addition, 17% of executive directors also received long-term compensation components tied to the sustained success of the company, known as long-term incentives(LTI) and averaging around 105,000 EUR per year. The significance of LTI programs continues to increase at executive management level and will likely account for a considerable proportion of overall compensation in the future.

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The Kienbaum executive director compensation study is available in the Kienbaum Shop. More information on the topic of remuneration can be obtained at www.kienbaum-compensation.com.

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