A proposal is gaining traction within German political circles aimed at addressing the widening gap between executive compensation and employee wages. The initiative, spearheaded by Left Party Vice-Chairman Maximilian Schirmer, suggests the introduction of a “wage fairness quota” for companies receiving state subsidies or in which the state holds shares, such as Volkswagen.
The proposed quota stipulates that companies meeting these criteria would be obligated to ensure their lowest-paid employees receive at least one twenty-first of the CEO’s annual salary. This measure is framed as a response to what Schirmer describes as an “absurd inequality” prevalent in German corporations. Current data indicates that the average annual salary for a Dax CEO stands at €5.8 million, representing 41 times the average employee’s earnings. At Adidas, the ratio is significantly higher, reaching 95 times. The current minimum wage in Germany amounts to €2,220 gross per month, highlighting the substantial disparity when considering executive compensation – particularly when a CEO earns upwards of €10.6 million annually, as is the case at Volkswagen, resulting in a 400-fold difference.
The proposal draws parallels to actions taken by previous leaders during economic crises. Schirmer suggests that if Friedrich Merz were to strive for a leadership role, he should move away from a “BlackRock mentality” and instead emulate approaches taken by figures like Barack Obama and Angela Merkel. Obama, during the 2009 financial crisis, implemented a cap of $500,000 for executive compensation at companies receiving government assistance. Similarly, Merkel cautioned against “excess” in executive salaries as early as 2013. The suggestion underscores a desire to promote greater economic equality and corporate responsibility within Germany.