A proposal has been put forward to address the widening gap between executive compensation and wages for lower-paid employees within German companies. The initiative, detailed in a paper by Left Party Vice-Chairman Maximilian Schirmer and reported by “Handelsblatt”, suggests the introduction of a “pay equity ratio.
The proposed measure would apply to companies receiving state subsidies or in which the state holds shares, such as Volkswagen. Under the model, these companies would be required to ensure their lowest-paid employees receive at least one twenty-first of the CEO’s annual salary.
Schirmer’s paper highlights what he describes as “absurd inequality” within German corporations. He cites figures showing that the average salary for a DAX board member currently stands at €5.8 million annually, representing 41 times the salary of an average employee. At Adidas, this ratio extends to 95 times. The current minimum wage in Germany is €2,220 gross per month. When considering a CEO earning over €10.6 million annually, the discrepancy can reach as high as 400 times the minimum wage.
The proposal also draws comparisons to past interventions by international leaders. Schirmer advocates for a shift in perspective, urging Friedrich Merz, should he aim for a leading political role, to move away from what he perceives as a “BlackRock mentality”. He points to instances where former U.S. President Barack Obama, during the financial crisis in 2009, capped executive pay at companies receiving state aid at $500,000. Similarly, former German Chancellor Angela Merkel cautioned against “excessiveness” in executive salaries in 2013.
