Payday let-down

Deutsche Bank's executive superstar Josef Ackermann has always skimmed a generous portion of cream from the profits his institution churns out.

His efforts in 2010 - for which he was named "European Banker of the Year" - will be compensated with 8.9 million euros ($12.4 million). That's down from the 9.3 million euros he earned in 2009.

Ackermann's executive compensation was topped last year by Volkswagen's Martin Winterkorn, who earned 9.3 million euros after a year of record profits.

In fact, the Deutsche Bank head was also surpassed by one of his own employees, investment banker Anshu Jain, who earned nearly 12 million euros. Jain was rumored to be a possible successor to Ackermann, who will retire in 2013 at the age of 65.

Under Ackermann's guidance, Deutsche Bank emerged from the financial crisis relatively unharmed.

The Swiss-born banker is well connected in German high society. His gregarious style, however, has occasionally landed him in the media's spotlight - mostly recently in February when he made a chauvinistic gaffe about female executives.

Pay linked to success

Executive compensation, especially in the financial industry, was the subject of intense public scrutiny and new restrictions during the financial crisis. Such compensation can fluctuate widely as portions of it are pegged to long- and short-term successes.

Ackerman's pay, for instance, will come in multiple forms. He'll receive 2.7 million euros upfront, along with 1.1 million euros in stocks, which he's obliged to keep for a period of time. In a few years, 2.5 million euros in stocks and cash will become available to him, provided Deutsche Bank's profits stay brisk.

He'll also receive about 2.5 million in delayed payments from previous years, without which his compensation would be 6.3 million euros.

Back to 2007 levels

Bernd Thomaszik of the consulting firm Mercer, which specializes in executive compensation, said in some instances, increasing salaries at the top can be an indicator of economic recovery.

"When a company has good results, then their executives will be better compensated," he told Deutsche Welle. "Generally speaking, it does reflect the current economic circumstances. We saw a trend in 2010 and expect that executive compensation will be reaching 2007 levels."

The fact that VW's Winterkorn has overtaken Deutsche Bank's Ackermann in salary comes as no surprise to Thomaszik. When profits return, so do executive bonuses, he said.

"Some companies ... stayed at the same level, and so bonuses were earned and there were no reductions in executive pay," Thomaszik said. "The auto industry had a recession like it had never seen before during the last quarter of 2008."

New restrictions

In August of 2009, Germany introduced "VorstAG," a law that altered the composition of executive pay. Under the law, executives receive less cash up front in their compensation mix and more variable incentives based on long-term successes. Bonuses, which were previously calculated from single-year profits, must reflect several years of results, according to Thomaszik.

That brings Germany's system of executive compensation more closely into line with those of the United States and Great Britain, he added.

"The law only strengthened what companies were already doing," Thomaszik said. "There was a focus on long-term sustainability, and this was backed up by long-term incentives. The system is structured so that executives can't receive a large amount of variable compensation if the institute isn't having good results."

Other top-earning German executives in 2010 were Dieter Zetsche of Daimler with 8.7 million euros and Peter Löscher of Siemens with 8.9 million euros.

Author: Gerhard Schneibel

Editor: John Blau