Updated:

Executive Remuneration in the UK vs. Germany Essay

Exclusively available on Available only on IvyPanda® Made by Human No AI

Introduction

One of the most serious crises of modern history, the 2008 financial crisis, pointed to several problems within the executive compensation system of companies. The gap between executive salaries and the rest of the workforce continued to widen dramatically, and the high proportion of variable rewards led executives to pursue short-term goals that could conflict with the organization’s long-term goals. Consequently, Germany enacted proper board compensation legislation, and Britain made significant changes to its Enterprise Bill and regulatory reform. This section will therefore focus on the aspects of executive remuneration and issues related to it.

Discussion

Arguably, the most important difference between the German and British executive remuneration systems is that in Germany, executive compensation must not exceed that of other companies of the same size and engaged in the same activity. In turn, in Britain, there is no legal requirement to compare remuneration to similar figures. However, some guidelines exist according to which such a comparison can be made.

The two countries’ systems also differ in how the employee engagement criterion is implemented in their territories. Thus, there is a mandatory requirement for companies in Germany with more than 500 employees “to have employee representatives on the supervisory board when determining executive compensation”. In the U.K., despite several proposals, there is still no mandatory requirement for employees to participate in determining the remuneration of their executives.

Another difference is the fact that compensation reporting for each individual is mandatory in Germany, while in Britain, it is advisory. This means that in Germany, companies must publish information about the remuneration of each of their employees in executive positions, while in Britain, such information is not mandatory. In practice, however, there are problems with implementing these measures in both countries, especially in pension contributions and stock options.

There are also essential differences in variable compensation related to the fulfillment of specific goals or objectives of the company. In the U.K., there are no laws governing the amount and structure of such compensation except in the financial sector. In Germany, there is also no law regulating this issue. However, there are several restrictions in calculating such compensation, justified by many years of evaluating such an indicator in the industry. These restrictions are necessary to limit the possibility of substantial deviations from the industry’s variable compensation standards. There are also more apparent constraints in the financial sector.

Conclusion

Thus, most of the processes in determining executive compensation in Germany are mandatory and statutory, while in Britain, they are advisory. Despite the current proposals for reforms to this system in Britain, there are still several practical problems associated with the growing pay gap between executives and other employees, which in Germany is partially mitigated by the existence of supervisory bodies that represent the interests of other employees in determining executive remuneration. The higher mandatory involvement of employees in such decisions and the need to act constantly within the existing norms of similar companies restrict German companies from assigning too-high rewards.

References

Hengeller M and May Slaughter, “” (2013) 6 Employment Law Newsletter 1. Web.

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2024, April 13). Executive Remuneration in the UK vs. Germany. https://ivypanda.com/essays/executive-remuneration-in-the-uk-vs-germany/

Work Cited

"Executive Remuneration in the UK vs. Germany." IvyPanda, 13 Apr. 2024, ivypanda.com/essays/executive-remuneration-in-the-uk-vs-germany/.

References

IvyPanda. (2024) 'Executive Remuneration in the UK vs. Germany'. 13 April.

References

IvyPanda. 2024. "Executive Remuneration in the UK vs. Germany." April 13, 2024. https://ivypanda.com/essays/executive-remuneration-in-the-uk-vs-germany/.

1. IvyPanda. "Executive Remuneration in the UK vs. Germany." April 13, 2024. https://ivypanda.com/essays/executive-remuneration-in-the-uk-vs-germany/.


Bibliography


IvyPanda. "Executive Remuneration in the UK vs. Germany." April 13, 2024. https://ivypanda.com/essays/executive-remuneration-in-the-uk-vs-germany/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1