The German Corporate Governance Code suggests a fixed remuneration (G18): “If members of the Supervisory Board are granted performance-related remuneration, it shall be geared to the long-term development of the company.”
In response, the task-related components, fixed remuneration and compensation for committee membership are gaining in importance while performance-related components are declining.
Fixed remuneration
Over the course of several years, a growing number of companies have switched to paying only a fixed remuneration and additional compensation for committee work. In 2020 this practice has spread to just under 78% of the boards, compared with 27% in 2012.
In 2020 an ordinary member receives average fixed remuneration of €79.000 — a growth of 4,6% since the 2018 analysis. Average basic compensation for chairs has risen by 4,7% to €196.738; vice chairs have seen a slight 0,6% decrease, from €126.674 to €125.890.
Our perspective
By the time some supervisory boards first waived performance-related remuneration, basic compensation had risen dramatically — for example by an average 38% between 2010 and 2012 for an ordinary member. Now fixed remuneration is the most widely used fee mechanism, such growth has slowed considerably.
Average growth of fixed remuneration for supervisory boards
|
2012 |
2014 |
2016 |
2018 |
2020 |
| Ordinary member |
38% |
14% |
18% |
17% |
5% |
| Chair |
34% |
13% |
19% |
17% |
5% |
| Deputy chair |
47% |
14% |
19% |
18% |
0% |
Committee fees
97% of the boards covered — four percentage points more than in the 2018 analysis — reward committee engagement. Only 50% compensate nomination committee work, probably because meetings are infrequent.
Just under three-quarters of the boards pay a higher rate of remuneration for audit committee membership, or at least for the committee chairman. Among DAX boards, the figure is 70%.
Performance-related remuneration
Only 15 boards (22% of those covered in the Board Index) apply performance-related compensation. Of those, 10 (roughly 66%) apply long-term criteria. Among them, two boards grant virtual shares with a four-year vesting period. Only five boards pay a short-term bonus.