ZEW Survey Among Financial Market Experts - Financial Market Experts Favour New Rules for Manager Salary

Manager salaries and bonus payments are important topics at the G-20 summit in Pittsburgh this week and during the federal election campaigns in Germany. Disincentives for bank manager salaries are blamed for the financial crisis. A broad majority of financial market expert surveyed by the Centre for European Economic Research (ZEW) assesses the wrong reimbursement system as an important reason for the crisis on the financial market. Almost 90 percent of experts also hold the opinion that a change in the reimbursement system for managers is absolutely necessary.

The experts showed unanimity when asked which measures are the best ones to avoid disincentives for manager salary. Almost 90 percent expect that extending the lock-up period for share options as well as the Malus regulation, which leads to a cutback of manager salaries in case of entrepreneurial failure, successfully counteract disincentives. 82 percent of experts assume that an interconnection of bonus payments and other objectives than the share price is a right measure to avoid short term manager decisions. 74 percent consider the extension of management liability in case of entrepreneurial failures a promising measure. The experts are considerably less convinced when it comes to the suggestions to introduce an upper limit for bonus payments or to link the bonus payments with the firm's wage level.

The question whether there should be a binding upper limit for manager salaries is being discussed recently. Only a minority of experts thinks this measure is sensible. 83 percent, however, hold the opinion that this suggestion is inapplicable to avoid disincentives.

For further information please contact

Matthias Köhler, E-mail: koehler@zew.de