Pretty much everyone in Germany who steps onto a platform can already sense that the situation at Deutsche Bahn is not going well. The group is struggling with the worst punctuality figures in years and with a record number of construction sites. In addition, the railway needs additional billions of euros from the federal government in order to be able to raise the necessary sums for the general renovation of its own routes. And then the mountain of debt grows.
Even if the development of the group offered little reason for rewards, in recent years the group’s board members have repeatedly been able to enjoy million-dollar bonuses – payments for good performance. Railway boss Richard Lutz should be able to more than double his salary for the past financial year with a bonus payment to 2.2 million euros. However, the sum has not yet been paid out. The railway had to apply for government support for electricity prices, which prohibited bonuses from being paid out.
However, the railway supervisory board now has concrete plans to change the controversial rules. According to information from South German newspaper Railway supervisory board chairman Werner Gatzer wants to change the entire compensation system for top railway managers in key points. The aim of the plans is to make it easier to reduce the performance-related parts of the salary in the event of poor development, it is said. And to orientate them much more closely to the company’s long-term goals than before. A temporary cosmetic treatment of the management balance sheet will be much more difficult in the new system.
The reasons for why bonuses are paid should change the most. Achieving short-term goals, such as profit, should only make up 15 percent of bonuses in the future. So far it has been 38 percent. In return, the importance of long-term goals should increase significantly. While it has so far been possible to more than compensate for weaknesses in areas such as punctuality with good results elsewhere, this will become more difficult in the future. If only three of six goals are achieved, the maximum possible bonus drops by around 25 percent due to a new “damping factor”. In addition to the five goals such as punctuality and customer satisfaction, the sixth should be sustainability.
The starting salary should increase
However, according to the plan, not all areas will be cut. Because new board members should receive a significantly higher starting salary in the future. In the first three years, they should be able to earn 1.4 million euros annually with a combination of fixed and variable salary, up from 1.1 million euros so far.
According to circles in the control committee, the railway has recently had difficulty filling positions with preferred candidates. An analysis by an external consultant shows that the group was left behind compared to DAX companies and other public companies and was in last place when it came to starting salaries. After all, they hadn’t changed at the railway in 14 years. The percentage increase is now below that of the standard salaries in the same period, it continues. With the plus, the group is intended to get the problem of recruiting good managers under control. The ratio of basic and variable salaries should also change with the reform. So far, the railway has paid 36 percent of the possible salary as a fixed sum. In the future it should be 50 percent. However, the salary levels for longer-serving board members should not change.
Whether Supervisory Board Chairman Gatzer can implement the plan, which would also apply to managers of Deutsche Bahn subsidiaries, will become clear next week. The entire supervisory board will then discuss it on Wednesday. The railway can only intervene in new contracts. Nevertheless, the plans should also apply to the current board, it is said. Initial discussions about voluntary adaptation to the new system are already underway.