STUTTGART - Daimler-Benz Chairman Juergen Schrempp tried to be diplomatic on the question of executive compensation at the annual shareholders' meeting on 27 May, but he stood his ground that top executives of top companies deserve top pay.
Pay is an important issue. The expected birth of DaimlerChrysler AG this autumn will join Daimler-Benz AG, a bigger company with lower pay, to Chrysler Corp., a smaller, more profitable company whose executives make much more with options and bonuses.
Daimler-Benz is defending a stockholder lawsuit over the stock option plan it introduced two years ago.
The company faces a second court hearing for a case that it has already won once. The case was heard first in the regional court in Stuttgart. Ekkehard Wenger, shareholder and professor of economics at the University of Stuttgart, is suing for 'unlawful enrichment at the cost of the shareholders.' He has already won a similar case in a different court against Volkswagen AG.
Opposition to the current option plan continued at the annual meeting.
'We do understand that the board members and management executives deserve a certain fee,' said shareholder Christian Strenger, 'but the sky shouldn't be the limit and the amounts concerned are in no way reasonable.' Strenger represents DWS, a financial advisory company that owns about 1 percent of Daimler-Benz.
'In the USA stock options are normal,' said Schrempp. 'Stock option plans crank up the economy and there should not be any limitations to them.'
Schrempp said Daimler-Benz was working on alternatives to the current plan should it be defeated in court.
The existing stock option plan was introduced two years ago for about 1,600 Daimler managers and 10 management board members. A board member who invested the maximum DM120,000 two years ago would have made an extra DM1.5 million now. The options only have value if the stock price rises at least 15 percent.
Aside from the compensation issue, shareholders welcomed the merger and congratulated Schrempp.
Bernd Kaufmann, representing an organization of small shareholders, said he expects positive results from the merger. Schrempp said dividends will tend to rise.
The name of company co-founder Karl Benz will live on in the car brand, said Schrempp: 'Our biggest asset is the name Mercedes-Benz.'
He refused to give new details about how DaimlerChrysler might work, although there were hints. 'We do want to grow, but we cannot spread the product further,' he said, meaning that the Mercedes-Benz brand could not be stretched beyond the A-class it introduced last autumn.
He indicated that an early DaimlerChrysler project will be a new vehicle developed for emerging markets.
'Opportunities will open up for jointly developing motor vehicles that we need for the markets in Asia, Latin America, in central and eastern Europe,' he said.
Schrempp admitted that the cultural connection between Chrysler and Daimler will not be easy, 'but in the process of discussion a good chemistry between the two sides has developed.'
Then he made a joke at his own expense.
He looked back two years to the time when Daimler-Benz AG absorbed its carmaking subsidiary Mercedes-Benz AG, eliminating a layer of management and a well-liked CEO, Helmut Werner.
Referring to the two districts of Stuttgart where Mercedes and Daimler had their separate headquarters, Schrempp said, 'We have already managed a merger, between Untertuerkheim and Moehringen.'