BMW Links Executive Pay to That of its Line Workers

BMW has become the first major company in Germany to change its compensation practices amid growing concern over excessive banker bonuses. The company cited a fairer work environment as its reason. Other firms are sure to take notice, given BMW's size and weight in the global business market.

BMW became the first major blue chip German company to link the bonuses of its top managers to those of its assembly line workers, amid growing global criticism of executive compensation. The move sends a strong message to other firms also examining their compensation practices, as the world's largest banks in particular have come under fire from politicians, shareholders and the public over excessive bonuses during one of the worst economic crises the world has seen.


BMW plans to tie executive bonuses to those of its blue-collar workers, in a bid to create a fairer and sustainable compensation environment within the company. Starting in 2010, the company will use a common formula to ascertain and award bonuses to its upper and lower level employees, based on the company's performance as measured by profit, sales and other factors. That means that upper level management could potentially lose more money than their lower level counterparts for bad performance, BMW said.

A spokesman for BMW said the company's goal was to create fair and transparent compensation practices and to prevent a gap between management and the workers, as the under class, from developing. "We don't just want to build sustainable cars. We also want to have sustainable personnel politics. We think this is good for the company culture," the spokesman told SPIEGEL ONLINE. He declined to be more specific on how the formula will work.

BMW May Set Trend on Executive Pay

Other companies may follow BMW's example as pressure grows on firms to curb excessive bonuses in the wake of the financial crisis. German Chancellor Angela Merkel has been outspoken about her dislike for excessive bonuses, calling them "inappropriate." In September, she penned a letter with French President Nicolas Sarkozy and Prime Minister Gordon Brown of the United Kingdom ahead of the G20 summit in Pittsburgh that proposed a cap on the the total amount of bonus money a bank could pay out. They didn't stipulate how much banks could reward a single individual.

http://www.spiegel.de/international/business/0,1518,657462,00.html

It would be great to introduce the concept of "sustainable personnel politics" into marketing as a consumer appeal factor. Just as with "green" marketing, where consumers and looking for products with smaller environmental footprints, companies should create more policies like this and use it as a marketing point. To say: When you have a choice of products, don't just choose based on the qualities of the product itself, choose based on the corporate culture. Do they have a company where the executives and the line workers are subject to equal reward and the executives more subject to punishment if things go wrong that affect the entire company? Try to buy from those companies more. Oh, and also, as a consumer, choose companies that outsource jobs the least.

are part of a strong union and the laws in the country have a lot of worker protections...

Maybe they will do commercials should they stick with the plan (in Germany at least)...

A great first step by an exceptionally good company--at least in terms of the product they produce.

So from now on, if management wants a big raise, the workers automatically get one too!

Also, if the workers needed a pay increase, management wouldn't be so resistant.

It would also limit runaway executive salaries which rob investors and raises the price of the finished product.

A win-win solution.

"Really? ... BMW makes cars, too?" :D

And if there is talk that we should do something like this, there will be a massive advertising campaign slandering the would idea.