Can a company that receives millions in subsidies from the gas price brake pay bonuses to its board members and dividends to its employees? The industry says: Definitely and has good reasons for this. The Greens say: Probably not, and their arguments aren’t bad either.

It is a political test balloon, but one that has it all: Economics Minister Robert Habeck (Greens) indicated last week that companies that take advantage of the planned gas price help will have to wait for the distribution of dividends and the payment of Employee bonuses should be foregone. Other politicians and economists are now also in favor of such a ban. The working group of experts and party representatives, which is bringing the gas price brake on the way, is even of the opinion: It must be legally guaranteed that companies “may not issue any dividends, bonuses, special payments in the form of share packages or other separate remuneration” as long as they take advantage of gas price support. Such a dividend ban would have to be initiated by the federal government. However, there is currently a lot of interest in how the topic is being debated in public.

Katharina Beck, financial policy spokeswoman for the Greens, thinks the ban is good: “If companies are subsidized by the state and thus by taxpayers, they should not pay bonuses or distribute dividends at the same time,” she says. And the citizens’ movement Finanzwende has already unequivocally called on the federal government to link the gas price brake for companies to a ban on bonus payments and dividend payments. It would be wrong if state aid “ends up in the accounts of shareholders and CEOs,” says a letter from the Finanzwende movement to Habeck and Federal Finance Minister Christian Lindner (FDP).

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The main beneficiaries of the gas price brake would be particularly affected by a ban. The fertilizer and pharmaceutical manufacturer Bayer, for example, paid out a dividend of two euros per share this year and passed on almost half of its profits to the shareholders. Analysts expect the dividend to increase next year. Or Germany’s largest gas consumer, BASF. The chemical giant from Ludwigshafen is currently paying a dividend of EUR 3.40 per share. The management has decided on a dividend policy that provides for an annual increase in the dividend. In addition, BASF has only slightly lowered the dividend once in the past 20 years during the financial crisis. Actually, that’s why BASF is a safe bank for investors. On the other hand, the group could become one of the biggest beneficiaries of the gas price brake. If the dividend ban comes, investors would look into the tube – or BASF decides not to accept any help from the gas price brake.

Covestro is already thinking in exactly this direction. The plastic manufacturer wants its shareholders to participate in the company’s success. To this end, the company had just formulated a new dividend policy: Between 35 and 55 percent of the group result should be distributed as a dividend. Markus Steilemann, CEO at Covestro, is also President of the Chemical Association VCI and thus representative of the entire industry. He warns against an “emotionally led envy debate”. The employees in the affected companies would do everything to get the companies through the energy crisis. Investors trustingly offered the companies their capital. “A ban on dividends would be a problem,” said Covestro’s CTO Klaus Schäfer.

The industry association BDI takes the same line. “In many family businesses, dividends are the main component of the family income and thus fulfill the same function as the salary of the employees in the company,” it says from there. And bonuses are not allowances for executives in companies, but variable parts of the regular target income. Accordingly, the BDI rejects all advances in this direction.

But the issue is not off the table just because those affected do not want it. Because it is foreseeable that chemical companies, for example, will also make billions in annual profits in 2022 due to the quite successful business development. Employees and shareholders will benefit from this with bonuses and dividends. At the same time, paying out subsidies worth billions with the help of the gas price brake is not only driving critics of capitalism crazy. “From a moral perspective, companies that are still able to pay dividends should refrain from accepting public funds,” says Michael Wolff, an expert in good corporate governance and business administration professor at the University of Göttingen, in an interview with the Handelsblatt. And Isabella Weber, an economist at the US University of Massachusetts Amherst and a member of the Gas Price Commission, says: “Companies that participate in the gas price brake should not make extraordinary profits from the crisis. That is what justice demands.”

Marc Tüngler, general manager of the German Association for the Protection of Securities, warns: Anyone who bans dividends accelerates deindustrialization. Such a ban would weigh on the price and investors turned away. The result “Many companies would not use the gas price brake and the instrument, which is actually intended to secure the location and jobs, has the opposite effect.” Tüngler is realistic about the bonuses: they will exist. “But they have to be adjusted in terms of their amount.” His suggestion is that the subsidies should be linked to the fact that companies that make use of them maintain the location permanently.

A similar debate had already taken place during the Corona Aid period. A ban on bonus payments and dividends was imposed on Lufthansa, for example: in 2021, the state caught the company, whose existence was threatened due to the pandemic, with a billion euros. The short-time allowance was also linked to the discussion. Corporations such as Mercedes-Benz made and make use of the short-time work scheme, which means that employees receive part of their wages from the state. At the same time, the group made a record profit last year and diligently paid dividends and bonuses.

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The article “If politicians just look on, the gas price brake will make shareholders richer” comes from WirtschaftsKurier.