Frankfurt Airport Managers Under Fire Over Pay Hikes

December 5, 2003

Airport Managers Under Fire Over Pay Hikes
Frankfurter Allgemeine, Germany


The Frankfurt state court this week started a trial surrounding Frankfurt 
airport managers' responsibility in a badly flopped terminal project in the 
Philippines, which sent the airport operator, Fraport, into the red in its last 
business year. Also this week, a news report claimed that Fraport had raised 
the salaries of the managers who oversaw this venture even more generously than 
had previously been thought.
Despite heavy losses and the scrapping of dividend payouts as a result of the 
ill-starred terminal project in Manila, Spiegel newsmagazine reported that 
departing supervisory board chairman and Hesse state premier Roland Koch 
granted pay hikes of EUR150,000 each to Fraport Chairman Wilhelm Bender and his 
deputy, Manfred Schölch. Spiegel cited an internal document showing that 
Fraport managers already collected ample retrospective bonuses for 2002 last 
summer, although the company had to write off nearly EUR300 million on the 
Asian project.
Under their contracts, the top managers can double their salaries if the 
company reaches certain sales and earnings targets which they themselves 
co-determine. 
Because additional income and acquisitions are weighted too heavily, Spiegel 
wrote, the five Fraport board members were able to add 75 percent to their 
fixed salaries when their company was posting a loss because of the flawed 
business decision in the Philippines. While ordinary Fraport employees have 
heavily contested the management pay hikes, Herbert Mai, Fraport personnel head 
and a former union boss, also collected a bonus of more than EUR130,000.
Koch's spokesman called the Spiegel report “highly unprofessional and 
unfair,“ adding that “under Koch, economic success for the first time 
became a criterion of management remuneration at Fraport“ and that half of 
the managers' pay is now performance-related. In effect, the spokesman said, 
the board members thus had to take “substantial cutbacks“ for 2002. 
The suit was filed by an asset manager who claims that Fraport managers knew 
about the risks of the Manila deal, a partnership with business cronies of the 
discredited former government of the Philippines, early on and should therefore 
not have approved it. The investor, Georg Wengert, is suing for a retroactive 
withdrawal of the board's discharge by the general meeting. Such a ruling would 
imply no personal consequences for the board members, but would represent 
merely a symbolic reprisal. The presiding judge indicated on the first day of 
the hearing that he does not give the suit “a great chance of success.“
Wengert, however, said that he may also file a “prospectus liability“ suit 
on behalf of 50 Fraport shareholders. Wengert claims that supervisory board 
reports from 1999 show that the managers knew about the risks implicit in the 
Philippines deal, but did not describe these sufficiently in the prospectus for 
Fraport's initial public offering in 2001. A prospectus liability suit can 
result in a company being forced to reimburse its shareholders for the cost of 
the shares they bought in the initial public offering.

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