German Chancellor Angela Merkel's conservative Christian Democrats turned down a proposal from their coalition partners to limit the amount a company can pay an executive without being taxed.
The Social Democrats' proposal would have limited the amount of executive salary that companies can deduct fully from their taxable profit to $1.6 million Cdn.
However, the Social Democrats have managed to push through several populist measures over the past year, signalling the party's shift to the left in preparation of next year's election.
In March, the government raised pensions for this year and next, suspending former chancellor Gerhard Schroeder's 2001 system that links pension levels to what Germany can afford in the longer term, given the aging population.
The Social Democrats also pushed the government into extending unemployment benefits for jobless people over 50 years old and to instituting a minimum wage for postal workers. The party is now pushing for minimum wages in other industries.
Social Democrat chairman Kurt Beck says he also wants greater transparency for all forms of boardroom compensation, including lucrative severance packages for fired executives.