France Moves To Curb Executive Pay

22 Mar 2013

France is set to follow in Switzerland’s footsteps by tackling private sector wages in the latest attack on European executive pay.

Legislation to increase shareholder power over remuneration and limit or ban enhanced pension deals and “golden parachutes” – similar to measures overwhelmingly approved by Swiss voters in a referendum this month – is being prepared, officials said.

A draft law planned to appear before the summer will aim to “put an end to a certain number of practices and introduce transparency into the remuneration” of top executives, Najat Vallaud-Belkacem, minister for women’s affairs and official government spokesperson, said on Thursday.

She was speaking after Jean-Marc Ayrault, the prime minister, told parliament that he intended to apply similar measures to those imposed on public sector bosses “to the leaders of the big private companies”.

The Swiss vote, applauded by Mr Ayrault at the time, came on the back of a move by the EU to cap bankers’ bonuses – supported by France though strongly opposed by Britain. Last week Angela Merkel, the German chancellor, signalled her backing for tighter regulation of executive pay.

Shortly after President François Hollande took power last year, he introduced a decree limiting individual annual pay in state-owned companies to €450,000 – a move that saw the salary of Henri Proglio, head of electricity company EDF, slashed by 70 per cent from €1.6m.

A crackdown on big pay deals was a key theme in Mr Hollande’s election campaign, including his proposal to impose a 75 per cent marginal tax on incomes above €1m. The tax rate was blocked by the constitutional council at the end of last year on technical grounds. Government plans to revive the 75 per cent rate received another setback this week when the finance section of the State Council, the legislative watchdog, concluded that any resubmission of a levy above 66 per cent would also be thrown out.

A move to cap executive pay won 83 per cent support from French voters in an opinion poll held after the Swiss vote. Ms Vallaud-Belkacem said: “The French understand very well that out of concern for fairness and the regulation of abusive practices, we want to legislate on this subject.”

But there were clear signs that, for all the rhetoric, the government wants to avoid another showdown with business leaders angered by tax policies. Ms Vallaud-Belkacem said it could not enact the same measures for the private sector as it did for state companies.

Pierre Moscovici, finance minister, said the issue had to be discussed with Medef, the employers’ federation, and Afep, which groups France’s top quoted companies, before legislation could be decided. They have a joint code of conduct covering remuneration, which is under review.

A senior government official said a decision would have to be made on what issues were left to self-regulation and which were included in legislation.

The European Commission is due to produce legislative proposals this year to strengthen shareholder rights that would include enhancing their influence on pay.

Source: http://www.ft.com/cms/s/0/17880166-9232-11e2-851f-00144feabdc0.html#axzz2OFEu54qe