France eyes curbs on executive pay

France eyes curbs on executive pay

By Ben Hall in Paris

Published: May 29 2008 18:33 | Last updated: May 29 2008 18:33

The French government on Thursday threatened to take further action to curb pay for bosses of poorly performing companies, calling recent rises for some executives “perfectly scandalous”.

Christine Lagarde, finance minister, called on employers to ensure that remuneration for their top managers reflected the company’s performance, suggesting further legislation if they failed to do so.

The French government intends to use its presidency of the European Union, which begins in July, to press for EU-wide rules governing executive pay, officials said, arguing that there was a head of steam building among finance ministers for a Europe-wide clampdown.

Ms Lagarde’s attack comes amid a widening political backlash in Europe against allegedly excessive pay packages for top business leaders.

The Dutch government is preparing to impose an additional tax on executive bonuses and a levy on companies that pay out vast severance packages.

Jean-Claude Juncker, the Luxembourg prime minister, called excessive corporate pay a “social scourge” and said EU ministers would consider higher taxes on “golden goodbyes”.

“This type of increase in companies which are sometimes not doing well is perfectly scandalous,” Ms Lagarde told French radio.

She was reacting to a recent survey by L’Expansion magazine on Wednesday that found that total pay of chief executives of France’s CAC 40 leading companies, including salaries, share options and dividends, soared by 58 per cent in 2007 to €161m ($252m, £128m).

Ms Lagarde was careful to focus her criticism on companies deemed to be doing badly or that were undergoing painful restructuring including job losses.

“There is absolutely no problem when people succeed . . . let them earn lots of money,” she said, while adding that the “principle of equity” was at stake.

The government is understood to be unhappy with the level of executive pay at EADS, the aerospace group, which is in the middle of a highly controversial cost-cutting programme with thousands of job losses.

President Nicolas Sarkozy has taken a strong stand against excessive pay-offs for company bosses as part of his drive to “moralise capitalism”. The government has already imposed restrictions on so-called “golden parachutes”.

The new rules, introduced last year, oblige companies to set performance conditions for severance packages, although it is up to the companies to set the criteria.