France curbs bonuses at bailed-out firms

31st March 2009, Comments 0 comments

State-assisted companies will not be able to hand out executive bonuses and stock options until the end of 2010.

PARIS – French Prime Minister Francois Fillon on Monday unveiled a government decree curbing executive bonuses and banning stock options at bailed-out companies until the end of 2010.

Decided after a string of executive payoffs sparked a public uproar, the decree will ban bonuses at firms that announce "major layoffs" while receiving public aid – a category that includes leading French car firms and banks.

"These are rules for a time of crisis," Fillon told reporters, saying the measures would give France "the means to be exemplary".

The decree, which comes into force on Tuesday, will also curb bonuses and severance packages at all publicly owned companies until the end of next year.

It stops short, however, of banning golden parachutes at private firms, even those that receive state aid to weather the economic crisis, or of setting across-the-board caps on executive pay.

Several banks and a car parts supplier touched off a furore in France after revealing they had paid millions of euros in perks for executives while accepting taxpayer money.

Fillon lashed out Monday at the "irresponsible behaviour of a few," saying "the government will not let the behaviour of some cast aspersions" on the wider French business world.

The government will also set up a committee of experts to examine the wider issue of pay at firms that lay off staff, he said.

The opposition Socialist Party, which is pressing for a five-year ban on stock options and other benefits on all companies except start-ups, attacked the measure as "entirely insufficient".

"This decree is a token gesture, that does nothing to tackle the roots of the disease," said the Socialists' spokesman on the economy, Michel Sapin.

Union leaders, who were poised Monday to call for a new day of anti-government protests on 1 May, attacked the measure's limited scope, with Bernard Thibault, head of France's biggest union the CGT, calling it "very, very limited".

As the economic crisis bites, sending French jobless soaring to nearly 2.4 million, the government fears that anger in the workforce could spill over into social unrest.

President Nicolas Sarkozy's government has sought to channel resentment by talking tough on executive pay after more than a million workers took to the streets for the second time this year to contest his policies.

Investment bank Natixis, which received EUR 2 billion in government funds, is in the eye of the storm after admitting to paying EUR 70 million in bonuses to some 3,000 employees.

Natixis, a subsidiary of Caisse d'Epargne and Banque Populaire, currently being merged, reported a net loss of EUR 2.8 billion for 2008 and is laying off 1,250 workers in France and abroad.

In March, top executives at Societe Generale bank agreed to hand back thousands of stock options after Sarkozy described the perks as "unacceptable" given the state aid enjoyed by the bank.

Bosses at French energy giant GDF Suez, 35.7-percent state-owned, decided to give up their stock options after workers went on strike in protest – although the company is turning a profit and is getting no aid from the state.

The government has also vowed to oppose a golden parachute for the departing boss of auto supplier Valeo, Thierry Morin, awarded a multi-million-euro payoff although the firm sank into the red under his leadership.

The issue of pay in state-assisted firms has become a politically hot subject across Europe and the United States, where executives at bailed-out insurance giant AIG agreed last week to pay back USD 50 million (EUR 38 million) in bonuses.

In Britain, the former head of beleaguered bank RBS, Fred Goodwin, is resisting pressure to give up a million-dollar monthly pension while the Netherlands and Sweden have taken step to curbs executive pay.

AFP / Expatica

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