GMI Blog – French Government to Impose Pay Cap on CEOs

The following entry appeared as part of GovernanceMetrics International’s GMI Blog. GMI is the leading independent provider of global corporate governance and ESG ratings and research. Corporate stakeholders – including leading investors, insurers, auditors, regulators and others – use GovernanceMetrics services to identify and monitor risks related to non-financial measures covering key environmental, social, governance and accounting risk factors.

By Paul Hodgson – CCO and Senior Research Associate

The new socialist government in France – leading the way by taking a 30 percent pay cut itself – promised to impose pay limits on executives at companies in which it owns a majority stake, according to the Financial Times today. Pay will be capped at 20 times that of the lowest paid worker in the company and will lead to substantial pay cuts for CEOs, whose earnings are, frankly, already far lower than typical CEO pay levels in the US.

Pressure will also be exerted on other companies in which the government owns shares, but not a controlling share.

According to the FT, the government will also vote against the severance package for the former CEO of Air France-KLM, which is laying off thousands of workers, because it considers it unfair and excessive.

The only company in the US to limit pay in such a way is, of course, Whole Foods. There the CEO’s cash compensation is limited to 19 times the average employee wage. While no such limit applies to equity compensation, such awards continue to be moderate, and total compensation for the co-CEOs at Whole Foods is much lower than at equivalent national food retailers.

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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