France defies basic economics: Severely caps top pay of executives

[TheGreatGatsby]

France’s new socialist government has launched a crackdown on excessive corporate pay by promising to slash the wages of chief executives at companies in which it owns a controlling stake, including EDF, the nuclear power group.

In a departure from the more boardroom-friendly approach of the previous right-of-centre administration, newly elected president François Hollande wants to cap the salary of company leaders at 20 times that of their lowest-paid worker.

According to Jean-Marc Ayrault, prime minister, the measure would be imposed on chief executives at groups such as EDF’s Henri Proglio and Luc Oursel at Areva, the nuclear engineering group. Their pay would fall about 70 per cent and 50 per cent respectively should the plan be cleared by lawyers and implemented in full.

Mr Proglio earned €1.6m last year – 65 times more than his lowest-paid worker.

The government also wants to pressure other companies in which it owns a stake to follow its lead, even though it has no legal power to force such a change.

France is unusual in that it still owns large stakes in many of its biggest global companies, ranging from GDF Suez, the gas utility; to Renault, the carmaker; and EADS, parent group of passenger jet maker Airbus.

Mr Ayrault said he “believed in the patriotism” of company leaders and their willingness to share the country’s economic pain. Mr Hollande and his ministers are taking a 30 per cent pay cut.

Demonstrating the government’s eagerness to flex its muscles over boardroom rewards, Pierre Moscovici, the finance minister, said the state also plans to vote against a €400,000 payoff to the sacked chief executive of Air France-KLM at the company’s annual meeting in Paris on Thursday. France owns 15.8 per cent of the struggling Franco-Dutch airline.

Mr Moscovici said the payment to Pierre-Henri Gourgeon did not live up to the standards of “salary moderation and decency” that Mr Hollande wants to impose. Air France is going through a painful restructuring that will entail thousands of job losses.

Louis Gallois, the departing EADS chief executive and socialist supporter, warned that the pay cuts were going to be “steep” for some bosses and that such “crisis measures” must only be temporary, including Mr Hollande’s plan for a 75 per cent tax on yearly wages above €1m.

“We need to be more flexible than that,” he said, adding that it was “best left to companies to fix salaries”.

Pierre-Yves Gauthier of AlphaValue, a Paris-based corporate research group, said the measures “could almost have been put in place to create pressure on Mr Proglio”, whom some socialists would like removed because of his ties to Nicolas Sarkozy, the former president.

France to cap top pay in state groups - FT.com

 

[JakeStarkey]

How many European countries cap top pay?

 

[TheGreatGatsby]

I don't know. That's a good question. Look at the state of Europe's economy though.

 

[JakeStarkey]

Same problem as ours: terrified of Greece, Spain, etc, defaulting because of their investments in our commercial and private security mortgage bundling, along with their citizens greed, similar to ours, individually and corporately and nationally, in not managing finances wisely.

 

[TheGreatGatsby]

Same problem as ours: terrified of Greece, Spain, etc, defaulting because of their investments in our commercial and private security mortgage bundling, along with their citizens greed, similar to ours, individually and corporately and nationally, in not managing finances wisely.

I think all of that stuff is the pin that popped the balloon. But nations stopped adhering to free market principles long ago and that's how the balloon filled in the first place.

 

[TakeAStepBack]

Fiat currency is how the balloon filled. But I have to say, this is hilarious. France will have a lot of public sector award winning CEOs and such once that cap is in effect.

Might as well just chop off one of their hands and legs and send them wrestling.

 

[Sallow]

How many European countries cap top pay?

I sorta remember that most of Europe's CEOs self cap their salaries at around 5 million a year..

But that was a while ago.

 

[JakeStarkey]

Same problem as ours: terrified of Greece, Spain, etc, defaulting because of their investments in our commercial and private security mortgage bundling, along with their citizens greed, similar to ours, individually and corporately and nationally, in not managing finances wisely.

I think all of that stuff is the pin that popped the balloon. But nations stopped adhering to free market principles long ago and that's how the balloon filled in the first place.

If we adhered to your free market principles in the last eleven years, what would have happened with the mortgage security market and to Americans generally, TGG?

 

[iamwhatiseem]

Same problem as ours: terrified of Greece, Spain, etc, defaulting because of their investments in our commercial and private security mortgage bundling, along with their citizens greed, similar to ours, individually and corporately and nationally, in not managing finances wisely.

I think all of that stuff is the pin that popped the balloon. But nations stopped adhering to free market principles long ago and that's how the balloon filled in the first place.

If we adhered to your free market principles in the last eleven years, what would have happened with the mortgage security market and to Americans generally, TGG?

The mortgage market in the U.S. is anything but free market. Not even close.

 

[Sallow]

I think all of that stuff is the pin that popped the balloon. But nations stopped adhering to free market principles long ago and that's how the balloon filled in the first place.

If we adhered to your free market principles in the last eleven years, what would have happened with the mortgage security market and to Americans generally, TGG?

The mortgage market in the U.S. is anything but free market. Not even close.

Don't you worry none..the profiteers found a way around that..

Predatory lending - Wikipedia, the free encyclopedia

 

[JakeStarkey]

I think all of that stuff is the pin that popped the balloon. But nations stopped adhering to free market principles long ago and that's how the balloon filled in the first place.

If we adhered to your free market principles in the last eleven years, what would have happened with the mortgage security market and to Americans generally, TGG?

The mortgage market in the U.S. is anything but free market. Not even close.

Do you read? I said "if".

 

[Sallow]

Same problem as ours: terrified of Greece, Spain, etc, defaulting because of their investments in our commercial and private security mortgage bundling, along with their citizens greed, similar to ours, individually and corporately and nationally, in not managing finances wisely.

Spain's banks are still in good shape. Their problem is perception. If Spain's citizens made a run on the bank..that WOULD be a problem.

But you are right about your first point.

Add in Greece took out loans to update and upgrade their military. Probably because in their twisted minds they want to make another try at Cyprus.

 

[idb]

Same problem as ours: terrified of Greece, Spain, etc, defaulting because of their investments in our commercial and private security mortgage bundling, along with their citizens greed, similar to ours, individually and corporately and nationally, in not managing finances wisely.

Spain's banks are still in good shape. Their problem is perception. If Spain's citizens made a run on the bank..that WOULD be a problem.

But you are right about your first point.

Add in Greece took out loans to update and upgrade their military. Probably because in their twisted minds they want to make another try at Cyprus.

I think they're going to have another crack at those pesky Phoenicians

 

[ekrem]

Hollande cut salaries of the government by 30%.
These are companies fully or partly owned by French State and the CEOs of these companies will have to follow suit. In the election campaign Hollande promised, that CEOs of these "state-companies" will earn at most 20 times the lowest salary these companies pay-out.

 

[iamwhatiseem]

If we adhered to your free market principles in the last eleven years, what would have happened with the mortgage security market and to Americans generally, TGG?

The mortgage market in the U.S. is anything but free market. Not even close.

Do you read? I said "if".

Correct me if I am wrong but are you not insinuating that it would be worse if we adhered to free market principles? Without reading through the entire thread - it is hard to figure out if a poster is serious or tongue-in-cheek.

 

[iamwhatiseem]

If we adhered to your free market principles in the last eleven years, what would have happened with the mortgage security market and to Americans generally, TGG?

The mortgage market in the U.S. is anything but free market. Not even close.

Don't you worry none..the profiteers found a way around that..

Predatory lending - Wikipedia, the free encyclopedia

Oh c'mon Sallow - the "profiteers" didn't "find a way around" anything.
The government STRONGLY encouraged...STRONGLY encouraged...one more time...STRONGLY encouraged lenders to provide risky loans with no money down.
As soon as Fannie Mae was allowed to buy private mortgages - the games began. And the games rules and methods were developed, encouraged and managed by the U.S. Government.

 

[JakeStarkey]

I am suggesting somebody tell me what would have happened if we used free market principles, iamwhatiseem. What would have happened?

 

[JakeStarkey]

The mortgage market in the U.S. is anything but free market. Not even close.

Don't you worry none..the profiteers found a way around that..

Predatory lending - Wikipedia, the free encyclopedia

Oh c'mon Sallow - the "profiteers" didn't "find a way around" anything.
The government STRONGLY encouraged...STRONGLY encouraged...one more time...STRONGLY encouraged lenders to provide risky loans with no money down.
As soon as Fannie Mae was allowed to buy private mortgages - the games began. And the game rules and method was developed, encouraged and managed by the U.S. Government.

So it was only the government's fault?

 

[California Girl]

Same problem as ours: terrified of Greece, Spain, etc, defaulting because of their investments in our commercial and private security mortgage bundling, along with their citizens greed, similar to ours, individually and corporately and nationally, in not managing finances wisely.

Spain's banks are still in good shape. Their problem is perception. If Spain's citizens made a run on the bank..that WOULD be a problem.

But you are right about your first point.

Add in Greece took out loans to update and upgrade their military. Probably because in their twisted minds they want to make another try at Cyprus.

Spain's banks are in good shape? Really? If that's true, how come they're looking for a bailout?

Markets in spin as anti-bailout party rises in Greek polls and Spanish borrowing costs soar - Europe - World - The Independent

Madrid government forced to deny plan to bail out troubled bank with state cash

 

[iamwhatiseem]

Don't you worry none..the profiteers found a way around that..

Predatory lending - Wikipedia, the free encyclopedia

Oh c'mon Sallow - the "profiteers" didn't "find a way around" anything.
The government STRONGLY encouraged...STRONGLY encouraged...one more time...STRONGLY encouraged lenders to provide risky loans with no money down.
As soon as Fannie Mae was allowed to buy private mortgages - the games began. And the game rules and method was developed, encouraged and managed by the U.S. Government.

So it was only the government's fault?

Did I say that?
No - I said the government not only provided the means for exploiting the system - they very much encouraged anyone making loans to do exactly that.
The government was not only complicit, but a full partner in what happened, since without their willingness to throw taxpayer money into the $billions a year losses of Fannie and Freddie - none of it would have been possible in the first place.