France to cap executive pay at 450,000 Euros for state firms
French finance minister Pierre Moscovici (pictured) announced plans on Wednesday to limit the salaries of French state companies to 450,000 Euros per year. Moscovici said the measure was needed to "make state companies more ethical."
AFP - France's finance minister announced Wednesday plans to limit executive pay at state-owned companies to 450,000 euros ($560,000) per year, calling the measure a matter of justice and morality.
The pay cap -- which delivers on a campaign promise by France's new Socialist President Francois Hollande, who sought to tap widespread public anger over executive salary packages -- will take effect in 2012 or 2013 depending on the company, Finance Minister Pierre Moscovici said.
"Earning 450,000 euros a year doesn't seem to me a deterrent if we want to have quality men and women at the head of our companies," Moscovici told a press conference after a cabinet meeting where he presented plans for the cap.
The minister said the measure was needed to "make state companies more ethical" and respond to "the demands of justice and transparency" at a time of economic crisis.
He said the government planned to release a decree on the new limit by the end of July, and would introduce a bill in parliament later in the year to address stock options, so-called "golden parachute" clauses and other components of executive salary packages.
The cap will apply to all companies in which the state holds majority ownership, including the postal service, nuclear power giant Areva, electric utility EDF, railway company SNCF and public transport operator RATP, the cabinet said in a statement.
On the campaign trail, Hollande had said that no executive at a state company should make more than 20 times the lowest-paid worker's salary.
The finance ministry said the 450,000-euro cap had been calculated by looking at the average salary of the 10 percent of lowest-paid workers at 15 state companies.
Less than 20 executives currently have salaries over the limit, the ministry said.
But the cap means the entire executive pay scale will have to be overhauled, meaning other top earners will also have to take pay cuts, it added.
"I'm convinced that the strict salary framework at public companies will in time inspire the stabilisation of certain practices in the private sector," Moscovici said, promising that all salaries for top executives at state firms would now be made public.
The UMP, the party of former president Nicolas Sarkozy -- who lost to Hollande in last month's presidential run-off election -- dismissed the cap as political posturing.
"It's a campaign promise. They're pretending to fix our problems by reducing executives' salaries. It falls under the category of 'ostentatious morality'," said UMP leader Jean-Francois Cope.
"They make the French people believe they are fixing the problems with the budget and the economy by reducing the salaries of our country's executives. It's extremely hypocritical. This doesn't fix anything."