Moscovici Announces No Limit on CEO Salaries

Meeting Pierre Moscovici au ThŽatre Alhambra-26-09-2011

Pierre Moscovici.
Photo: Flickr.com/besoindegauche

Setting a limit on the income of the CEOs of public companies was one of the most symbolic and awaited of the propositions François Hollande made during his presidential campaign.

The intention was to set the maximum income at 450,000 euros per year, as was published in a government decree July 26, 2012.

This initiative followed the in the wake of Hollande’s famous speech entitled, “the financial industry is my enemy.” A bill was supposed to be ready regarding this issue in the fall of last year.

But in October 2012, the Constitutional Council censored a law that was part of the 2013 fiscal year budget that would have raised taxes on stock options. This first renunciation of the budget foreshadowed the next development.

On May 23, 2013, Finance Minister Pierre Moscovici announced in an interview with the French newspaper Les Echos that there will be no specific law limiting CEO salaries.

“After several months of dialogue, I decided to concentrate the legislative action on the 75% tax on incomes exceeding 1 million euros, which will be discharged by the employer. It will be submitted to Parliament within the framework of the 2014budget, and will have a time limit of two years. We will not go beyond the legislative level: there will be no specific government bill on the governance of the companies,” he said.

He also announced the hardening of the Afep-Medef (France’s main business confederations code), leaving them alone with self-regulation.

“In this spirit, I met last week the president of Medef, Laurence Parisot, and chair of Afep, Pierre Pringuet, who were committed to quickly presenting an ambitious reinforcement of their code of governance. “

“Say on pay” has been proposed to counterbalance the bad impression given by the renouncement of a campaign promise. This system “will make it possible for the shareholders of a company to come to a conclusion about the remuneration of the managers,” Moscovici said. “Our goal is to avoid solidifying rules into law… we prefer to bet on a ‘demanding self-regulation.’”

In order to comprehend Moscovici’s decision, it is important to consider that his position in the government was viewed as precarious by some after a disagreement over whether or not to sell Dailymotion to Yahoo!. Moscovici wanted the company to be sold for profit, while Productive Recovery Minister Arnaud Montebourg refused in the name of French competitiveness.

Bercy, the shortened name for the Ministry of Finances, located in and named for the neighborhood Bercy, is regarded by many as in need of drastic reorganization because of the lack of cooperation currently taking place. Some hold the opinion that there are too many ministers, while others believe there needs to be a restructuring of the cabinet.

Moscovici is not in a position to take any risks. A recent opinion poll stated that the approval ratings of Hollande and his Prime Minister Jean-Marc Ayrault are at a record low, a high rate of dissatisfaction that is also the case for the ministers of Bercy. 70% of the French said they were not happy with Moscovici’s decisions.

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