During the 1980s, French capitalism underwent a partial renewal. As a result of the effects of globalisation, it converted to the governance rules of countries in anglophone countries but did so in its own cherry-picking manner.
It copied all the iniquitous remuneration practices for corporate officers, as brought about by this capitalism of shareholders. But it rejected the transparency so dear to financial markets and remained the same as it had always been since at least the Second French Empire of the mid 1850s, namely a capitalism of connivance and consanguinity between the circles of business and political power.
Over the past three decades, this hybrid capitalism, made up of a mixture of the worst aspects of both systems, Rhenish and Anglo-Saxon, marrying lavish remunerations and secrecy, has since changed little save for one thing; the remunerations have become even more lavish, to the point of being indecent.
That is the compelling conclusion from reading the 21st annual report on company executives’ remunerations by Proxinvest, a French agency that advises investors and which permanently studies all the documents of reference which companies listed on the CAC 40, France’s benchmark stock market index, but also, more largely, companies from the SBF 120 , (the French stock market index that regroups the 40 corporations on the CAC 40 and 80 other companies on the Euronext first and second markets) are required to file before the French stock market regulator, the Autorité des marchés financiers (AMF).
The figures published by Proxinvest cover all elements of remuneration, including fixed salary, annual bonuses, board meeting attendance fees, benefits in kind, stock options, performance-based free shares and cash incentives. What emerges from the report is that the financial binging of leaders of these 120 largest French corporations has constantly grown. At the beginning of the 2010s, Renault boss Carlos Ghosn was a case apart from all the others with an average annual remuneration, including that from Renault’s industrial alliance partner Nissan, of close to 15 million euros. But since then, that figure has become quite unexceptional, and even almost normal.
Bernard Charlès, CEO and vice-chairman of software company Dassault Systèmes “remains in the top place of the table with a total remuneration of 24.7 million euros” in 2019, the report reveals, “thanks to a very generous free attribution of performance shares whose valorisation [editor’s note,since the moment of their attribution] has not been reprocessed by Proxinvest”.
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The second highest earner was Douglas Pferdehirt, chairman and CEO of TechnipFMC, a group specialised in engineering in the oil and gas industries, created from a merger between US company FMC Technologies and France’s Technip. In 2019, Proxinvest reported, Pferdehirt was handed “a total remuneration that came to 13.7 million euros (+17%) whereas the company shows net losses of 2.5 billion euros and also a loss in [stock value] of 42% since the merger, and in a very degraded labour relations context”. Late last year the group announced it was to separate the two entities of the merger.
The third biggest earner among French executives was Daniel Julien, CEO of Teleperformance, a company whose services centre on customer call centres, client acquisition and technical support, and debt collection, and which entered the CAC 40 in June this year. In 2019, Julien pocketed 13.2 million euros, which included a fixed salary of 2.34 million euros and 8.5 million in the form of free shares.
As for the next highest earner, Proxinvest reported: “François-Henri Pinault, chairman and CEO of Kering, reached fourth place in the table with 11.1 million euros according to Proxinvest (5.4 million according to the company). Proxinvest takes into account the assistance agreement concluded with its holding Artémis for a sum of 5.7 million euros.”
“Jean-Paul Agon, CEO of L’Oreal, holds fifth place in the table,” the report continued, “with 9.8 million euros, a remuneration increased by 3%. He now represents the second-highest fixed remuneration (2.2 million euros) on the CAC 40. The expected pension disbursement (1.6 million) is the highest of the CAC 40.”
Proxinvest noted that in 2019, despite the economic context, the total average remuneration of chief executives among SBF 120 companies rose by 2% to reach 3.7 million euros, which it said was “the third-highest level historically”.
What transpires from these figures is clear for all; inequalities continue to grow and at considerable speed. While the world of salaried staff is living through testing times, a small caste at the top of companies, totally insensitive to the surrounding crisis, enriches itself in such proportions that are beyond understanding. During the period between 2014 and 2019, reports Proxinvest, “the remunerations of directors from the SBF 120 continually rise faster than that of staff (+28% for directors and +17% for staff)”.
In contrast, one can only be astonished at the complicity here of the powers that be represented by French President Emmanuel Macron. For in a number of countries where similar inequalities are observed, it has retriggered lively debate over the pressing question of employing fiscal measures to contain these disturbing evolutions. Led by Bernie Sanders and other figures on the Left of the Democratic Party, there was a strong exchange of views during the party’s primaries about increasing taxation of the wealthiest Americans. A graphic, popularised by French economist Gabriel Zucman, demonstrated the urgent need to so given the collapse of taxation of the richest individuals over recent decades.
Watch how radically taxes on the wealthy have fallen over the past 70 years:
— David Leonhardt (@DLeonhardt) October 7, 2019
(Full column: https://t.co/XP0a4Iljti) pic.twitter.com/dGxmOjQ1b5
In other countries, the idea of creating a wealth tax specifically to contain the inequalities exacerbated by the Covid-19 pandemic and the social crisis has gained ground, such as in Argentina, where the lower house of Congress last week approved a 2% flat tax on individuals with assets of more than 2.5 million dollars.
But in France there is no such move. At the beginning of the 2000s, several governments attempted to place a moral restraint, however modest, on certain forms of remuneration of chief executives, and in particular regarding stock options. But the business world in turn displayed remarkable inventiveness, establishing new forms of remuneration each time that legislation was introduced to regulate previous payment packages. Which is how stock options progressively disappeared; according to Proxinvest, stock options represented no more than 3% of total remunerations paid in 2019, replaced by the attribution of free shares (36% of remunerations in 2019).
The governments under Emmanuel Macron have proved complicit in this evolution. Soon after his election in 2017, Macron introduced two measures which have characterised his presidential term as one of the most unjust; these were the abolition of the “solidarity tax on wealth”, the ISF, and the introduction of a flat tax on revenue from capital and savings. Over the past months there has not been any measure to correct these handouts to his clientele of the very rich.
In short, the figures from Proxinvest shine a spotlight on one of the most serious injustices present in France. Totally protected from the effects of the crisis, the country’s leading executives continue to enrich themselves far beyond the bounds of reason, while in parallel millions of families face the social calamity and misery of being plunged into unemployment and poverty.
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- The original French version of this op-ed article can be found here.
English version by Graham Tearse