Although the
new French government promised in its election manifesto to introduce a law
imposing a shareholder “SAY ON PAY” vote on directors’ pay, AFEP-MEDEF and the
government have finally agreed to scrap the bill and relegate SAY ON PAY to the
status of a mere recommendation in the AFEP-MEDEF report.
Meanwhile,
Switzerland has been setting up a draconian framework following the March 2013
referendum masterminded by business tycoon Thomas Minder. Under the new
legislation, each item of fixed pay must be submitted to a shareholder vote,
whilst variable pay will only be disbursed once the approval of the
shareholders at the General Meeting has been obtained.
With obvious
reluctance, France is introducing a vote on the principles of pay that is not
only non-binding (according to the rules on regulated agreements) but not even compulsory,
as it is only recommended by the AFEP-MEDEF corporate governance code. The code
also states that a company may publicly disclose the reasons why it has chosen
not to apply a given provision of these recommendations…
We have been
told that this is the best solution on the grounds that it would be difficult
to introduce shareholder voting on pay in the General Meeting without causing
an uproar, as the shareholders’ vote on regulated agreements is merely
consultative and non-binding, whereas matters of pay are the sole prerogative
of the Board of Directors, not the General Meeting.
This year we
suggested to AFEP and its chairman Pierre Pringuet that they recommend all
French companies introducing a SAY ON PAY vote in 2013, as Publicis has done
with regard to the pay awarded to its Supervisory and Management Board chairmen.
In view of the
wide variety of companies involved, Pierre Pringuet felt that it was necessary
to wait for the government’s decision on the matter so that a common rule could
be applied to all companies …
It seems,
therefore, that directors and managers of major companies have not cottoned on
to the fact that this is not about the amount of pay (communicated and
published) but the procedure whereby it is approved, as the Board of Directors
is nowadays perceived as a “clique of friends” who award themselves
“privileges” and make decisions that do not tally with the company’s actual or perceived
performance.
By refusing to
propose a vote on pay itself (as practised in the UK for a number of years and
also by French limited liability companies), French businesses are running the
risk of provoking an uproar on the part of disgruntled shareholders unhappy
with the figures resulting from principles voted in during previous years! It
looks like France has missed the boat yet again …
Olivier de Guerre
olivier.deguerre@phitrust.com
