The
PERNOD RICARD company just presented a "Say on Pay" resolution to its
General Meeting; it is the first company to pass such resolution after an
agreement was reached between AFEP/MEDEF (representing the companies) and the
French government ; the latter eventually decided not to enact about such
"sensitive" matter.
The
PUBLICIS company was the first this year to propose a "Say on Pay"
resolution, and this before the French government's decision was made on the
matter.
As
far as politics is concerned, let us welcome this first step which finally
allows the shareholders to reclaim this sensitive matter, whereas Boards of
Directors did not consider such matter as being the responsibility of the
General Meeting of Shareholders.
As
far as "governance" is concerned, it is unfortunate that the major
companies and the governement did not propose measures similar to those already
applied in the United Kingdom or currently entering into force in Switzerland.
How
can one justify, after the years of distrust that have led many shareholders to
not understand why they were denied the right to say on the matter, that the
vote be solely advisory and not entail the least decision-making effect? The
shareholders of Safran voted no to the severance pay of the CEO by a majority
of those present, and yet the Board of Directors considered that the agreement
should not be questioned…
How can one
justify that variable compensations be granted to the head without any scrutiny
right to the shareholders, even though in Switzerland a prior consent of the
shareholders is required to do the same.
For
many years partnerships (including the listed ones) and limited liability
companies are obliged to subject managers' compensations to shareholders' vote.
And this works without problems, even if there can be arguments in certain
"extreme" cases.
France
should show by example and not fear a revolt of shareholders, as if the latter
were not able to validate high compensations when a positive result is
achieved. And this may well be where the shoe pinches, because variable
compensations also imply that the compensation could amount to nothing in case
of a bad performance. Unfortunately, very few businesses dare to go that far,
hence the variable part of the performance becomes a fixed compensation de
facto.
Hopefully this
will not be the last step ; still, such a wasted time and so many
misunderstanding accumulated, while it would have been much easier to look for
our neighboor's solution in a more direct way.
Olivier de Guerre
Chairman of PhiTrust Active Investors
