* Government to detail measure to cap pay in mid June
* Unclear if plan targets executives other than CEOs
* Measure seen as symbolic, execution complex
By Caroline Jacobs and Dominique Vidalon
PARIS, June 1 The heads of French state-owned
companies, such as Aeroports de Paris and utility EDF
, may not like the new government's plan to cap their
pay but, with lifestyles to maintain, most will likely accept
the new deal.
EDF's Henri Proglio, the poster child for well-paid chief
executives of state-owned firms, has signalled he will accept
President Fancois Hollande's plan to limit salaries to a maximum
20 times that of the lowest-paid employees.
Others, analysts say, will likely follow the example of
Proglio, whose pay would fall about 70 percent to around 510,000
euros ($631,000). The reference rate for maximum salaries will
be based on a spread of the lowest salaries, not the absolute
lowest - France has a minimum annual wage of 16,380 euros.
"It is basically a change in the contract. If a CEO refuses,
he will not be renewed. They have no choice," said Laurent
Maruani, chairman of the marketing department at French business
Exactly how the government plans to implement Hollande's
campaign promise will be announced by mid-June, a month after
the president and his 34 ministers took office and immediately
cut their salaries 30 percent.
Hollande has made restoring equality to France a priority,
part of his rebuke to former centre-right President Nicolas
Sarkozy's policies that allegedly favoured the rich.
He also wants a 75 percent tax rate for income above 1
million euros ($1.24 million).
Many questions remain, such as whether the cap on salaries
will apply to CEOs only or be extended to other executives who
could end up earning more than their boss.
"They must first determine who is targeted, what criteria
they will use to calculate the remuneration. Will they take into
account the fixed and variable parts of the pay? What about
stock options? I expect an intricate construction," said
Stephane Beal, associate partner at law firm Fidal.
Prime minister Jean-Marc Ayrault shocked corporate France
earlier this week when he said the limits would apply to
existing contracts and not just new hires, as had been suggested
during the election campaign.
Luc Oursel, CEO of Areva, the world's biggest
maker of nuclear reactors, told Les Echos newspaper in an
interview this week there would be possible headaches if the
measure were to apply to all employees in state-owned companies.
"One must keep in mind that it is a complex issue. Some
business leaders have a corporate mandate that the board of
directors can change, while others have a private labour law
contract that binds the two parties and cannot be unilaterally
changed - or else they run the risk of creating complex
conflicts," Oursel said, referring to possible legal action.
Proglio would at least keep his high profile job at the
world's No.1 operator of nuclear plants, and be able to say he
was doing his bit at a time of belt-tightening around Europe.
Ayrault said in an interview this week: "I believe in the
patriotism of leaders, who can understand that the crisis calls
for the political and economical elite to set an example".
For now, it seems the government will limit the measure to
companies it controls or owns, enabling it to impose the pay
cuts by decree as it did for its own salary cuts when it took
"It is a symbolic measure to mark the government's intention
to fight against an uneven distribution of incomes and it also
sends a message that public companies must be managed
differently from private ones," said Henri Sterdyniak, head of
the French economic observatory OFCE's economics department.
While headhunters say the cuts could make it hard to recruit
top talent for state companies further down the line, advocates
say salaries will still be sufficiently high to attract strong
candidates, many of whom would end up in lower-paid government
jobs if they did not go to the private sector.
"It is a very bad idea, purely symbolic," said Xavier
Gabaix, Professor of Finance at the Stern School of Business
Finance in New York. "There will be departures to the private
sector. It will increase cocooning in the public sector."
France, through its holding agency APE, owns a majority
stake in companies like Aeroports de Paris, Areva and EDF.
It has minority stakes in utility GDF Suez,
carmaker Renault and France Telecom w here i t
will be more difficult but not impossible to wield influence as
it did with Franco-Dutch carrier Air France-KLM and
aerospace and defence group Safran.
On Thursday, France used its 30 percent stake in Safran to
derail a plan to award the CEO a golden parachute and a
retirement benefit. It also used its 16 percent in loss-making
Air France to vote against an already awarded 400,000 euro
pay-off to former CEO Pierre-Henri Gourgeon.
($1 = 0.8088 euro)
(Editing by Dan Lalor)