March 23, 2009 / 10:57 AM / 8 years ago

UPDATE 2-France plans law to limit executive bonuses

* New law proposed to curb executive bonuses

* Axa boss says bonuses should not be sole focus

(Adds background, detail)

PARIS, March 23 (Reuters) - France will introduce a law to limit executive bonuses in the form of stock options or shares because businesses have failed to accept a voluntary accord, the spokesman for the ruling UMP party said on Monday.

Bosses at French bank Societe Generale decided this weekend to renounce stock options they had awarded themselves following an outcry over excessive rewards in times of financial meltdown.

But employers federation MEDEF has resisted a demand by President Nicolas Sarkozy to introduce a general code of conduct to regulate executive pay.

Under pressure from the unions over their handling of economic crisis, Sarkozy’s allies said they would forge ahead and impose their own restrictions on business leaders.

“MEDEF does not want to react ... Since there is neither the desire nor the means, we will give them the means and we will draw up a law,” Frederic Lefebvre, spokesman for the centre-right UMP, told French television.

“I think we can define the main points very quickly.”

He said bosses should not be able to raise their bonuses unless those of other employees were also increased.

From Europe to the United States, executive bonuses at firms that were bailed out by taxpayers have become a lightning rod for anger over the economic slump.

Last week, between 1.2 million and 3 million people took to the streets of France, demanding more help for struggling workers and asking the government to curb executive rewards.

Societe Generale’s decision to award hundreds of thousands of stock options to four top executives while receiving state aid has sparked particular outrage.

French banks received 10.5 billion euros ($14.3 billion) in crisis aid in 2008, with SocGen taking 1.7 billion euros.

MEDEF has said it cannot impose curbs on employers, but is asking members to act responsibly.

The association’s president, Laurence Parisot, will appear before parliament’s legal committee in a hearing on Wednesday as politicians debate if and how executive pay should be restricted.

Proposals have ranged from raising taxes on stock options to placing a cap on executive salaries and temporarily banning bonuses and options.

However, some business leaders say they risk being made scapegoats for the downturn.

“It would be a bit naive to believe that we can resolve the crisis by focusing only on the issue of compensation,” Henri de Castries, chief executive of insurer Axa, told French radio.

Economy Minister Christine Lagarde said on Sunday the government would use the legal route if a voluntary agreement with employers could not be reached.

“We are looking into stock options and free shares,” newspaper Le Figaro quoted a source close to the situation as saying on Monday. (Reporting by Thierry Leveque and Sophie Hardach; Editing by Richard Williams)

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