France says U.S. executive should hand back payoff

PARIS, Sept 28 (Reuters) - Patricia Russo, the recently ousted chief executive of loss-making Alcatel-Lucent (ALUA.PA), should hand back a 6 million euro ($8.8 million) payoff, French officials said on Sunday.

Russo received the so-called "golden parachute" after running the Franco-American telecoms equipment company for just 20 months, during which time Alcatel-Lucent shares fell by more than 60 percent.

The handsome severance package for the U.S. businesswoman has fuelled anger in France over executive pay, with President Nicolas Sarkozy and government ministers demanding a cap on boardroom salaries.

"We now have a system that has lost all morality. Take the case of Alcatel-Lucent," Labour Minister Xavier Bertrand told Europe 1 radio on Sunday.

"It is inconceivable. Where is the decency? Nowhere to be found ... I would like her to have the decency to make a reimbursement. We will see," he added.

Claude Gueant, Sarkozy's top adviser, said Russo should follow the example of Pierre Bilger, the former head of power and transport company Alstom, who handed back his 4.1 million euro severance pay when he left the company in 2004 after it had to be bailed out by the French state.

"It is an example that could inspire others," Gueant told France inter radio. "It is a scandal when a golden parachute becomes a reward for failure," he added.

Alcatel-Lucent removed Russo in July after it was forced to lower its profit expectations yet again, but has defended her compensation package, saying it was approved at an annual general meeting in 2007 and was in line with market practice. (Reporting by Thierry Leveque; writing by Crispian Balmer; Editing by Paul Bolding)