Commentary: France: A Ceo's Pay Shouldn't Be A Secret

Marc Vienot has forged a successful second career as the conscience of France's corporate elite. Four years ago, the former chairman and chief executive of Societe Generale helped France emerge from a series of corporate scandals by heading a commission to craft guidelines on corporate governance. Much to everyone's surprise, French companies followed Vienot's recommendations. By nominating independent board members, the companies took a much-needed step toward breaking up France Inc.'s old-boy network, which granted CEOs rubber-stamp approvals and left shareholders holding the bill for management's misdeeds.

Now, Vienot is dropping the ball. He flinched uncomfortably during a press conference on July 22 when asked why, in a new report, he failed to recommend that executive pay be disclosed in corporate annual reports. His response: Revealing CEO pay would just help competitors lure French CEOs away with better pay packages. He also quipped that Americans like bragging about their pay, and the French don't. "What other profession in France has to reveal salaries?" demanded Vienot, adding that it's difficult to "justify the discrimination" against CEOs.

ANTI-ENTREPRENEURIAL. The feeble logic of Vienot's statements undercuts the good work done by the committee to date. Shareholders do deserve to know the compensation of a company's top executives--and how much of it is performance-related. And there is an even more compelling reason to go public with the numbers: to puncture the prevailing negative attitude in French society about money.

The French still believe that it is noble to inherit a fortune and dirty to earn one. By going public with their pay, French CEOs would force French society to confront its schizophrenic feelings about wealth. Equating pay with performance instead of shame would help to create a more entrepreneurial class of managers. It would reward executives for achievement rather than attending the right school. "Pay transparency would create a virtuous circle. It would establish an incentive to perform," says one French investment banker.

A few French CEOs have dared to brave the masses. AXA's Claude Bebear, who earned $2.5 million in salary and bonuses last year, has been publishing his salary, bonus, and stock options since the company listed on the New York Stock Exchange in 1996. Although many executives say France isn't ready for the truth about executive pay, the annual revelation of Bebear's salary is a complete non-event.

Bebear is among a handful of French executives, including Vivendi Chairman Jean-Marie Messier, whose compensation, including stock options, is commensurate with that of CEOs in the U.S. and Britain. By contrast, the CEOs of France's 40 largest companies earn up to 50% less than their American and British counterparts, consultants say. In addition, performance-related bonuses make up a smaller part of French CEO pay than in the U.S. or Britain, and stock options are loaded with restrictions. "They should reveal their pay to get paid more competitively," says a senior executive at a U.S. investment bank in Paris.

INVESTOR ACTION. Shareholders could take the matter into their own hands. With as little as 1% to 5% of the total outstanding shares of a company, they could propose to modify corporate statutes and require individuals to publish their compensation, shareholder activists say. "Executives are working for the shareholders [who] should decide the rules of the game," says Colette Neuville, president of the Association for the Defense of Shareholder Rights.

That's still radical thinking in France, the last remaining Western country where the Communist Party is part of the government and capitalists are vilified by leftist union leaders and intellectuals. That's why Vienot and his committee members are afraid to recommend full disclosure of CEO pay.

And that's exactly why they should. On the eve of the 21st century, with technology and a common European currency driving tumultuous change, it wouldn't take much to topple the ancien regime. A new generation of achievers is waiting in the wings--and watching for a signal from Vienot. Bon courage.

Paris Bureau Chief Edmondson covers corporate governance and other management issues.