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Standards & GuidanceNew French executive pay code published
Public opinion and the reactions of stakeholders should be taken into account “to the greatest extent possible” when setting executive compensation, according to the new recommendations on executive pay from French business groups MEDEF and Association Francaise des Entreprises Privées (AFEP).
The AFEP/MEDEF recommendations emphasise the importance of the compensation committee working to maintain “social cohesion”, and warns against short-term thinking, arguing convergence between the interests of shareholders and management can only be assessed over time.
The recommendations also state that pay packages of executive directors should be considered not only in relation to the market, but also in regard to the responsibilities directors assume. For instance, an executive placed in charge of restructuring an ailing business may be entitled to a higher level of compensation.
Although recent controversy over executive pay has focused on the US, Paul Betts in the Financial Times (11 January) argued that continental Europe has far bigger problems with remuneration than the Anglo-Saxon economies. He said that while French chief executives are already fairly accountable, Betts noted recent suggestions that companies should be forced to disclose the fees they pay to investment bankers.
Betts argued that as shareholders currently have no control over the vast sums companies pay to bankers for advice, and as two-thirds of mergers end badly, the bankers who promoted the deals should be held accountable.
LinksADEP/MEDEF Recommendations on Executive Pay
February, 2007 |
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