$4 Million Severance Elicits Outrage in France
Wednesday, March 25, 2009
PARIS, March 24 -- A wave of indignation swept over France when it became known Tuesday that the head of a large auto parts company who was edged out because of poor results walked away with a severance package worth more than $4 million.
The outrage, which intensified government threats to pass a law limiting executive pay, reflected a growing sense of unease as the global financial crisis bites ever more deeply into the French economy, with unemployment surpassing 2 million and recrimination mounting against President Nicolas Sarkozy's attempt to remedy the situation by propping up ailing banks and businesses.
As it has in the United States, the issue of stratospheric compensation packages for executives who were in charge when the crisis erupted has become a rallying cry for fired workers, labor unions and politicians. Many French people, like their U.S. counterparts, have complained they are being made to pay for the greed and heedlessness shown by political and business leaders who allowed world financial markets to spin out of control.
Aware of the mounting resentment and its political implications, the government was quick to react when news spread that Thierry Morin, who left the Valeo company Monday, received a $4.1 million goodbye gift from the board of directors. The package was granted, the newspaper Liberation reported, even though the company lost more than $250 million last year, laid off about 1,600 employees in France and received nearly $25 million in government aid to weather the crisis.
The budget minister, Eric Woerth, said it was "provocative" and "abnormal" for a struggling company that received aid from the government -- and in which the government has a minority interest -- to pay out such a generous severance package to someone who was let go over what were described as "strategic differences" with the board of directors.
"Those who proceed in this manner have understood nothing," Woerth added in television interview. "They have understood nothing about the fact that public opinion can't stand it any more."
Prime Minister François Fillon, addressing reporters during a visit to Washington, said the government would invoke its 8 percent shareholder voting rights to reverse the payout. "Those who do not demonstrate a sense of responsibility endanger our whole social and economic system," he said, according to the Reuters news service.
Jean-François Copé, parliamentary leader of Sarkozy's Union for a Popular Movement, said members of the majority in Parliament were getting closer every day to writing a law to cap executive pay. Claude Bartolone, a member from the opposition Socialist Party, said a law is necessary immediately, adding, "Enough is enough."
The government has been threatening such a law since last week when Societe Generale, one of the largest French banks, announced it was awarding stock options at favorable rates to four senior executives. The bank lost $6 billion in 2008 -- partly because of a maverick trader who registered billions in losses before he was discovered -- and has received more than $2 billion in government aid since the crisis struck in September.
"It is high time that Societe Generale rhyme a little more with general interest," said Finance Minister Christine Lagarde in a pun. She said her ministry was thinking about a law banning such options.
"Visibly, some people have trouble understanding what has been said," Sarkozy said Friday. "If you think I am aiming at a banking institution in the news, that's exactly it."
In the face of such high-level criticism, the bank executives announced Monday that they were renouncing the stock options.
Sarkozy has been calling for restrictions on the way financial traders and their superiors are compensated. The present system, he complained, encourages risk and fails to hold to account those who make bad gambles or allow reckless trades.
As the crisis spread through the French and European banking system, Sarkozy called on France's main industrial lobby, the Movement of Business in France, to draw up a new code of conduct by April or face government-imposed controls. But Laurence Parisot, who heads the group, said she was powerless to tell businesses whether they could or could not issue stock options. At the same time, she pledged that the group would come up with a response for Sarkozy before the deadline next week.
As political figures voiced their outrage Tuesday, however, she appeared to change her approach, at least as it applied to Morin.
"France's business grouping does not recognize itself in the behavior of an executive who tramples this way the general interest of his company, who has contempt for its employees, who ridicules its medium and small business partners, and notably the medium and small businesses that supply his company, and who tramples our governance code," she said at a news conference.