France Cracks Down on Bailed-Out Firms

PARIS, March 30 -- Responding to a popular outcry, the French government issued a decree Monday banning stock options and limiting bonuses for bankers or auto executives who lay off workers after accepting government aid to weather the economic crisis.

Prime Minister François Fillon, announcing the measures, said France was the first European country to lay down such legal restrictions on executive pay. Although not retroactive, they will run through 2010, he said in a statement, and they could be extended.

"There is no question of some people escaping from the consequences of the crisis while others suffer unemployment or pay cuts," he added, pledging to monitor compliance with the decree carefully because "it is a question of justice."

Banks and auto companies were singled out because they have received extensive aid since the financial crisis broke out in September, leading to economic turmoil across the globe. President Nicolas Sarkozy allocated $14 billion in October to prevent France's six main banks from sinking and loaned $8 billion under favorable terms to the country's three main car companies.

The billions provided to businesses generated widespread criticism of the conservative president, especially from union and Socialist Party leaders who argued that more should be spent to help families hit by the crisis. Sarkozy countered that he had to irrigate the banking system to get credit moving again so businesses could return to normal operations, and that he had to keep the auto industry alive because it is responsible for nearly 10 percent of France's jobs.

Against that background, many people were stunned to learn two weeks ago that Societe Generale, one of the largest French banks, granted lucrative stock options to four senior executives even though the bank lost $6 billion in 2008, partly because of a trader who lost billions before his supervisors discovered what he was doing. Public indignation rose by several more notches when it became known last week that Valeo, a major auto parts company, gave its departing chief executive a $4 million severance package even though the company lost more than $250 million in 2008 and laid off 1,600 workers in France.

Sarkozy had given French business leaders until April 1 to come up with a self-policing plan to guard against abusive executive compensation packages at a time when many French workers were losing their jobs and the government was using tax money to keep companies afloat. When it became clear that the main business associations would not act, his government decided to limit pay by decree, which is swifter than a law and not subject to debate in Parliament.

Fillon said that to police executive compensation outside the banking and automotive industries, he had asked the main business groups to put together a "committee of wise men" to rule on pay levels at any company that fires large numbers of workers. In the meantime, he said, executive pay should be transparent so it can be monitored by workers and their unions.

The Socialist Party, France's main opposition group, criticized the decree as "perfectly insufficient," saying the ban should be retroactive and extend beyond banks and auto companies. In a statement, the party charged that Fillon chose to issue a decree instead of passing a law because he was afraid of a parliamentary debate on the government's efforts to address the crisis.