With the return of inflation and threats to the economy, it is difficult to pass on the record pay of some big bosses even now to shareholders.
Shareholders revolt. In recent days, major US bosses have faced rejections regarding their pay. For example, the shareholders of processor manufacturer Intel voted by majority last week against the compensation of its new CEO Patrick Gelsinger, which reached $178.59 million for 2021 (including 170 million in shares and options).
A purely advisory voice of the remuneration committee, but that sends a message to the entire management of the company and even beyond.
A message was also received a few days later by the shareholders of the investment bank JP Morgan. Shareholders voted overwhelmingly on Tuesday to approve CEO Jamie Dimon’s emoluments, including a $52.6 million bonus. This is the first time this Wall Street superstar has suffered such an insult. With a personal fortune estimated at $1.6 billion by Forbes, Jamie Dimon is the richest CEO (excluding the company founder) in the United States.
A disapproval for this charismatic boss who has his napkin ring on the sets of economic news channels in the United States. And if the opinion is again only advisory, the bank has indicated in a document prepared for the general meeting that it would take into account the outcome of the vote to decide in the future on the packages to be offered to its leaders. †
+93% for CAC bosses
After two years of health crisis, economic earthquakes and as the world faces an inflationary rise it hadn’t seen in 40 years, these 8 or 9 digit bonuses seem to make people cringe.
According to a study by Equilar firm released in mid-April, the median income of CEOs of the 100 largest U.S. companies rose by 31% in 2021.
Between salaries, bonuses and stock options, they earned an average of $20 million.
Also in France, the big bosses benefited from the economic recovery in 2021. According to the Scalens platform, the total average pay (including salaries and variables) of the bosses of the CAC 40 was 8.7 million euros. An increase of 93% compared to 2020 (year is true of “austerity”) but also by 61% compared to 2019 before the Covid crisis (5.4 million euros that year).
In the middle of the presidential campaign, the announcement of the total salary of Carlos Tavares, the CEO of Stellantis, of 66 million euros, had signed the chronicle. Emmanuel Macron even finds this amount “shocking” and “excessive”.
“We had not foreseen a move of such magnitude, trusts in The world Loïc Dessaint, responsible for governance at voting consultancy Proxinvest. Every year we advise our clients to vote against the remuneration of certain executives, but for this season of general meetings that is much more than usual. For example, we advise them to oppose resolutions at Teleperformance, Axa, Danone, Kering or even BNP Paribas.
BlackRock calls for moderation
What is the problem with these record salaries? For Philippe Manière, president of the communication agency Vae Solis, the question is not economic.
“I think all this is not the least important compared to the numbers the company is dealing with, he estimates this Wednesday on BFM Business. There is simply a symbolic interest and we are faced with the question of who should decide that? If we think that there are people who are paid very well and they should contribute more, there is something that works very well, which is taxes, we must never forget that the numbers that we are talking about are pre-tax, they pay taxes, these people, we could even argue that the more they earn, the better it is for the community.
While these fees, important as they are, represent only a minimal proportion relative to the profits and market capitalizations of these companies, they do have a political impact on society as a whole.
“The rise in very high salaries contributes to fueling the feeling of inequality in France, it goes beyond social stability, believes Christian Chavagneux of Alternative Economiques. Should the salary be linked to the stock market performance or to the added value of Company?
While the purchasing power of the French is up 1.9% in 2021, according to INSEE and should worsen this year due to inflation, the double-digit increase in the pay of a handful of big bosses is fueling a sense of injustice.
Could this feeling now convince the shareholders of these large companies? The BlackRock investment fund, the largest shareholder in the world with $10,000 billion in assets under management, including about 5% of the CAC 40, has been calling on executives for more moderation for several years now. After writing to 300 major British bosses in 2017 urging them to collect no more than their employees, the fund is now calling for a vote against executive pay as the challenges of reducing carbon emissions insist not entered.
Recommendations that have hardly been followed up to now. The shareholders who voted against the remuneration of the bosses of Intel and JP Morgan therefore mainly saw the price decline of the respective companies. The investment bank’s action has lost 25% since the beginning of the year and Intel’s nearly 18%. Would shareholders have voted against if the trends had reversed?
Above all, this question of pay seems unsolvable in a global market of big bosses. If some companies impose caps, these can also have a perverse effect. Since 25 July 2012, a decree has capped the annual compensation of heads of public companies such as EDF, SNCF, La Poste and France Télévisions at 450,000 euros gross. A reward that can make these positions less attractive and deter talent.
“450,000 euros is a considerable amount, but if you can earn 1, 2 or 3 million euros on the market, there is no real reason to accept 450,000 euros, Philippe Manière believes. Of course you have saints, luckily there are lay saints who use it. agree do very hard work for much less than the objective value, but you can’t run a society on saints just because there aren’t enough of them.”