Bosses of France’s state-owned companies are set to face pay cuts of up to 68 percent as the country’s new socialist government makes good on President François Hollande’s pledge to crack down on hefty salaries.
Bosses in charge of France’s public sector firms are to face some eye-watering pay cuts, French Prime Minister Jean-Marc Ayrault confirmed this week.
The hefty wage reductions were necessary, Ayrault said, to "show solidarity" with low-paid workers.
The move is in line with President François Hollande’s pre-election promise to introduce a new pay scheme in public sector companies which would bar the CEO from earning more than 20 times the wage of the firm’s lowest-paid worker.
The proposal will affect ‘current’ contracts Ayrault said on Tuesday, meaning some CEO's could have hundreds of thousands of euros knocked off their annual salaries.
“I believe in the patriotism of the company leaders,” Ayrault said in an interview with L’Express magazine. “I am sure they understand that the financial crisis means the political and financial elites must lead by example.”
Ayrault reminded those affected that the measure had the support of the French people.
“The French people made their decision when they went to the polls on May 6 and business leaders respect universal suffrage,” Ayrault said.
The Prime Minister was also keen to point out that François Hollande and all government ministers had accepted to cut their own salaries by 30 percent.
EDF and Areva among those affected
The man who stands the most to lose is Henri Proglio, chief executive officer of energy giant EDF (Electricité de France) who currently earns a reported €1.55 million per annum– 64 times that of EDF’s lowest paid employee.
Proglio might have to review his lifestyle with his salary set to plunge to around €496,000.
Luc Oursel is another man who might be cursing the new socialist government. Oursel has only been in his post as the CEO of nuclear giant Areva for a matter of months but he is in line for a reported 49 percent cut to his salary from €679,000 to €335,000.
Jean-Paul Bailly, the CEO of La Poste, is also due a pay cut as he reportedly earns 34 times more than the lowest-paid employer. Bailly could have to wave goodbye to 41 percent of his €635,974 annual salary.
Not all CEO’s will be glancing nervously at their bank balances over the coming days. Guillaume Pepy, who heads rail company SNCF, earns a reported €250,000 – only 15 times that of the lowest paid worker.
In all, 36 businesses, which are either wholly or majority owned by the state will come under the rules of the new pay scales. Exact details of the scheme are expected to be revealed in the coming weeks.
Critics of the pay scheme argue it will drive managerial talent abroad or into the private sector but not all analysts agree.
Tomasz Michalski from Paris business school HEC thinks the policy is undoubtedly “populist” but does not believe public sector CEO’s will head for the private sector.
One reason Michalski points to is the fact many of them owe their jobs to the politicians.
“Every time a CEO is selected it is a political appointment, such as Areva’s Luc Oursel who was an ally of Sarkozy,” Michalski told FRANCE 24. “Also their value is often lower than those in the private sector because it is often the government who makes the big decisions.”
“Often public sector CEO’s are not real business people and I don’t think they would be able to get the same wage in a private sector business,” he added.
Pascal Lima, economics lecturer at Paris’ Sciences-Po told FRANCE 24 Hollande’s belt-tightening demand is down to his desire to restore the importance among these company leaders of the notion of “public service mission”.
Private sector CEO’s could also soon come under the radar of the government if François Hollande goes ahead with his plan to introduce a 75 percent tax rate on those earning more than €1 million a year.
'Thousands' to lose jobs
Ayrault’s pay cut announcement was timely as it came on the same day he held talks with the country’s trade union bosses at Hotel Matignon, his official residence in Paris.
At a time when France’s unemployment rate is at a 12-year high of almost 10 percent, unions fear companies are preparing to announce waves of job cuts.
The PM was handed a list of around 50 companies which are expecting to announce around 50,000 job losses in the near future. Thousands of other jobs are also indirectly threatened.
According to the list, firms planning to close factories reportedly ranged from carmakers PSA, Peugot Citroen and General Motors to retailer Conforama. There are also concerns Air France will announce a raft of staff cuts in the coming weeks.
“We want to deal with these layoff plans immediately,” François Chérèque, head of the CFDT union, France’s largest by membership, told Europe 1 radio. “We are urgently requesting the state to focus on jobs. Jobs are the number one problem.”