The French excel in many things: good food and wine, mathematics, haute couture, love-making, rugby, handball - and, somewhat surprisingly, in the art of paying handsomely the patrons of their largest listed companies.
One would expect to find Europe's highest-paid corporate fat cats in Britain, with its much closer affinity to US pay models and the diverse ownership structure of its companies, with their many shareholders. But research by a group of academics affiliated to the Brussels-based European Corporate Governance Institute (ECGI) on reported pay practices among FTSE Eurotop 300 companies shows that French bosses earn more.
On average, French chief executives earn €1.85 million a year. That is 16 per cent more than the average €1.55 million basic pay and performance-related bonus package of chief executives of UK companies and almost double the average pay of Irish chief executives at 932,500.
It is still a fraction of the pay-outs to US executives, who reaped huge rewards from the stock market bull run of the 1990s and are now coming under harsh review in the face of evidence of poor corporate performance in the post Enron/WorldCom economic environment.
For a typical US chief executive, the basic pay package, excluding variable and performance-related elements, is higher than the total package in Germany, Spain, Sweden and Switzerland, says Mr Guido Ferrarini, a professor at the University of Genoa and one of the authors of the report on executive pay in the European Union.
The data are inevitably incomplete and, by the author's own admission, at times misleading. Disclosure on executive pay differs widely in Europe, although many countries have increasingly sought to tighten reporting requirements through regulation or voluntary corporate governance codes, or both.
British chief executives seem to be paid less than their French peers but the reported figures do not include long-term options and pension benefits that could result in an overall higher package.
The study shows that 47 per cent of chief executive pay in France is variable or performance related. It is also 47 per cent in Germany, 41 per cent in the Netherlands, 38 per cent in Italy and 33 per cent in Sweden but just 28.2 per cent in Ireland. Britain's 31 per cent rises to 70 per cent if long-term incentive plans and pension benefits are included.
"The simple fact is that we still don't know very much," admits Mr Marco Becht, the ECGI executive director. Germany is "the darkest hole of all", he says.
Although there are moves to force more extensive disclosure of the pay of German directors and chief executives, German companies are obliged only to publish the total aggregate remuneration of the management and supervisory boards.
The study highlights how European disclosure requirements and executive pay practices reflect the differences in ownership structure in different states. But it also sees growing convergence between the British and continental European approach to the issue as a result of popular outrage and increasing shareholder activism over runaway executive pay, and especially the golden handshakes paid to top executives.
Joachim Schwalbach, professor of management at Berlin's Humboldt University, calls these severance packages "invisible handshakes" because of the lack of disclosure in many European countries. Reform has inevitably been strongest in the UK because of the spread-out structure of its corporate system and the perception that management, as in the US, often sets its own pay.
Continental European companies tend to be controlled by a single shareholder or blockholder. In Germany more than half all listed companies are controlled by a single block and only 17.4 per cent are without a blockholder with veto powers. In the UK, the average blockholder controls only 9.9 per cent of the votes, while in the US the average blockholding for NYSE and Nasdaq companies is 5 per cent.
The report suggests the onus in continental Europe is on improving corporate governance as a whole to ensure that blockholders do not abuse their position to undermine the interests of minority shareholders.
Making company control structures less opaque and giving minority shareholders fairer treatment is perhaps as important as increased disclosure on pay and UK-style mechanisms to control management - if not more so. But there are signs the continental European model is converging with the British system as corporate restructurings, privatisations and generational change within traditional European corporate dynasties are broadening the shareholder base.
Medef, the French employers' confederation, recognised in a report last month that the pay of top French executives had now "come closer to Anglo-Saxon standards". It warned of society's difficulty in understanding the pay awarded to senior managers and chief executives and urged "measure and self-control".- (Financial Times Service)
