Meanwhile across the Channel...

When writing last week about the potential CG trajectory under Britain's new government, I did not mean to overlook the recent high-profile exec comp developments happening on the other end of the Chunnel.

Late last month, a day after the company reported that first-half earnings rose 41%, Renault’s board announced a reduction in its chief executive’s next pay package after the carmaker’s dismissal of April's shareholder vote against his 2015 compensation triggered protests against executive pay in France.  The board approved a recommendation by the company’s remuneration committee to reduce the variable share of CEO Carlos Ghosn’s salary by 20 per cent, capping it at 180 per cent of the fixed salary.  It also modified the way the variable portion will be calculated.

At the company’s annual general meeting on April 29 in Paris, just over 54 per cent of shareholders voted against and 45.9 per cent voted for Ghosn’s pay package of €7.3 million ($10.75) for 2015, with less than 1 per cent abstaining.  The board did not heed the non-binding vote, declining to adjust Ghosn’s pay package.

In the aftermath, France threatened to take actions to force the board's hand, as a council on corporate governance comprising executives from major firms and representatives of the Mouvement des Entreprises de France employers association reviewed the decision.  France’s president Francois Hollande also weighed in on the matter, saying: “I’ve been told there is a code of good conduct [and] if it’s not applied there will be consequences,” adding that “[i]f this council does not react firmly, the first decision will be to make general shareholder assembly decisions binding.”

Then in June, France's Socialist government floated "anti-corruption" legislation that would allow shareholders to vote on the pay packages of chief executives when they are hired or when the structure of their compensation changes.  But it goes further than the UK's say-on-pay rules by also allowing them to reject executives' variable compensation, which is tied to companies’ annual performance.  The Renault board seems to have taken its cue to reign in the pay package from the latter provision.

Likely due to heightened societal concerns over income inequality, executive compensation controversies are lately flaring up with greater frequency in Europe.  What this portends for other markets is of keen interest looking ahead.

Robert Stead