Is the Boss Overpaid?

Ever since 2001, when France enacted a law requiring listed companies to reveal their executives’ pay packages, newspapers have had a field day denouncing greedy bosses. Not only are fixed salaries revealed, but so are bonuses, fees for serving on boards of directors, returns on stock options, pension packages, and other perks, such as corporate jets or chauffeur-driven cars. But executive remuneration has usually faded from view once the journalistic spotlight shifts elsewhere – that is, until now.

This year, executive heads have started to roll. In June, Antoine Zacharias, chairman and CEO of Vincy, France’s biggest public concessions and construction company, was obliged to resign when a majority of the board of directors judged his remuneration to be outrageous: €4.3 million in salary, a €13 million retirement bonus, a €2.2 million pension, and an estimated €173 million in stock options. But the focus of debate was a €8 million exceptional bonus that he requested after successfully executing a financial operation at the end of his tenure.

More recently, Noel Forgeard, the French co-CEO of the Franco-German aeronautical and defence company EADS, was forced to resign under a cloud of suspicion: he sold his EADS shares in March, before the company announced a costly delay in production of the Airbus A380. Whether Forgeard acted illegally is still under investigation, but, with the announcement causing the share price to plummet by 26% overnight – wiping out €5.5 billion of the company’s value – his position became untenable.

Such events have brought old questions back to the fore in almost every rich country: Are bosses being paid too much? Should laws governing stock options be reformed? Although the circumstances are different, the fundamental issues are always the same, for they touch on questions of legitimacy and morality. If remuneration is perceived as unjust, trust in the capitalist system will suffer.