Measures to strengthen control of golden parachutes paid managers of listed companies have recently adopted by Parliament (1). Now, the payment of all premiums of departure must be subject to the fulfilment of conditions of performance, be authorized by the general meeting of shareholders in a specific resolution, and subject to increased transparency. These provisions are applicable immediately, including the current commitments. The current officers of listed companies are therefore concerned.
Payment managers of listed companies (Chairman of the Board of Directors, Director General, Directors General delegates, members of the Executive Board) of any deferred compensation that would be not subject to a condition of performance is now prohibited, under penalty of nullity. The scope of this prohibition is broad: it addresses all elements of remuneration, benefits and compensation, regardless of their form, paid by the company itself or by any company controlled or that the control (2), the termination or change of functions of the leader. Lump-sum allowances, the exercise of stock options and the various material benefits in kind concerned. Are however excluded payments made pursuant to a non-compete clause, the "pension hats" and commitments of collective and mandatory pension and welfare plans. The condition of performance must be fixed by the Board of Directors (or monitoring as the case may be) before February 22, 2009, as regards the outstanding commitments. The Board of Directors is free to choose the criterion of assessment of the performance of the leader, subject that the latter is assessed on the performance of the company (changing the course of stock exchange, financial ratio, return on investment, etc.). These provisions thus require to establish a proportionality between the amount of golden parachute and the actual performance of the leader, and to give deferred compensation something clear and justified. They also tend to further empower the boards to intervene upstream, by authorizing the commitment, and downstream, noting the achievement of the performance condition. And the sanction is without appeal: all payment while the Board of Directors would have not found the realization of the condition of performance the departure or change of service of the leader is right.
Approved by shareholders
In addition, to make deferred remuneration more readable leaders and their control by the actual shareholders, the Commercial Code imposes now that they are approved by the shareholders in a resolution for each beneficiary. A new approval by the General Assembly is also required for renewal of the duties of the leader. Any commitment to pay a premium of departure or a "retirement hat" to a ruler was already since May 1, 2005 (3), be subject to the approval of the General Assembly of the shareholders as a regulated agreement. But in practice, the control of the shareholders was limited by the fact that all regulated agreements could be approved globally in a single resolution, preventing the shareholders to rule specifically on the compensation deferred a leader. Ongoing commitments must be submitted to the approval of the General Assembly of shareholders before February 22, 2009. Default or if shareholders refuse to approve these commitments, the latter may be cancelled if they have adverse consequences for society.
Finally, the transparency of the Executive compensation information is again increased. The decisions of the boards of directors authorizing deferred remuneration and those noting the respect or not the conditions of performance must be made public according to terms and time limits to be fixed by order in Council of State.