Year after year, the success of the NISSAN brand has been confirmed throughout the world (4.8 million vehicles sold in 2011) and during 2011/2012, the Japanese carmaker expects further sales growth of 10%. While this clearly benefits RENAULT, its key shareholder (43.4%), the success has only been very relative since the European carmaker has seen its share price plunge 75% over the past five years!
In contrast, the person that has benefited the most from NISSAN’s success is its Chairman, Carlos Ghosn. In addition to his “French” salary as CEO of RENAULT (€2.9 million), he takes home €9.9 million (before stock-options!) as the head of NISSAN, showing that synergies between salaries seem to work better than those between technologies.
Carlos Ghosn’s remuneration, which is a record in Japan, did not seem to cause upset at NISSAN’s AGM held in Yokohama recently. Shareholders have nevertheless seen the group’s share price drop 10% over one year and 44% over five years. Had it been organised on Anglo-US territory, the AGM would probably have been far more strained.
For slightly more than a year now, a number of shareholder meetings have become jittery when management’s pay has been discussed. The “boss’s pay rise/share price fall” duo is prompting questions and even indignation at times.
As an example, in the US, more than half the shareholders at CITIGROUP (-44% over one year) opposed the $15 million salary proposed for CEO Vikram Pendit.
In France, the debate over management pay remains focused on two more dogmatic questions: how much relative to the smallest wage in the company and what level of taxation for the highest salaries?
Although we have our own answers to these questions, note above all that the question rarely asked in France, albeit essential, is what level of remuneration for what company success?
This is the question at the heart of debates animating Board meetings and AGMs in Anglo-US countries. The “say on pay” possibility that shareholders have to vote in favour of or against management pay levels is increasingly being used. Unfortunately, this possibility only has consultative value and shareholders sometimes struggle to have their views heard. Indeed, in Dublin, their votes were not taken into account and they did not manage to oppose an $8.5 million payment to WPP chairman, Sir Martin Sorrell. In contrast, the chairman of AVIVA resigned, as has finally the head of BARCLAYS who had already limited his sights after shareholders intervened.
In France, the Board of Directors decides a CEO’s remuneration. The AGM can only give its opinion on stock-option plans and eventual golden parachutes. For the moment, rebellious shareholders will have to restrict themselves to other subjects than those concerning management pay.
However, better corporate governance merits a new debate! The time has come to move beyond the alternative between a regulating state shareholder and shareholder meetings that are ineffective in deciding on management pay. The Anglo-US example and its “shareholder spring”, as the press has so nicely put it, is a source of inspiration and a good example of self-regulation in the system. It is excellent food for thought to be favoured at a time when legislation and the increased role of the state seem to be the only answers to all governance questions in France.
Didier LE MENESTREL
With the collaboration of Marc CRAQUELIN