A group of 40 well-known personalities in France, including writers, politicians and chief executive officers of corporations listed on the country’s stock exchange, the CAC 40, have called for a cap on the amounts CEOs can receive, limiting their salaries to 100 times the French minimum wage. The call was launched with the publication of an open letter in French newspaper Libération, hitting its front page on Thursday, May 19, 2016.
The “40 Calling the CAC 40” group includes Paris mayor Anne Hidalgo, economist Thomas Piketty, artists, union leaders and the presidents of a luxury travel agency and a supermarket chain. They outlined their reasoning as follows:
Because we are living through an unprecedented period in the history of contemporary capitalism, whereas duringthe 1960s, CEO salaries represented 40 times the average wages paid by the largest American corporations, this gap has exploded, today reaching 200 in American corporations and 120 in French companies;
Because the government bet upon self-regulation in 2013 and that this has failed. In 2015, total compensation for CAC 40 employers increased from 5 percent to 11 percent, according to assessments, reaching an average sum of 4.2 million euros a year, or 240 times the minimum wage;
Because employers’ principal argument to justify such practices — that of a world market in high-level leaders necessitating a top-down salary alignment — is not corroborated by any serious economic study or concrete proof;
Because several international institutions, such as the OECD and the IMF, have sounded the alarm for several years about the growing burden imposed by these inequalities and their negative consequences on the potential growth of our Western economies;
Because through this type of behavior, our financial elite have assumed a pernicious attitude of every man for himself. While the majority of French people have had to make great sacrifices since the 2008 financial crisis, these practices on the part of employers call into question our pact of solidarity, foment defiance against our institutions and fuel votes for the extreme right.
For all of these reasons, we are asking the government to legislate that an employer in France cannot receive compensation of more than 100 times the minimum wage; i.e., 1.75 million euros a year.
Faced with the possible objection that France would be alone in the world to enact such a law, the signatories responded that it would be “a source of pride” in France. They concluded: “We would say that this is a start and that if this law is approved, it would obligate almost the entire group of CAC 40 employers (and therefore a very large part of their boards of directors) to lower their salaries by at least 58 %,” cutting them by more than half.
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In an editorial on the letter, Libération editor Laurent Joffrin lamented the “social and philosophical abyss” that would allow the large salary gaps in evidence today. In France, the minimum wage stands at 17,490 Euros per year, whereas the average compensation for CAC 40 bosses is 4,200,000 Euros, or 240 times higher. “How is it that a man who didn’t take any risk, who didn’t invent any revolutionary process, who probably rose up the ranks of a large corporation, can be worth 300 times more than another man or woman working for the same organization?”
Joffin recalls that no less a capitalist than JPMorgan once said that he wouldn’t trust a company where the highest officer was paid more than 20 times the lowliest employee.
Economists concur. “We can no longer say that compensation depends on merit,” said Thomas Dallery, author and professor of economics. “These salaries go beyond what is reasonable.”