World financial crisis

French clampdown on fat cat bonuses

Article published on the 2009-01-22 Latest update 2009-01-22 11:38 TU

French Finance Minister Christine Lagarde giving a speech about the car industry.
(Photo: Reuters)

The CEO of Renault, Carlos Ghosn, who received over one million euros in bonuses last year, said on Wednesday that he would not take a lucrative supplement to his pay packet after the announcement of a government bailout.

Ghosn told French radio that, after the announcement of a six billion euro stimulus package, he would not receive his usual bonus.

“If the performance of the company is not at the desired level, which is the case this year, even for reasons out of the control of anyone working for Renault, there is no bonus,” said Ghosn.

Earlier in the week, French banks also agreed to cancel profitable bonuses for their top executives following pressure from the government.

BNP Paribas confirmed that it would not dish out a bonus to its chairman or chief executive, while Credit Agricole cut their chief executive’s financial perks on Tuesday. Societe Generale, one of the oldest banks in France would also have to follow suit.

The banks were left with little choice, after the French government made it quite clear that any stimulus packages provided by the state, had to be met with “minimum” gestures from the banking industry.

“The banks must understand that the times have changed,” said Christine Lagarde, French Finance Minister.

Over ten billion euros was lent to French banks last month as the first part of an approved bailout plan to help protect them against the effects of the world financial crisis.

French President Nicolas Sarkozy warned that the banks must also limit dividend payments to shareholders after a meeting with bank bosses on Tuesday.

Meanwhile, on the other side of the Atlantic, the US government is pushing for stricter controls on stimulus cash it is providing to help the US economy beat the credit crunch.

The Financial Services Committee approved a measure to force recipients to prove they are using the cash to increase lending, to restrict their ability to use the funds to finance mergers and to prevent them from paying their top executives lucrative bonuses.

There had been frustration over the Bush administration's handling of Tarp – the Troubled Asset Relief Program, due to a lack of specifics on how the money should be spent.

According to Barney Frank, Chair of the Financial Services panel, the bill will force firms to ban "golden parachute" payments and bonuses to fat cats.