Emmanuel Macron talked about remuneration two years ago.shocking” And “excessive” to describe the salary of Carlos Tavares, already, at Stellantis, nothing is happening: the salaries of major French managers are soaring. Mainly due to the bonuses recorded each year: according to Oxfam figures, barely 27% of the remuneration of CAC 40 bosses was fixed in 2022. The rest varies depending on the company’s performance on various aspects. Take the case of Carlos Tavares at Stellantis for example: his fixed salary, two million euros, has been stable for several years, and represents only 7% of his income.
The rest is 11 million rewarding the manufacturer’s very high margin level, 10 million linked to sales of electric cars, 2 million for his retirement, 3.7 million in unlocked stock options, and a set of other bonuses . Carlos Tavares benefits from the fact that Stellantis has become a profitability monster, with 18.6 billion euros in net profit. The big bosses feed on the performance of the CAC 40, which does not suffer from inflation and whose profits jumped by 8% last year, far from the 0.9% growth recorded nationally.
However, this does not justify everything, in particular the two-speed increases: employees received three times less increase than their CEO. Above all, according to OXFAM, half of the bonuses are linked to short-term financial performance, compared to 5% for the achievement of climate objectives, for example. A conception of performance which therefore appears to be very restrictive.
Shareholders and managers, all winners
However, a company listed on the stock exchange is the place of a balance of power between three parties: the CEO, the board of directors and the shareholders. The latter choose the board, which is responsible for the strategy and selection of the manager. Shareholders also decide on remuneration but suffer from what is called information asymmetry: the CEO always knows more than them about the state of the company, and can promote long-term growth, rather as the payment of dividends.
And it’s even worse if the board of directors brings together people close to this manager and does not really control him: a shareholder, especially if he is not very powerful, may want to force the CEO to perform, by linking his destiny to that of the company, and by increasing its share of variable salary. A strategy which does not always pay off, as Olivier Godechot, sociologist at Sciences Po and research director at CNRS, points out.
“It may seem painless but in the long term it is not effective. There is always an ambiguity when it is the CEO who asks “incentive me, incentivize me” more than the shareholders who push for the incentive. They adopt a form of remuneration that appears to be in favor of shareholders but is not necessarily so.”
The pharaonic salaries of Carlos Tavares and his colleagues are also based on uncertainty as to the added value really provided by the manager, and on a distorting mirror effect: everyone has access to the remuneration of the other bosses, and will be tempted to negotiate a salary just above the median, which generates inflation. Significant costs for companies and for employees, but where managers and shareholders therefore seem to find their benefit: Oxfam notes that in 2022, 76% of the profits of CAC 40 companies were paid in the form of dividends.
