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Are Ceo's over Paid?

  • Date Submitted: 03/14/2010 06:59 AM
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Are CEOs overpaid?

Henri Proglio’s appointment at the head of EDF, the French utility company, in late November, and his asking for a salary equal to his previous salary at Veolia (2m €) spurred the debate on CEO pay in France. “I don’t like high salaries” stated Martin Hirsch, to whom government’s representative Eric Woerth (Budget Minister) responded “CEOs of large companies have high salaries because they have high responsibilities. What I do not like is a high salary for small responsibilities, and here, it’s not the case”
On that very last point, one can only agree with Mr. Woerth: EDF is one of the largest utility companies in the world, with $95.5 billion in revenues in 2008, and one of the top French industrial companies (where the government has a core shareholding and a substantial say in management). One can also understand that being sought after, Mr. Proglio asks to keep his level of compensation, should he accept this new position. Moreover, a 2 million € salary would be close to the CAC40 CEO’s median salary.
However, the salary he had at Veolia, that is of 2 million €, is higher by 45% to that of EDF’s former CEO, Pierre Gadonneix. One could reasonably wonder: is Mr. Proglio better and more competent by that much? Have the responsibilities at the head of EDF increased by that much? Or is it simply a premium the state is willing to pay, in order to attract such assets in strategic companies?

The discussion around Mr. Proglio’s case is a punctual illustration of a more global debate regarding CEO’s pay. Substantial responsibilities, size or the strategic relevance of the company are often brought up by some to justify a certain level of CEO pay, while others argue that despite all these parameters, salaries often strike indecent levels. All these interrogations eventually come down to one question: Are CEOs overpaid?

Going back over the CEO’s role can be helpful, so as to reframe our reflection and have a better overview of the functions...

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