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Opinion: France may feel vindicated. But it's more like America than many French would care to admit.
During remarks at the G20 summit in London, French President Nicolas Sarkozy tried to deflect responsibility for the economic crisis by indirectly blaming it on the U.S. “The crisis didn’t actually spontaneously erupt in Europe,” he said.
No, Mr. President, French banks actually worked very hard to make it happen. Some of them, such as Credit Agricole and BNP Paribas, ran themselves into the ground because they wanted to be more like American banks and make more money.
France transformed its banking system from being almost entirely government-owned in 1982 to one that was increasingly privatized, and which is nearly independent today. Societe Generale, the French bank to which AIG paid $11.9 billion in TARP money, had listed the number of shares its top executives would be paid in stock, along with the strike price, on its website in early March. The next week, the company announced the executives would abandon the options under pressure from France’s Finance Minister Christine Lagarde.
President Sarkozy, like President Obama, is also coping with an AIG scandal. It turns out that 53 percent of the bonuses paid out to AIG employees, $87.5 million, will not be returned because the money was paid to employees who are overseas. Two of the top executives of Banque AIG, the French derivatives unit based in Paris, volunteered to return their retention bonuses before announcing that they were resigning.
Although Sarkozy has been railing for weeks against the bonuses paid to French financial executives, international corporations have been moving toward the U.S. pay model for years. Foreign governments have enabled companies to use American style pay incentives such as stock and cash bonuses. “Europe has been making laws over the last 10 years that are looser in stock ownership than they used to be,” said Steve Werner, professor of management at the University of Houston.
More than 30 percent of the largest 500 global companies are based in the U.S., and their pay practices exert greater international influence than those of any other nation. “Multinational companies are breaking down pay traditions,” said Dow Scott, author of “Incentive Pay: Creating a Competitive Advantage.” “The executives overseas are catching up.”