how are the salaries of big bosses calculated?

A minimum remuneration of 23.5 million euros for the 2023 financial year was approved by the shareholders of Stellantis for their general director, Carlos Tavares, Tuesday April 16, 2024. An amount which could rise to 36.5 million euros . This remuneration is broken down into two parts: a first fixed of two million euros, the other variable from one year to the next. The latter is made up of a bonus linked to the company’s performance of nearly 5.8 million euros, benefits in kind and a retirement pension of approximately 1.9 million euros.

Added to this is a volume of shares allocated to Carlos Tavares, which determines the final amount of the Stellantis boss’s remuneration and which could increase it to more than 30 million euros.“It’s a plan over several years, explains Charles Pinel, general manager of Proxinvest, an investor advisory company. Carlos Tavares must reach milestones based on specific performance criteria, and he will be awarded free shares.”

A vote informed by consulting companies

The amount proposed to the shareholders’ vote therefore comes from performance calculations and “corresponds well to reality”, believes Charles Pinel. His company advises shareholders of listed companies ahead of the vote. “Our clients are mainly management companies that manage funds, and when General Meetings are held, we issue voting notices for each resolution, whether financial, legal or governance” and particularly when it comes to executive remuneration. These opinions are established on “a battery of criteria”explains Charles Pinel and aim to “defend as best you can” the interests of investors in the company concerned. But they only represent a tool for shareholders, who can vote according to their own criteria and the company culture.

In France, since the Sapin II law of December 9, 2016, the shareholder vote is binding and can therefore cancel the compensation plan presented. This is not the case in other European countries, such as the Netherlands, where the Stellantis group resides, where the vote only has a consultative value. The Assembly can, however, send a message to the leader, since approval with less than 80% of the votes is tacitly considered a sign of distrust of the resolution passed. On April 16, Carlos Tavares’ compensation was approved by 70% by Stellantis shareholders. “The average approval rate is 95%”indicates Charles Pinel.

Between yourself

The remuneration of a manager is proposed by the company’s board of directors, based on the work of a dedicated committee internal to the company, often assisted by expert firms. Their job is to find a balanced amount, which will suit the shareholders and which remains motivating for the manager.

“The dangernuance Charles Pinel, This is because in large companies, the board of directors is itself made up of company directors, themselves very well paid.”

“There may be a certain proximity, an interplay between the board of directors and the manager which may be a bias.”

Charles Pinel, general director of Proxinvest

at franceinfo

A dimension which adds to the controversy already created by the amounts of remuneration of big bosses. Regarding that of Carlos Tavares, several left-wing elected officials have already announced their desire to legislate to limit the salaries of big bosses by limiting salary gaps, for example from 1 to 20, in companies. The amount of remuneration of the boss of Stellantis is also “shocking” for the deputy and spokesperson for the National Rally Julien Odoul.

“The shareholders are owners of the company, if they judge that the manager has the right to remuneration of 20, 30, 50 million, that is shareholder democracy”recalls Charles Pinel. “Why plateau in the private sector?”he wonders, conceding that such amounts can create “frustrations for employees”but welcoming the French system which “thanks to the General Assembly and the binding resolution system”sets certain limits.

In 2022, Carlos Tavares earned the third highest remuneration of the SBF 120 bosses – the 120 largest listed companies in France –, behind Bernard Charlès, CEO of Dassault Systèmes and Daniel Julien, CEO of Teleperformance.