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France Pushing for a Maximum Wage; Will Others Follow?

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A reader pointed out a news item we missed, namely, that the new government in France is trying to implement a maximum wage for the employees of state-owned companies. From the Financial Times:

France’s new socialist government has launched a crackdown on excessive corporate pay by promising to slash the wages of chief executives at companies in which it owns a controlling stake, including EDF, the nuclear power group.

In a departure from the more boardroom-friendly approach of the previous right-of-centre administration, newly elected president François Hollande wants to cap the salary of company leaders at 20 times that of their lowest-paid worker.

According to Jean-Marc Ayrault, prime minister, the measure would be imposed on chief executives at groups such as EDF’s Henri Proglio and Luc Oursel at Areva, the nuclear engineering group. Their pay would fall about 70 per cent and 50 per cent respectively should the plan be cleared by lawyers and implemented in full…

France is unusual in that it still owns large stakes in many of its biggest global companies, ranging from GDF Suez, the gas utility; to Renault, the carmaker; and EADS, parent group of passenger jet maker Airbus.

Of course, in the US, we have companies feeding so heavily at the government trough that they hardly deserve the label of being private, but the idea that the public might legitimately have reason to want to rein in ever-rising executive pay is treated as a rabid radical idea.

In July 2011, Doug Smith proposed a maximum wage, using a 25 to one ratio, for any enterprise that used taxpayer funds. I’d be curious to learn how this idea developed in France, since it would be helpful to know who this idea developed and what experts/research they relied on. From Doug’s post:

For those, however, receiving bailouts, deposit insurance, government guarantees, tax breaks, tax credits, other forms of public financing, government contracts of any sort – and so on – the top paid person cannot receive more than twenty-five times the bottom paid person. This ratio, by the way, is what business visionary Peter Drucker recommended as most effective for organization performance as well as society. It also echoes Jim Collins who, in his book Good To Great, found that the most effective top leaders are paid more modestly than unsuccessful ones. And, critically, it is a ratio that is in line with various European and other nations that have dramatically lower income inequality than the United States.

In other words, the French proposal isn’t that big a change from existing norms, at least in most other advanced economics (ex the UK, which has also moved strongly in the direction of US top level pay). But despite the overwhelming evidence that corporate performance is if anything negatively correlated with CEO pay, the myth of the superstar CEO and the practical obstacles to shareholder intervention (too fragmented; too many built in protections for incumbent management, like staggered director terms; major free rider problems if any investor tries to discipline extractive CEO and C level pay, which means it’s easier to sell than protest) means ideas like this are unlikely to get even a hearing in the US. Let the looting continue!

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42 comments

  1. different clue

    The article wasn’t as scary as the headline. I thought at first it meant an actual upper limit on the actual doers of physical work. That seemed very unsocialist, somehow.

    We had a kind of “maximum wage” in this country between the New Deal and the Eisenhower era , didn’t we? Didn’t a 90% tax on income above a certain bracket level incentivise corporate boards to not even bother to pay their executives anything into or above that cutoff, because it would almost all be taxed away and would therefor be a poor use of corporate money? Doing that again would be the simplest way to restore a “maximum wage” in this country.

    One wonders if we would have to have a tax enforced “maximum harvest of interest/dividends/etc.” and a “maximum wealth” limit enforced by taxes to begin reversing some of the klepto-acquisition of vast wealth in few hands we currently suffer.

    1. wunsacon

      >> We had a kind of “maximum wage” in this country between the New Deal and the Eisenhower era , didn’t we? Didn’t a 90% tax on income above a certain bracket level incentivise corporate boards to not even bother to pay their executives anything into or above that cutoff, because it would almost all be taxed away and would therefor be a poor use of corporate money.

      Exactly!

      And once elite MBA holders realize again (like in the 50′s) they can’t skim/steal great fortunes from large institutions, they’ll have to re-discover motivations OTHER than endless personal greed: helping others, pursuing something they love, or just doing a great job because of pride/honor.

      For those elite who cannot adjust back to the way things were, we are *better off* without their “contributions”. We should encourage them to leave the country or even just sit home collecting welfare checks — where they’d do less damage.

      1. James

        It’ll never happen in the US, and the fact that it can and will now be painted as a “French” idea in the first place is only the most visible reason why. US government regulatory, legislative, executive, and judicial capture is already a fait accompli, and the rest, as they say, will be history soon enough.

        And to think, we all thought that the epic battle between capitalism and socialism had been settled decisively with the end of the Cold War in the late 20th century, when in fact, it now looks like the real war has only just begun early in the 21st. Something tells me capitalism hasn’t even been properly punched in the mouth yet. Here’s hoping the big knucklehead has a glass jaw.

        1. Warren Celli

          James said; “And to think, we all thought that the epic battle between capitalism and socialism had been settled decisively with the end of the Cold War in the late 20th century, when in fact, it now looks like the real war has only just begun early in the 21st. Something tells me capitalism hasn’t even been properly punched in the mouth yet. Here’s hoping the big knucklehead has a glass jaw.”

          The epic battle was never settled decisively because the epic battle was never fought.

          Capitalism — and socialism too — are both ideals that were long ago co-opted and re-purposed by the aberrant sociopathic Xtrevilist few to fit specific divide and conquer deception schemes and at the same time to deflect from their deceptions and the real core struggle — the never settled moral struggle! That is the real war that the Xtrevilist few DO NOT want to engage in. Why? Because that IS their glass jaw. That IS where they can be “properly punched in the mouth”. That IS the epic struggle! This is in reality a moral battle between the dark forces of the sociopathic aberrant Xtrevilist few and Fairism — the fair apportionment for all people of freedom, opportunity and access to resources.

          I have long been an advocate of limiting not only yearly income but also total asset wealth to a fair amount decided by the people in a direct democracy — one person one vote hand counted paper ballots transparently cast in public elections.

          You are right, it will never happen, in the US, or anywhere for that matter — but only IF WE DO NOT TALK ABOUT IT!

          I have raised this issue a number of times and it always goes over like the proverbial lead balloon. We are instilled with the belief that we should not reveal our incomes and be humble, but in the same brain washing we are taught to admire wealth and celebrity. Sit tight and don’t rock the boat, aspire to an unrealistic manufactured and tightly controlled dream, and don’t say squat until you make it — good luck with that little scam. We are brainwashed to the greed and evil are good meme. Well I say eff that! Eff the super pac super pigs; Bill Gates, Warren Buffet, the prissy ass ‘The Donald’ — yuk, gag, gag! —, and on and on and on, and eff all of their narcissistic blow hard degenerate selectively elevated movie stars and total phony baloney loser sports ‘stars. Gag me with a spoon!

          I think we should have a seven to one yearly income spread based on contribution to self AND society, not based on selfishness alone. And total asset wealth should be proportionately limited. We falsely base merit on a corrupt system that does not reward merit, rather it rewards the sociopathic aberrant Xtrevilist few who control the system. Wunascon has it right, we need to revisit and change the motivations to a more socially healthful framework; “helping others, pursuing something they love, or just doing a great job because of pride/honor.” and more.

          What is a fair amount of yearly income and total asset wealth?

          Deception is the strongest political force on the planet.

          1. Joe Rebholz

            Warren Celli said: “This is in reality a moral battle between the dark forces of the sociopathic aberrant Xtrevilist few and Fairism — the fair apportionment for all people of freedom, opportunity and access to resources.”

            Fairism is not only moral but it is also practical and efficient in that any system (for example humanity) to operate well should supply all its components all the resources they need to to perform their various functions well. So jobs, education, food, shelter, health care, minimal violence, maximal stability, etc. for everyone.

          2. proximity1

            Warren,

            Ronald Reagan was elected, not once but twice. Like Bill Clinton, also twice-elected, Reagan remains a “hero” to many Americans. Lincoln’s a hero, and Adams and Washington.

            You write, “This is in reality a moral battle between the dark forces of the sociopathic aberrant Xtrevilist few and Fairism — the fair apportionment for all people of freedom, opportunity and access to resources.”

            The fact is, somewhere, the Xtrevilist crowd finds enormous numbers of Americans to “pull the lever” in the voting-booth for its candidates–often, too often, all the candidates could be rightly figured as belonging to this crowd.

            If that is the case, then your scheme of things is up against a very stubborn problem: many among the would-be supporters of Fairism not only vote the ‘wrong way,’–clearly against what’s both fair and even against their own enlightened interests–but also work at jobs which place them in the direct employ of the Xtrevilist crowd.

            What to do? They have the public schools, the school-boards, the city and county councils, they run the local newspapers, television and radio stations; in Hollywood, they make the blockbuster films everyone throngs to see. & etc.

            It is, I think you’re right, a moral battle. But it’s a moral battle that runs right through the heart of lots and lots of people–whose thoughts, emotions, loyalties, take-home salaries, and families are divided, splintered in parts some of which lean one way in certain circumstances and another way in others.

            Once you get all the people united for Fairism together on the supposed same side of the line which supposedly separates them from the Xtrevilists, you’re going to discover that many, many of them have very divergent ideas about what’s wrong and what ought to, must be, done about it.

            We have to “sort” and in that task there is a world of strife and friction. What’s your very real, very practical tool by which use we can reliably get the good Fairists together and away from the clutches and the undue influences of the Xtrevilists?

            That Reagan–he was the “nicest”, most “charming” guy! Did you know that even lots of people who saw straight through him found themselves still captive, still charmed, by his visual, personal appeal?

            A moral war, yes, but its raging inside of us as well as between the Xtrevilists and the Fairists.

            What to do?

          3. Warren Celli

            Proximity 1, excellent comment with good situation analysis. Especially when you say this;

            “A moral war, yes, but its raging inside of us as well as between the Xtrevilists and the Fairists.”

            You actually pose two questions when you recognize that internal struggle — when you recognize our cannibalistic human nature. The first question you seem to pose is; do we go with that cannibalistic human nature or do we work to rise above it?

            Rising above that cannibalistic human nature, for me personally, is always the answer, and that is what the creation of a rule of law — a morality, a code of conduct — is all about. It requires making choices and alliances. We must engage in the ‘us’ and ‘them’ dynamic. I choose to see all of humanity as ‘us’ and all other species as ‘them’ to be utilized for sustenance needs as humanely as possible — even there a morality of Fairism is required to minimize any suffering in the necessary exploitation.

            The second question you pose is what to do about those within the human species, the sociopathic Xtrevilists, who succumb to their cannibalistic nature and prey upon their fellow humans?

            That is your second question. What to do you ask?

            You are already doing it I say. We are reframing the debate. We speak not of the duopoly political illusions but instead we speak of what puts fear into the hearts of the Xtrevilists — Fairism! That IS their Achilles heel. That IS their glass jaw. We speak of the immoral sociopathic aberrant Xtrevilist few against the many. In doing so we do not dissipate our energies as they wish us to on their intentionally divisive scams. We do not validate and legitimize their existence. We are then free to actually plan what to do. That is job one then, re-framing the debate. Applying our intelligence and creativity to create new memes that will counter their divisive memes and put the focus on dividing and exposing their machinations. We can not do that when we are constantly in defensive mode responding to and exposing their machinations. Talk of Xtrevilism vs Fairism, not democrat vs republican.

            Beyond that I believe that election boycotts and a constitutional rewrite are the best unifying effort with the emphasis on regaining control of the media, corporations, and the banking system. Each one requires a specific plan to lengthy to go into here.

            Deception is the strongest political force on the planet.

        2. C

          Sadly you may be right. The issue is that our current state of affairs is aided and abetted by a form of paranoid nativism strongly on display during the debates over healthcare. Rather than consider what other countries did good or bad and learn from it both supporters and opponents of the law seemed unwilling to look beyond our borders.

          At one time Americans travelled the world to learn from the successes and failures of others. Hell even in the 50′s and 60′s Americans were willing to think about other countries. Nowadays people of all stripes are actively hostile to learning from others’ examples.

          As a consequence this method may be doomed here not because it is French but because people won’t want to know about it.

          1. Otter

            Very few “Americans travelled the world to learn”.

            The vast majority went to impose (the US Marines) or teach (the Peace Core) The Great American Democratic Ideals on the poor benighted savages of the world.

            I believe the next largest group were looking for great hash.

  2. JGordon

    Formerly I had a very high standard of ethics and integrity. But now I have realized the true character of the American people: if lying, duplicitous kleptocrats weren’t already in power today, then the American people would elect them into power by this November. That’s how vile and deluded Americans are (in general).

    Well, I have decided to join the mainstream rather than be an outcast. So I am now in favor of being lied to constantly and elite looting. My only question is how can I best get me some of that!

    Hurray for Obama/Romney 2012. Maybe the best criminal fraudster win.

    1. Warren Celli

      JGordan — your vile and deluded.

      You need to realize that one of the many goals of brainwashing is to instill a sense of defeatism so as to make you give up, join the corruption, and therefore add to the intentionally created perpetual conflict. American viewpoints and behaviors are a product of the brainwashing they get from the sociopathic aberrant Xtrevilist few in control.

      Rather than so gullibly adopting those negative viewpoints and behaviors you might want to think about putting some effort into eliminating those at the top who promote them. I seriously question your claimed former “very high standard of ethics and integrity.”

      Deception is the strongest political force on the planet.

  3. Middle Seaman

    It will be almost impossible to limit the salaries of management. Inreality, both sides will reject the limits equally. Managements will find new and better ways to grab money. The government will ignore the limits and claim vehemently that every company complies with the limits fully.

      1. F. Beard

        What part of a government-backed usury for stolen purchasing power cartel sounds like a “free-market?”

  4. Jesper

    A possibility to get around this might be to outsource the low paid jobs thus leading to worse job security for the low paid.

    Ownership should give control, if the salaries are too high at the top in companies that the state controls then the solution is quite simple: Lower them.
    If the board of directors can’t (or more likely won’t) do what the owners want then the board isn’t representing the owners interests and should be replaced.

    1. Rcoutme

      An article I wrote for The Moderate View addresses this point. The ratio needs to be with the lowest paid person working for the company–not the lowest paid employee. Thus any cleaning crew worker hired by an outside contractor would limit the top pay of the highest paid person as well.

      In my suggestion (also 20:1, btw) I excluded some aspects.

      1. Any employee who realized immediate gain to the corporation (sales people and entertainers would be examples). Note that immediate means immediate, so selling loans would not qualify as the proceeds are not realized immediately.

      2. Stock option would be allowed in excess: however the options must be set at the time the individual gets them or when that employee first got the job–whichever is HIGHER. In addition, the options can not be used for a minimum of three years. This creates a long-term thinking mentality for the survival of the corporation. In addition, since such employee’s compensation is dependent upon the corporation remaining profitable for three years AFTER he/she leaves, such a person is unlikely to make short-term decisions that will destroy the corporation long-term. In addition, corporations that try to lure critical employees away in order to gain inside information may find the new employees unwilling to compromise their next three years worth of options.

      Just sayin’

  5. F. Beard

    This sounds like a good idea because it would encourage the CEO to increase the pay of the workers in order to increase his own pay but wouldn’t it also encourage him/her to replace some workers with automation and increase the pay of the remaining ones?

    But what if instead the workers were paid with common stock? Wouldn’t they all then benefit to some extent by increased productivity?

    It all goes back to the banks, folks. We can’t have a money system based on usury for stolen purchasing power and expect no ill consequences.

    1. They didn't leave me a choice

      But isn’t it an admirable goal to automate away the maximum number of jobs. After all, if machines can do them, why shouldn’t machines do them? I think you’re a bit too stuck to this ideal of “jobs” being what people need. No, people need resources to live, jobs are just a means not an end to themselves. If there’s not enough resources in peoples hands to run a healthy consumer economy, then put them there, by government fiat. Think of it, why would it ever /not/ be preferrable to automate everything away?

      The only real reason I can see for that is the false morality that considers consumption to be the privilege bought by labour. But that morality has already been abolished for the 1%, after all, they don’t do real work, all they do is coast on their rents on the rest of us.

      1. F. Beard

        You have almost completely misrepresented what I said!

        Automation is GOOD! However, automation should not be financed with the STOLEN purchasing power of the workers!

        It all goes back to the banks – the means by which the so-called “credit-worthy” steal and have stolen from everyone else.

      2. F. Beard

        But isn’t it an admirable goal to automate away the maximum number of jobs. They didn’t leave me a choice

        You remind me of a girl I knew from Indiana. She used her dishwasher to store dry goods because she liked to hand wash dishes! Another gal I knew, the fatal redhead, did not like the George Foreman Grill because she liked to stand at the stove and flip the meat herself!

        But even in the case of my own lazy self, I enjoy some manual work. The Biblical ideal seems to be small family farms, vineyards and groves. I could enjoy that myself so long as I also got to tinker with mechanical stuff too.

        1. They didn't leave me a choice

          Sorry if I misrepresented you, the “but wouldn’t it also encourage him/her to replace some workers with automation and increase the pay of the remaining ones?” part just caught my ire somewhat.

          I’m not opposed to manual work per se, people should be able to find something they can enjoy doing at home even if they don’t have a formal “job” framework to do that work in. Also, doing the dishes and cooking by hand is relaxing, can’t blame her for doing it.

          As for that common stock proposal, how would it work in practice? Would not such a system rapidly lead to the current situation of extremely concentrated ownership due to the workers having to sell the stocks for necessary things like food etc? How liquid would such shares be? What is the problem they fix, exactly? Should they pay dividends in government fiat? Would a corporation that pays its workers in common stock work otherwise with the fiat money?

          1. F. Beard

            As for that common stock proposal, how would it work in practice? They didn’t leave me a choice

            It would work this way: The government-backed counterfeiting cartel, the banking system, would be abolished and companies would find they needed to “share” wealth and power with their workers or else lose out to competitors who did. GM surpassed Ford because it was a common stock company while Ford was family owned, is my understanding.

            Would not such a system rapidly lead to the current situation of extremely concentrated ownership due to the workers having to sell the stocks for necessary things like food etc? They didn’t leave me a choice

            No, because the abolition of the counterfeiting cartel should be combined with a universal bailout, including non-debtors, till all debt to it is paid off. That would leave workers far less desperate. Also, we should have a BIG to keep people from being so desperate.

            How liquid would such shares be? They didn’t leave me a choice

            That would depend, of course, on the issuing company. Some companies would be forced to borrowing fiat at honest interest rates instead.

            What is the problem they fix, exactly? They didn’t leave me a choice

            Oh, usury, counterfeiting and exploitation of the poor and other less “credit-worthies” to name just a few things. Do you need more reasons?

            Should they pay dividends in government fiat? They didn’t leave me a choice

            No, dividends are dumb. The common stock ITSELF would serve as money without the need to earn or borrow a “foreign” currency.

            Would a corporation that pays its workers in common stock work otherwise with the fiat money? They didn’t leave me a choice

            Tax obligations would still require fiat, so yes.

          2. F. Beard

            I’m not opposed to manual work per se, people should be able to find something they can enjoy doing at home even if they don’t have a formal “job” framework to do that work in. They didn’t leave me a choice

            I agree but usury for counterfeit money (“credit”) has precluded that for many people unjustly.

    2. Mel

      No. Under the present dispensation, people who aren’t being used in production are unemployed and don’t get paid anything. Paying them nothing in common stock wouldn’t be different from paying them nothing in dollars.

      1. F. Beard

        Well, certainly there are past injustices that need to be rectified. Certainly all debt to the counterfeiting cartel, the banks, is invalid and should be abolished with a universal bailout (including non-debtors) till it is all paid off.

        And since the corporations were built with stolen purchasing power, then nationalizing their shares and distributing them equally to the entire adult population should not be out of the question either.

  6. Ep3

    But yves, owning stock is the new form of democracy. Anyone can have a vote, majority rules, and all it takes to participate is hard earned dollars. So those that work hard and make big bucks can express their opinion n any corporation. Corporations are accountable to the new citizens, shareholders. And now they act on a global scale, not constrained by local gov’ts and local “imbalances”. It’s freedom of the free market!

    1. F. Beard

      Good point EXCEPT corporations should NOT be allowed to steal the purchasing power of the general population via loans from the counterfeiting cartel, the banking system.

  7. rjs

    dont think this would be wise with the amount of debt outstaanding; it would make more sense to raise the minimum to whatever it would take to get your ratio..

  8. Conscience of a Conservative

    France’s economy has not exactly been the role model of growth. Of course it’s always easier to treat a symptom than a cause and the cause has been boards that are not looking out for the shareholders best interest.

    1. proximity1

      “France’s economy has not exactly been the role model of growth. Of course it’s always easier to treat a symptom than a cause and the cause has been boards that are not looking out for the shareholders best interest.”

      Well, C-of-C, if France’s economy isn’t exactly a role model of growth, it ain’t for lack of tryin’ the good old Anglo-Saxon economic theology.

      I bet you’d be surprised how many French-based factories have been shuttered since the 2007 election of Ultra-liberal (read “Neo-conservative”) Nicolas Sarkozy, their incomes and jobs sent to Eastern European or Asian countries where the hourly wage is a fraction of the going rate in France.

      Did you know that Renault makes many of its products in Eastern Europe, the old Soviet-Bloc? Why do they do that? And, if they aren’t making a profit there, what do you recommend? China? Some French manufacturers are already in China or doing their damnedest to set up there.

      We’ve just had five years of Conservative rule—wait, make that “more than thirty years” since the so-called Socialists were in the president’s office. And, in the five years since Sarkozy was elected, not once (in six years, actually) has there been a government-initiated raise in the nominal minimum wage. Have you noticed what exectutives’ incomes have done over that same period?

      Have you noticed, too, that many of what are called “socialists” in Europe–France included–are hardly distinguishable from the norms of Anglo-Saxon economic “conservatism”? Did’ja notice that?

      1. Conscience of a Conservative

        In the 1830′s it was abundantly clear France was being left behind in the industrial revolution, so France attempted to catch up by having state directed investment similar to what the USSR and China would later do. The initial results were good, but after the low lying fruit was picked off the results were terrible. State Central planning is a disaster.

    2. F. Beard

      Well, if conservatives truly had consciences we would not have this problem of oscillating back and forth between fascism and socialism, now would we?

    3. different clue

      In a biophysically and ecologically growth-limited world, why should a “model of growth” be a good thing? China is pursuing growth and will hit the cinder block ceiling of resource depletion and wide areas of landscape uninhabitability.

      The ruling classes sell “growth” as the safety valve and refuge by which the non-rich majority can be diverted away from attempting to force a fairist redivision of the means of subsistence and survival.

  9. Patrice Ayme

    The Roman republic had an ancient law limiting individual wealth. Any family was limited to a maximum of 300 hectares.
    However, the law was not respected, and individuals of extreme wealth came to dominate the Senate (after the later was massacred during the Second Punic war, against Hannibal, war profiteers came to dominate the Senate).

    The Gracchi brothers, from old Senatorial families, saw the danger, were elected tribunes, and ordered the implementation of the ancient law. The Senate refused to finance the implementation commission. The Gracchi then took hold of the Pergamum treasure, bequeathed to the Roman republic, to finance the commission. Then the plutocrats launched a civil war, killing the Gracchi, and 5,000 of their supporters, just in the first round.

    The Roman republic never recovered.After the assassination of Caesar, nearly a century later, the Populares (the equivalent of the Socialists) were left without a leader, and Rome became a full plutocracy, that sank irresistibly to the bottom of civilization.

    France will pass the 20 to 1 law, as the socialists control the entire state, senate, National Assembly, Regions, big cities, etc. Only the French Constitutional Court could stop it.

    That’s unlikely. why? Because one cannot have a minimum wage, without a maximum wage. It’s not a question of philosophy, but of mathematics.

  10. kris

    That’s right. That’s right.
    There’s no such a thing as “star CEO”. Star CEO my ass.
    If one reads Michael Mauboussin, it’s all about luck.
    Those people become CEOs due to their political connections, not skills.
    No difference here in Ontario. Becoming a CEO of a gov owned company is all political connections, not skills.

    1. Otter

      I am sure you did not mean to imply that only “gov owned” companies are prey to politically connected CEOs.

      Nor did you mean to imply that the government owns more than a tiny miniscule fraction of companies.

  11. Dan Kervick

    According to a New York Times editorial today, we shouldn’t get mad at corporations any more. Instead we should make sure they are “mollified” so that reformers can “breathe”.

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