As CEO pay in Europe rises, so does talk of curbing it

As losses pile up on balance sheets and stock prices drop, Europe is threatening to rein in U.S.-size compensation for its top corporate executives.

From Paris to Amsterdam to Berlin, finance ministers, politicians and government watchdogs are talking of curbing soaring executive pay, bonuses or golden parachutes for CEOs who depart with big severance packages.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of eurozone finance ministers, has called rising corporate pay a "social scourge" and wants higher taxes on what he calls "golden goodbyes." Fifteen nations use the euro as their currency.

French President Nicolas Sarkozy is urging debate on European-wide pay limits when France takes over the European Union's rotating executive presidency Tuesday.

Behind the threats is growing public and shareholder ire with multimillion-dollar compensation packages that are starting to rival American CEO pay at the same time European economies and financial markets are sagging.

Europe's financial industry has posted huge write-downs from investment losses in the U.S. subprime housing loans market. Stock prices in many sectors have dropped: On Europe's biggest exchange, London's FTSE 100 stock index is down 12% since January. And consumers face rising prices, as the inflation rate across Europe has surpassed 3% on higher energy and food costs.

Unhappy stockholders

At banking giant HSBC's annual meeting here last month, many shareholders howled before approving a compensation package for the bank's six top executives of $240 million, or 12 times their annual salaries, if they hit targets the next three years. The protest came after the bank in March reported write-downs of $17.2 billion, mostly from bad U.S. housing loans last year, although overall profit was up. "People see these (CEO compensation) numbers that they think are ridiculous for companies that have underperformed," says Cliff Weight, director of British consulting firm MM&K, which analyzes executive compensation. "Some of these figures are egregious. It just isn't comprehensible to the man in the street."

Many in the Netherlands objected to the windfall reaped by top executives who sold ABN Amro, a Dutch banking institution, to a group of European banks. Rijkman Groenink, ABN chairman, netted about $34 million upon retiring after the sale. Five others made $17 million to $26 million. The Dutch also were outraged when Jan Bennink, CEO of Numico, left last year with about $125 million in options, shares and bonuses after selling the baby food company to French yogurt giant Danone. Bennink later said he'd give his bonuses to his children and charity.

Germans raised eyebrows when top executives of Daimler got a 45% salary increase in 2007, the year the German carmaker sold its money-losing Chrysler division.

Against the backdrop of growing public resentment, Willie Walsh, CEO at British Airways, this year passed up a $1.5 million bonus due him for meeting an earnings target. Walsh was paying penance for the botched opening in March of the big new BA Terminal 5 at London Heathrow.

Total compensation for CEOs of big British companies with market capitalizations in excess of $20 billion rose 33% last year to a median of about $9.2 million, according to an MM&K analysis last month.

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