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

LONDON -- 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."