France Update: Say on pay: the ambivalence of the control of the remuneration of agents of listed companies

In just a few years, the say on pay – understood as the voting mechanism of shareholders on the remuneration of corporate officers, both for the current financial year (ex-ante vote) and the past financial year (ex-post vote) – has established itself as the metronome of the remuneration of corporate officers of listed companies, whose legal regime it has profoundly reshaped.

The French legislator has established and modelled a “French-style” say on pay, whose requirements go beyond European regulations and raise it among the most rigorous mechanisms for regulating the remuneration of agents in the European Union.

The mechanism, adopted in 2016 and recast in 2019, has brought about a real upheaval in the legal regime governing the remuneration of directors of listed companies and, implicitly, in the rules of governance, with a transfer – albeit partial – of the original competence of the board to shareholders in terms of remuneration. In this respect, say on pay is part of an overall dynamic of accountability of major private actors, where alignment of interests, transparency, measurement and competitiveness, including on the remuneration side, are among the paradigms of good governance.

This movement contributed to the haste, effervescence and legislative rigour that marked the say on pay. The current regime is that resulting from Ordinance No. 2019-1234 of 27 November 2019 and its Decree No. 2019-1235 of the same day, adopted pursuant to the PACTE law as part of the transposition of the “Shareholders’ Rights II” Directive, whose main objective was the establishment of a unified and coherent framework governing the determination and payment of remuneration of representatives of listed companies under the control of shareholders. The remuneration policy, around which this control, ex-ante (on the policy itself) as ex-post (on the result of this policy), is exercised, constitutes the figurehead of the system.

The regime thus put in place is complex and does not avoid difficulties of interpretation and application, contrary to the objective of coherence set by the legislator. While the efforts of soft law, practice and issuers help to mitigate if not eliminate some of these difficulties, the remuneration regime for trustees still suffers, in some respects, from relative legal uncertainty.

While legislation has stabilized, practice has appropriated the say on pay system and reflections are being carried out on a possible evolution of the latter, it is time to take stock. Like a plural say on pay, this dossier intends to conduct a plural analysis of the difficulties, legal as well as practical and even political, posed by the system of say on pay, its application and its apprehension, both for its front side (ex-ante control, on the remuneration policy) and for its back side (ex-post control, on the implementation of the remuneration policy).

By Ginestié Magellan Paley-Vincent, France, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact france@transatlanticlaw.com

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