The French state in line with its new policy, has voted against the compensation of the former. CEO of Air France-KLM
An anecdote in passing: as a registered shareholder Proxinvest, entering the meeting, was informed that it had given "blank power to the Chairman"! This situation is totally excluded in principle by Proxinvest, which also was not the only shareholder in that situation, led us to investigate. After verification, Proxinvest had filled its ballot properly and had in no way given power to the president. Nevertheless, the registration coordinator justified the situation by stating that the ink used to complete the ballot was not "black" enough and inevitably it was assumed that Proxinvest’s voting rights were given to the President as the scanner was unable to read it. This procedure is very worrisome as all illegible or empty ballots are considered void hence the associated voting rights are transferred to the Chairman.
The Annual General Meeting of Air France, which was held on Thursday, May 31, 2012 at the Carrousel du Louvre, enjoyed strong media interest with over 800 attendees. This interest was in part due to the French State’s position, the main shareholder with 16.1% voting rights, on the compensation received by, the former CEO, Pierre-Henri Gourgeon of around € 1,525,000.
With regards to the non-competition agreement and its associated sum € 400 000 paid to Pierre-Henri Gourgeon, Jean-Cyril Spinetta indicated that the Board had acted reasonably in the interest of the company and that even though the clause was not mentioned in his initial contact, this was a common procedure for managers at this level.
A shareholder opposed the example of Louis Gallois, former CEO of EADS, who just had forsaken any special pension and non-competition bonus. An interesting remark from a retired employee thus followed and caught the general assembly’s attention: “Why should we pay Pierre-Henri Gourgeon to act as an honest man, and not as a thug? “
CASE REMINDER
Besides the non-competition compensation of € 400 000, the Board of Directors of Air France-KLM had granted an "additional remuneration" exceptional of € 1.125 million "in view of the unpredictability and early cessation of Mr. Gourgeon functions "(source: reference to Air France-KLM annual report - page 26). The company said the agreement does not correspond to deferred compensation, it was not subject to approval by the general meeting of shareholders as provided by the TEPA Act ...
Neither the spirit of the Act nor the spirit of the AFEP-MEDEF was respected here and Proxinvest invited the French state to establish a clear and precise legislative framework requiring boards to obtain prior approval of the general meeting of shareholders for the compensation of executives.
In the eyes of Proxinvest, this compensation was not acceptable to shareholders, ruined by the division by 4 of the value of their investment in ten years, nor did acceptable for employees forced to endure the efforts of the conservation plan require.
Proxinvest recommends to the Boards of directors of companies:
• Include a non-competition clause in all future with contracts with a moderate compensation associated to it;
• Refuse any compensation of any officer claiming his pension rights and then receiving a supplementary pension plan (the case of Pierre-Henri Gourgeon);
• Not to offer double payment advantages: once by a highly paid compared to other employees and a second time by the mechanism of severance.