The French state in line with its new policy, has voted against the compensation of the former. CEO of Air France-KLM

Proxinvest had recommended to its investor clients to oppose the resolution 4 of the General Meeting of Air France-KLM on May 31, 2012 and the French state, Air France-KLM’s main shareholder, has finally assumed its role on the sensitive issue of severance packages.

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.

Later, Chairman Jean-Cyril Spinetta, facing 31 written questions,  announced that the board had decided to cut by half of fees and his personal pay not to levy no more than € 200 000 Compensation of Chairman despite his new responsibilities and changes in its status as CEO of Air France-KLM. This attitude was warmly applauded by the public.

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? “


According to Proxinvest, the payment of € 1,125,000 made by the board and considered to be simply an "additional remuneration" and justified by "the unpredictability and the anticipated termination of Pierre- Henri Gourgeon” is un-proportional given his services to Air France-KLM and cannot be approved. This allowance does not respect the AFEP / MEDEF code as observed by an employee of the company at the AGM. The answer of Jean-Cyril Spinetta was that this amount was below industry standards and below the amount of two years of fixed salary and variable "should have been paid for premature departure." This answer was followed by a lively collective protest of the assistance and the resolution was rejected by 78.8% of voters.
The renewal resolutions of the board came under criticism as a result of shareholders disappointment. The reappointment of Jean-Francois Dehecq suffered the worst score with only 74.1% of votes, closely followed by the appointment of Alexandre De Juniac with 79.62% in favor. Proxinvest had advised his clients to oppose both resolutions due to the absence of a majority of independent members on the Board, as the renewal of Leo Van Wijk who obtained 80.57% of votes in favor.


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.