The boss’s pay may now be tied to their company’s climate goals. This is the shock measure of the new governance code for French employers devised by the French association of private companies (Afep) and Medef, who jointly published this best practice guide on 20 December. It recommends that the remuneration of company leaders be calculated “by integrating various criteria related to social and environmental responsibility (CSR), including at least one criterion related to the company’s climate objectives”.
To evaluate the specific issue of remuneration “quantifiable criteria must be privileged”, warn the two bodies. It is therefore not a question of linking the remuneration of the bosses to vague objectives, the achievement of which would be impossible to verify.
This code is not binding and serves only as a recommendation. However, almost all the companies in the SBF 120 stock index have already adopted the Afep-Medef governance code. If it’s not gospel, it has the merit of “reminding those at the back of the pack that they are exposing themselves to risks,” comments Geneviève Ferone Creuzet, vice president of Shift Project, a think tank that advocates decarbonizing the economy.
Between 5 and 15% of the remuneration involved, 20% in the long term
Out of a sample of 50 large French companies, 22 have so far integrated a climate-related performance indicator into their 2022 executive compensation policy and have specified the weight of this criterion in the calculation, according to the Autorité des financial markets (AMF ). This performance indicator often corresponds to a company’s target for reducing polluting emissions. The part of the salary attached to it represents “between 5 and 15% of the annual salary” of executives, indicates the MFA.
Ultimately, “20% of executive variable remuneration should be related to quantitative targets for the fight against global warming,” Medef vice president Dominique Carlac’h estimated on BFM Business on Wednesday.
From this point of view, the latest version of the code provides that the board of directors of listed companies “determines multi-year strategic guidelines in terms of CSR”. It is then up to the executives of these companies to present an “action plan,” a timetable for its implementation, and to report annually to the board of directors on the progress of that plan.
