Top executives at Societe Generale have handed back thousands of stock options after French President Nicolas Sarkozy warned the perks were “unacceptable” given the state aid enjoyed by the bank, an internal letter showed on Sunday.
Four Societe Generale bosses including chief executive Frederic Oudea received tens of thousands of stock options each last week, but agreed on Friday not to exercise them while the bank continued to benefit from state aid.
Faced with continued attacks, they announced in a letter to staff at the bank that they would give them up entirely.
“To cut short the controversy, we have decided to renounce these stock options and have informed the board of administrators,” read the letter, which was to be mailed yesterday.
Speaking a day after a million people took to the streets to demand a state boost to low wages, Sarkozy said on Friday it was “unacceptable” for executives of firms bailed out with state aid to receive bonuses and stock options.
The president made it clear he was referring to Societe Generale, which has received state loans worth 1.7 billion euros (US$2.3 billion) to help it through the financial crisis.
“Obviously, some people are having trouble understanding what we are saying. Wherever there are layoffs, wherever there is state aid, bonuses and stocks options are unacceptable,” Sarkozy said.
“You cannot seek state money and [at the same time] draw up a plan to give out shares and bonuses,” he said.
The outrage in France about bonuses in the financial sector has been mirrored in other countries where vast amounts of state money have been used to bail out struggling institutions.
US President Barack Obama is facing widespread anger over bonuses paid to managers at nationalized insurance giant AIG, with the issue of pay in state-assisted firms now a politically toxic subject.
In the UK, the former head of beleaguered bank RBS, Fred Goodwin, is resisting government pressure to give up a monthly pension of about £700,000 (US$1 million) despite overseeing record losses.
Stock options enable executives to buy a specific number of shares in their company in the future and are frequently used as a form of bonus or incentive to encourage managers to boost share value.
Societe Generale said last week it would award 150,000 options to chief executive Oudea and 70,000 to chairman Daniel Bouton.
Prior to the change of heart by the Societe Generale bosses, French Economy Minister Christine Lagarde stepped up her criticism of the bank on Sunday, saying it was time the group “came into step with the public interest.”
She also questioned the role of stock options, casting doubt on their effectiveness as a motivational force and the ethics of awarding them.
Bouton is familiar with pressure from the French government after facing sharp criticism and suggestions he should step down following a rogue trading scandal in 2007 that cost the bank 4.9 billion euros.
After offering to resign, he ultimately relinquished his responsibilities as chief executive and chairman and now holds only the chairman position.
Last Tuesday, the French government asked the employers association Medef and the Association of French Private Enterprises to come up with a corporate governance code to encourage company bosses to renounce their bonuses if they are cutting jobs.
Societe Generale has said it would create jobs in this year.
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