Fat CEO Paychecks to Get a Hefty Trim in France

How much more does your average American CEO make than you? In 2011, the average CEO of a company large enough to be listed in the Standard & Poor's Index was paid 380 times what his employees earned. That number is astounding for two reasons:

• First, it's really big.

• Second, according to the folks at the AFL-CIO's Executive Paywatch site, it's about nine times bigger than the gap that yawned between CEO compensation and average worker pay just 30 years ago.

Quelle horreur!

Here in America, we read news reports like this one and grumble. But over in France, they've decided to go ahead and do something about it.

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Last month, the French finance minister announced a plan to cap salaries paid to CEOs of state-owned enterprises. Henceforth, no CEO at a company in which France owns a sizable stake can be paid more than 20 times the company's average worker's wage.

According to The Wall Street Journal, this new CEO pay-law could cut compensation for the leaders of some of France's leading state-owned businesses -- from the French post office to Electricite de France -- by as much as two-thirds. In theory, some French CEOs could soon have to scrape by on as little as $557,550 a year.

The English Translation

Of course, when you put it that way, this doesn't sound like too big of a hardship. But to put it in context -- and remind you of just how big the differences are between CEO salary and average workers' wages here in the U.S. -- we thought we'd run down for you a few side-by-side comparisons of what a similar pay cap would cause here in the states:

*All numbers courtesy of AFL-CIO Executive Paywatch, and include all compensation ranging from salary to bonuses to stock options, deferred compensation, and other fringe benefits. (For example, Apple CEO Tim Cook had take-home salary of "only" $1.82 million in 2011. The extra $376.18 million was all benefits.)

While each of these executives would still be a fair sight away from needing to apply for food stamps, most folks would probably agree -- losing a quarter billion of his paycheck would be enough to make even Apple's Tim Cook start feeling some pain.

CEOs in Need

Now, before you run off and try to organize a Live Aid concert to benefit poverty-stricken French CEOs ... don't.

For one thing, France's pay cap hasn't gone into effect yet. The official decree isn't expected out until later this month, and even once the details are drafted, they may not go into effect until next year. Also, the details as we've seen them only seem to apply to salaries per se, and do not yet address "stock options, so-called 'golden parachute' clauses and other components of executive salary packages," according to news site France 24.

Also, The Wall Street Journal rushes to head off any wild-eyed speculation that France might try to limit private sector CEO salaries, quoting local business lobbyist Laurence Parisot as warning that under no circumstances should the finance ministry's move be extended to the private sector. Such action, warns Parisot, would "isolate" France, diverting talent to more countries where CEO pay is more generous, such as -- notably -- the United States, which "won't follow" any attempts to rein in CEO pay that France might attempt to instigate.

For the time being, at least, the 10.1% of French citizens who are out of work and looking for a job can breathe a sigh of relief. At least most of their CEOs' salaries are safe. And the 8.2% of Americans looking for a job can rest easy, too. Our captains of industry remain just as comfortably immune from the Great Recession as their peers in Socialist France.

Motley Fool contributor Rich Smith visited France once. Contrary to what you may have heard, the people were friendly, and the croissants were fresh. Rich holds no position in any company mentioned, but The Motley Fool owns shares of ExxonMobil and Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.