The Afep and the Medef have revised the corporate governance code for listed companies (the previous version was released in 2010). 

The revisions are a compromise between the French government (the finance ministry stopped plans to pass a new law in May) and French employers, a compromise that is "binding in principle but not in law".

Supervision of the application of the Code has been improved by the establishment of a corporate governance committee [haut comité de gouvernance d'entreprise], which is responsible for ensuring that companies comply with the principles set out in the Code. The committee has seven members (four members holding or who have held high level positions in international companies and three qualified members (investor, lawyer, deontologist)). The committee may be consulted by boards of directors and may act at its own discretion in response to incidences of non-compliance with one or several principles of the Code without a satisfactory adequate explanation from the company involved.

Companies that do not follow committee recommendations must report the circumstances in their annual reports and state why they decided not to comply – known as the "comply or explain" principle. The Code now states what constitutes a good explanation and companies must report what alternative measures they have taken, as applicable, and notify the committee of the timeframe within which they plan to comply with the rules. They must also provide a table summarising the recommendations with which they chose not to comply and explanations for their decisions, in the interest of greater transparency.

The main changes are as follows:

Introduction of "say on pay"

From 2014, the revised Code will allow shareholders to vote, in an advisory capacity, on officer remuneration. The board of directors must submit information on all remuneration paid or payable for the last financial year and for each corporate officer to the shareholders at the annual general meeting.

Following this presentation, the shareholders will have an opportunity to vote. If the vote is negative, the board of directors must deliberate on the matter at its next meeting and subsequently publish a notice on the company's website stating what actions are to be taken further to the shareholder vote – another instance of "comply or explain".

Restriction of welcome bonuses

Under the revised Code, a welcome bonus may only be awarded to new corporate officers entering the company from outside its group. Once set, the bonus amount must be made public.

Termination indemnities

Companies must now assess performance over two financial years; the upper limit of two years' pay (fixed and variable) will continue to apply. 

Non-compete indemnities

Non-compete indemnities may not exceed the upper limit of two years' pay (fixed and variable) and the board of directors must authorise the conclusion of a non-compete agreement and make the decision public. Non-compete clauses must allow the company to waive its right to enforce the obligation on the departure of the officer; implementing the clause is subject to prior approval from the board of directors.

Executive retirement plans ("retraites chapeau")

Beneficiaries of these plans must now meet seniority conditions to be set by the board of directors (a minimum of two years with the company). In addition, the annual increase of potential benefits is limited to 5% of the beneficiary's remuneration (the full amount is limited to 45% of the reference remuneration).

More restrictive recommendations on performance conditions applicable to stock options and performance shares

Companies must state the maximum percentage of stock options that can be allocated to corporate officers as part of the overall package voted by shareholders for all employees.

The revised Code requires a formal undertaking from officers not to use hedging instruments to protect them from risk on their stock options and performance shares. Performance conditions have also been stepped up: where possible, they must include internal and external (i.e., comparing the company to other companies from the same sector) criteria. Officers must hold a high number of shares.


As for any other director, the revised Code specifies that the board of directors may elect members who are also company employees and will benefit from special training to carry out their duties. For the remuneration committee, it is recommended that one committee member be a director-employee.

Limit on the number of offices

The Code limits the number of offices that may be held by a given person to two other offices within other listed companies from outside the group in question, including abroad (three in total). The previous limit was five.

NB: Publicis is currently the only French group to have introduced a "say on pay" policy (the first CAC 40 company to do so). Since 2012, the Chairman and CEO receives a variable salary depending on performance criteria, which may not exceed €5 million (he received €4.8 million in 2012).

Comparison with other European countries

The United Kingdom introduced an advisory vote for shareholders ten years ago and is now moving toward a combined system – a binding vote on remuneration policy every three years and an advisory vote on remuneration policy for the previous financial year.

In Switzerland, further to a popular initiative in March 2013, shareholders now have a binding vote on the remuneration budget for their companies' management teams.