Huff, puff and bluff in EU executive pay row

"Scandalous", "totally irresponsible", "shocking", "a social scourge".

European finance ministers cannot find words harsh enough to describe executive pay packages, stock options and handsome payoffs for failed CEOs.

Stories of giant severance payments for top bosses and a tax evasion scandal involving the super-rich and one of Europe's micro-state havens, Liechtenstein, have embarrassed governments trying to curb wages rises amid soaring oil and food prices.

"We are aware of the huge gap between our continued appeals for wage restraint and the continued existence of these excesses by certain captains of industry," Jean-Claude Juncker, chairman of the 15 eurozone finance ministers, said last month.

The French business magazine L'Expansion reported last month that the combined earnings of the chief executives of the country's 40 top listed companies rose 58 per cent last year to €161 million.

While modest by US or British levels, the figures prompted Finance Minister Christine Lagarde to complain: "This type of increase, in companies which are sometimes not in great health, is perfectly scandalous."

Ministers asked the European Commission to study executive pay and recommend measures which EU states can take to counter perceived abuses such as 'golden parachutes' for departing executives.

Shareholder activists in some EU countries, notably Britain, are starting to challenge severance payoffs that appear to reward failure and share grants not linked to results.

But while a handful of countries such as the Netherlands and France are planning legislation to curb excesses, much of the ministerial rhetoric appears aimed at assuaging egalitarian European voters' anger rather than at taking tough action.

Juncker, prime minister of Luxembourg and the son of a steel company union organiser, embodies this dichotomy.

He divides his time between inveighing against the 'scourge' of excessive CEO pay and using his national veto in the EU to protect Luxembourg's banking secrecy, which critics say protects tax evasion by wealthy savers from other European countries.

After the outcry over wealthy Germans stashing money beyond the tax authorities' reach in 'investment foundations' in Liechtenstein, Luxembourg denied there were any loopholes in EU savings tax rules and resisted Berlin's efforts to tighten them.

France passed a law last year forcing companies to be more transparent about deferred remuneration and severance payments for executives.

A taskforce set up by the Dutch government recommended this month that supervisory boards exert more control over management pay and ensure transparency and a greater correlation between salaries and performance.

Dutch Finance Minister Wouter Bos has proposed legislation calling for a 30 per cent tax on severance packages of over €500,000 for executives as well as an extra tax on pensions for executives earning an annual salary over €500,000.

Some European governments are looking with interest at 'say on pay' legislation proposed by US Democratic presidential candidate Barack Obama that would allow shareholders to cast an annual non-binding vote on the pay of top executives.

But Europe is struggling collectively to find a response to the excesses of corporate greed and what many see as short-term 'Anglo-Saxon' capitalism.

Bankers and policy officials who met at the Organisation for Economic Co-operation and Development in April agreed on the need to tie executive pay to longer-term performance to promote stability, but differed on the need for regulation.

"How do you avoid irrational reward exuberance?" said the OECD's Thomas Weiser, who chaired the discussion. "The financial sector would say 'by self-restraint'. There are others who say pecuniary self-restraint has not worked in the history of mankind."