June 2, 2008 10:37AM

Only in France, Part II

Not surprisingly, the French are leading an effort to impose EU‐​wide regulations on executive compensation, as reported by the UK‐​based Independent:

France, which takes over the presidency of the EU on 1 July, will ask finance ministers to consider a European directive to curb disproportionate bonuses or golden handshakes to company bosses. …The French finance minister, Christine Lagarde, said companies must put their own house in order or face a rash of national, or EU, legislation to clamp down on “excesses”. French officials said Paris felt that, without such an EU‐​wide curb, large companies or highly paid executives would evade national curbs by exercising their right to move from one EU country to another. …President Nicolas Sarkozy has already spoken out against large “golden parachutes” to failed business leaders. Although often presented in Britain and the US as a kind of French Mrs Thatcher, he has called for the “moralisation of capitalism”, something closer to the late President Charles de Gaulle’s statist and social approach to business.

But give them some credit. French politicians are clever enough to realize that imposing bad policy on French companies would cause firms to migrate to less‐​oppressive jurisdictions. That is why they want anti‐​market rules to be imposed across the continent (much as they support tax harmonization so that all nations have bad tax law and France is not disproportionately impacted).

In an ideal world, French politicians would avoid new taxes and regulation and instead would investigate whether existing government policies — such as anti‐​takeover restrictions — were insulating corporate management from investor oversight. But that would mean reducing the power and influence of government, so that option is not part of the discussion.