The ERAFP, the French civil servants pension fund breaches a major institutional paralysis: it will cap the CEO compensation to 100 times minimum wage. 

By announcing its March 15, 2012 new Interim Guidelines for Engaged Shareholding, ERAFP established a limit of 100 SMIC for CEO compensation and created a surprise if not a historical milestone.

Not only will he vote against the election of any combined Chairman & CEO, the sacrosaint French PDG, it will oppose to all option plans at big firms It will also request that 50% of board members of large companies be independent and have no more than three mandates.

In 2005, by enacting its own maximum level of socially acceptable CEO compensation of 240 times the minimum wage, Proxinvest had caused a scandal. How could anyone dare assessing the boss compensation? A far too complex issue for some, a special local personal appraisal only for directors said others, such as Allistair Ross Gobey then CEO of Hermes and chairman of the ICGN. Faced with the complacent mécanics of conflicted Boards, Proxinvest intended only to give the recipe for a collective solution to the problem of management compensation. When each investment fund or asset manager as even each stared each individual shareholder will have its own limit, the worst abuses can be avoided.

Actually one big French asset manager MACIF GESTION had adopted as early as 2008 the 240 time limitation for any CEO pay package.

Created by the French pension reform law of 2003, ERAFP (the French public service additional pension scheme) has since 2005, managed the retirement benefit rights of French government and local authorities civil servants and the staff of French public hospitals, through a fully funded scheme.

With only 12 Bn euros of assets and almost 4.6 million beneficiaries, 51,000 employers and contributions of more than 1.5 billion euros per annum, ERAFP is one of the world’s largest public pension funds in terms of members.

Philippe Desfossés, the CEO of ERAFP is a no-nonsense investor. He considers that “western economies have been indulging themselves in cheap credit and over-consumption, that their deleveraging is going to be painful and will last several years. In that respect, socially responsible investment will be a guiding principle for the 21st century.”

Found on a blog : “It is so obvious, only the CEO creates value : proof ? if the CEO was alone the company profits would be infinite !”