Executive compensation and the nature of shareholding: practices and developments in large French companies.

Summary The remuneration of top executives has increased substantially in recent decades and has contributed to the growth of inequality through high incomes. Two typologies for controlling shareholders are proposed to analyze the evolution and practices of (P-)CEO compensation in large French listed groups. The first typology is based on the identity of the shareholder and differentiates between active shareholders committed to the firm's strategy and passive or diversified shareholders. Among the latter are shareholders whose strategy is essentially financial. Remuneration is higher and more sensitive to short-term performance for the latter. The second typology is based on two criteria: the degree of control (shareholding) and the length of control (years of control). Using a threshold panel data model (PTR model), executive compensation policies allow us to differentiate four regimes in terms of degree and two in terms of length of control. This typology differentiates between dispersed, influential, dominant and majority control, on the one hand, and the effects of recent and long-term controlling shareholders, on the other. Finally, the evolution of remuneration is studied on the basis of these two typologies and over a period of 12 years. Beyond factors linked to the functioning of the "executive market", the typologies highlight a phenomenon of catch-up and contagion following the transparency of remuneration since 2001, and a strong increase in bonuses due to the effect of the increase in market capitalization and the accompanying changes in shareholding.