The consensus announced on Christine Lagarde’s candidacy to head the IMF can be set alongside the confirmation, that same week, of the “dividend bonus” imposed by the French government on companies – a profit-sharing bonus that firms increasing their dividends must pay their employees.
On the one hand, a sign that France, despite its economic difficulties, succeeds in promoting its representatives to positions of responsibility in international bodies (see Jean-Francis Pécresse’s editorial in Les Echos of 26 May).
On the other, the unfortunate feeling that our elected representatives and public decision-makers know very little about how companies work, and/or take little interest in it. Macroeconomics versus microeconomics, or a planned economy versus entrepreneurial responsibility? French economic culture is no doubt an inexhaustible subject for observation and analysis.
The announcement of this “bonus”, quite apart from how it is actually implemented, is likely to generate a host of perverse effects, both for “small” companies (presented as not concerned by the measure) and for “large” ones (a priori “obliged” to pay the bonus).
For the “small” ones, first of all:
– an additional difficulty in attracting talent, faced with large companies that can offer attractive overall remuneration “packages” (stability, mobility and career development, training, working hours, and now a “guaranteed bonus” – we will see why below…);
– an impact on their own pay policies, since employees can be expected to ask for similar schemes, thus limiting managerial room for manoeuvre. The question is not whether the heads of small businesses should give their employees a stake in the company’s results: more than the heads of large companies, they are in daily contact with their troops, and neither can nor want to forget this lever for mobilising their staff. The difference, from now on, is that they will probably have to face doubts about that willingness, and justify themselves.
In large companies, the consequences will be different.
In the immediate term, HR or Comp&Ben (compensation and benefits) teams will have to look again at the make-up of pay policies – and it is just the right moment, since the 2012 annual pay negotiations are already being prepared. Because one would have to be very naive to believe that this “bonus” will mechanically and systematically be added to existing pay. In a large company, there are so many pay parameters that it will undoubtedly be possible, in the vast majority of cases, to “earmark” for this “bonus” sums that would otherwise have gone to other levers.
And that is the first perverse effect of the “bonus”: a reduction in managerial freedom over the levers of motivation and recognition.
In any company dynamic, the balance between individual and collective pay is a subtle and difficult exercise, and an important managerial choice. By imposing the “bonus”, the government signals a preference – no doubt unintentionally – for collective pay schemes, at the expense of recognising individual contributions to the company’s performance, whose budgets will in effect be reduced. At a time when the civil service is trying to encourage performance-related pay, it gives one pause…
There is at least a second perverse effect. Some defenders of this “bonus” will point out that the conditions for awarding it are defined, and that it is not a fixed “charge”. Those used to pay negotiations will appreciate the point… Because in a country where, despite extreme pressure on public finances and on the economic balance of many companies, merely mentioning a challenge to certain “acquired rights” is a high-wire act, one can confidently predict that when a company considers not paying this “bonus”, its HR and labour relations directors will need a great deal of courage, tenacity and probably a knack for working miracles to ensure that this new “acquired right” is not perceived as such. This second risk, then, is that the “bonus” is in fact, already, an additional tax.
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