Skip to main content

Shareholders pocket two-thirds of French companies' profits, workers get 5%

A screen shows the Cac-40 index in Euronext's market services surveillance room in Courbevoie
A screen shows the Cac-40 index in Euronext's market services surveillance room in Courbevoie AFP/ERIC PIERMONT

French companies are paying out the vast bulk of their profits to shareholders, leaving little for investment and even less for employees, according to a report published Monday. Challenged to comment on the findings, Prime Minister Edouard Philippe said he could not tell private companies what to do.


Companies paying out more and more in dividends is a global phenomenon but, according to the report by the French branch of Oxfam and the thinktank Basic, France is now the world leader in the field.

The top 40 businesses quoted on the Paris bourse, the Cac-40, paid out the equivalent of 67.5 percent of their profits to shareholders, leaving 27 percent for investment and just 5.3 percent for their employees, the report finds.

And the trend is on the up.

In the 2000s companies paid out less than a third of profits in dividends, today it is more than two-thirds.And even when they are making a loss, some companies have still paid handsome dividends.

Cement maker LafargeHolcim, which launched a cost-cutting programme last year and is currently being investigated for alleged payments to the Islamic State armed group, made a 1.5 billion-euro loss last year.

But on Wednesday it is set to pay out two Swiss francs (1.67 euros) per share, the same as last year.

Over the last five years the company has paid out twice as much in dividends than it made in profits.

And energy company Engie paid out three times as much in dividends as it made in profits between 2009 and 2016.

CEOs earn 119 times more than employees

Although France did relatively well in an Oxfam league table of inequality last year, the report points out a huge gap between rich and poor inside French companies.

In 2016 Cac-40 firms paid out 15 times as much to shareholders than they did to workers, it says.

If they had kept dividend payouts at their 2009 level and raised salaries instead, each employee would have been 2,000 euros better off every year.

CEOs' salaries have also soared since 2009 to 119 times their employees' average salary, with 54.5 percent of their income tied to their company's share price, "encouraging them to align their interests with those of the shareholders and prefer short-term choices that aim to boost revenue", according to the report.

Rising profits fail to boost investement

The trend also harms investment, with long-term effects on the French economy.

While profits fell 10 percent in 2011, Cac-40 companies raised dividends 15 percent, a rise of 5.9 billion euros, reducing investment by 38 percent, a fall of 17 billion euros.

Since then profits have recovered - with the Cac-40 scoring a record 93 billion euros in 2017 - but investment has yet to return to its 2010 level.

That has a major effect on competitivity, the factor that successive governments have identified as the French economy's biggest problem, arguing that labour reform and tax breaks for business are the way to improve it.

Boosting profitability will lead to more investment, the argument goes.

Companies in Germany, whose economy is frequently held up as a model by French politicians, have a higher rate of investment, financing it by loans and paying out dividends that are less than 50 percent of their profits.

Oxfam and Basic do not seem unduly impressed with the present government's economic policies or those of its predecessors, pointing out that tax credits have almost doubled in France over the last 10 years and were worth 26 billion euros in 2016.

"If taxes had increased at the same rate as profits since 2011, business would have paid 13 billion euros more it taxes at an international level in 2016," the report says. "That is the equivalent of the some needed to answer the humanitarian needs of 93.2 million people in 34 countries in crisis around the world."

Philippe leaves it to business

"The decision to invest a large share of profits is a decision the business of a company and its shareholders," Prime Minister Edouard Philippe said, when asked to comment on the report in an interview published in Le Monde newspaper on Tuesday. "A way has to be found for ensuring that wealth created can go to employees. But I cannot substitute myself for the companies."

Some shareholders are institutions like pension funds, he pointed out, and investors "take risks and that should be rewarded".

Page not found

The content you requested does not exist or is not available anymore.