Breakingviews - Renault needs to break pay taboo to get right boss

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LONDON (Reuters Breakingviews) - French carmaker Renault is challenged on numerous fronts and still smarting from a nasty spat with its largest owner, the French government. Even in good times, remuneration restraint at state-owned enterprises makes it hard to attract talent. To snag the right new boss, 13 billion euro Renault will need to pay up. It can look to the skies for some inspiration. 

Chairman Jean-Dominique Senard is compiling a shortlist following the ouster of Thierry Bolloré, an acolyte of ex-boss Carlos Ghosn. It will be a difficult job. Senard has done creditable work in stabilising the company following Ghosn’s arrest a year ago in Japan. But relations with alliance partner Nissan Motor remain strained, and rival Peugeot is hooking up with Renault’s former prospective partner Fiat Chrysler Automobiles. Meanwhile, operational performance has deteriorated: Interim CEO Clotilde Delbos recently announced that 2019 sales would be lower than previously forecast.

That makes bagging the right person key. Delbos is a leading internal possibility. Patrick Koller, the CEO of Franco-German car parts maker Faurecia, and Luca de Meo, of Volkswagen-owned SEAT, are also possibilities, Reuters reported. The ideal person would have extensive experience in Japan, which ought to favor Toyota Motor Executive Vice President Didier Leroy’s candidacy.

Attracting high-calibre contenders will be costly. Yet like other French state-controlled enterprises, Renault is expected to show restraint over executive pay. Ghosn received around 3.5 million euros from the carmaker in 2018, or roughly half what his rival Carlos Tavares earned at Peugeot. But Ghosn was also paid for his roles at Nissan and Mitsubishi Motors - and even that was not enough, if Japanese prosecutors’ charges are to be believed. General Motors boss Mary Barra made almost $22 million in 2018.

Renault’s state of semi-crisis gives Senard and his board some leverage to argue for fattening the new boss’s salary. And there’s a salient precedent: Air France KLM busted through its own self-imposed “compensation ceiling” when it hired Canadian Benjamin Smith to run the airline. His target remuneration of some 3.25 million euros this year compares to the maximum 1.2 million euros his predecessor could trouser in 2017.

Arguing the case for higher remuneration will be delicate, particularly given the allegations against Ghosn, which he denies, not to mention his extravagant spending habits chronicled in the press. But when a repairman is needed urgently, money is often no object. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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