Subject: Suspension of bonus payments by companies receiving emergency state aid
State aid for companies hard hit by the economic fallout of the pandemic is understandably subject to conditions such as the temporary suspension of dividends and bonus payments for as long as the aid is being received. However, in view of recent developments, it is far from clear that these conditions are being complied with in line with current EU rules.
1. It has recently emerged that the CEO of Air France-KLM, which is receiving state aid, is being paid a bonus (in the form of shares) despite record company losses1. How is this in line with the ban on bonus payments by Air France-KLM decided by the Commission2 until it has repaid at least 75 % of state aid received? Does the Commission intend to publish its formal decision in full?
2. Is it also considering the introduction of stricter temporary framework conditions and related rules governing bonuses and variable pay incentives by companies receiving recapitalisation assistance from the state?
3. During the 2008 financial crisis, bonuses were also paid by recipient companies, including banks3. What lessons has the Commission learned from this and how is it putting them into practice with a view to suspending dividend and bonus payments to companies in such a situation and those that are being called upon to take additional measures to remain afloat?
1 https://www.telegraaf.nl/financieel/423714714/miljoenenbonus-topman-air-france-klm-ondanks-recordverlies-
en-staatssteun
2 https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1581
3 https://www.nrc.nl/nieuws/2009/09/21/banken-keren-middenin-crisis-gewoon-bonussen-uit-11785762-
a374619
Answer given by Executive Vice-President Vestager on behalf of the European Commission (5 July 2021)
The non-confidential version of the Commission decision approving aid granted by France to recapitalise Air France and its holding under the Temporary Framework (4) is publicly available (5).
In line with the Temporary Framework’s safeguards to preserve competition, France committed to a ban on bonus payments to managers of Air France-KLM S.A., Air France S.A. and Transavia France S.A.S. until at least 75% of the recapitalisation is redeemed. No bonus can be effectively paid from the notification of the Commission decision approving that aid until then.
It is in the first place for the Member State concerned to ensure that the conditions and safeguards are met, on which a Commission approval decision is based. The Commission monitors the decision, including the ban on bonus payments referred to in the question of the Honourable Member, also with the cooperation of a monitoring trustee.
Point 78 of the Temporary Framework already contains a prohibition for bonuses or variable or comparable remuneration elements for management in undertakings which benefitted from a recapitalisation measure, as long as at least 75% of the recapitalisation has not been redeemed.
The rules introduced at the beginning of the financial crisis provided that until the end of the restructuring period there should in principle be a limitation on excessive executive remuneration and the distribution of bonuses (6). That was further developed in points 38 and 39 of the Banking Communication (7). The approach taken in the banking sector as well as in the Temporary Framework rests on the principle that state aid should be limited to the minimum necessary and that there should be no outflow of money from the company.
⋅1∙ https://www.telegraaf.nl/financieel/423714714/miljoenenbonus-topman-air-france-klm-ondanks-recordverlies-en-staatssteun
⋅2∙ https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1581
⋅3∙ https://www.nrc.nl/nieuws/2009/09/21/banken-keren-middenin-crisis-gewoon-bonussen-uit-11785762-a374619
⋅4∙ Communication from the Commission — Temporary framework for state aid measures to support the economy in the current COVID-19 outbreak,
19 March 2020, OJ C 91I, 20.3.2020, p. 1, as amended.
⋅5∙ https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_59913
⋅6∙ Points 44 and 45 of the 2009 Commission Communication on Recapitalisation of financial institutions in the current financial crisis.
⋅7∙ Communication from the Commission on the application, from 1 August 2013, of state aid rules to support measures in favour of banks in the context of the
financial crisis, OJ C 216, 30.7.2013, p. .1