updated 10/16/2008 7:07:04 PM ET 2008-10-16T23:07:04

When economic turbulence shakes companies off course and investors demand bosses' heads, executives worldwide have long known what to do: yank the ripcord on their 'golden parachutes' and sail to safety.

But in the global economic meltdown, governments are launching an assault on these multimillion dollar severance packages — and already some executives are finding that the chutes no longer open.

Under heavy pressure from government officials, the head of French-Belgian bank Dexia SA, Axel Miller, was forced to renounce a reported euro3 million ($4 million) payout when he was ousted last month.

The bank had made bad bets on U.S. investments, and only survived thanks to a euro6.4 billion ($8.72 billion) bailout from the governments of France and Belgium.

In handing over taxpayers' money, French officials insisted that Miller renounce his golden parachute. That episode snowballed into a movement in several countries against big payouts for fatcat bosses who have led their companies to the edge of ruin.

As the financial meltdown starts to infect the real economy, popular outrage has grown over the money thrown at executives when they leave — and leaders have responded.

French President Nicolas Sarkozy last month railed that there had been "too much abuse, too many scandals" involving executive pay. His pressure has led to new steps to rein in payouts in France.

In Europe, examples of severance packages raised eyebrows in recent years have included:

  • Mannesmann AG boss Klaus Esser, who received a 60 million mark payout after the German cell phone company was taken over by Britain's Vodafone in 2000.
  • Patricia Russo, who received euro6 million this year after stepping down as CEO of troubled telecommunications equipment maker Alcatel-Lucent.
  • Noel Forgeard, former CEO of European aerospace giant EADS, who left with euro8.2 million in 2006, shortly after the maker of Airbus jets announced a series of costly delays to its A380 super jumbo jet program.

The issue has taken on particular resonance in France, with its egalitarian ideals and cultural mistrust of extreme displays of wealth.

Under pressure from Sarkozy, France's main business lobby, Medef, this month introduced new rules to govern executive payouts and stock options.

These included a prohibition on golden parachutes for executives who quit failed companies, a limitation on the size of golden parachutes for other executives to two years salary plus bonus, and an obligation that companies which offer stock options to top executives must also make arrangements for similar benefits to all employees.

The French government has made adherence to these rules mandatory for banks that will take part in France's euro360 billion ($491 billion) rescue plan announced earlier this week.

British Prime Minister Gordon Brown has attached similar conditions on its share of the euro1.7 trillion ($2.3 trillion) emergency bailout for the banking sector endorsed by European governments. Brown says executives must take more responsibility and end a system that encouraged reckless risk-taking.

Even the United States, often the model for mega-buck paydeals for top execs, has taken limited steps to control golden parachutes. Provisions outlawing them in certain cases were included in the government's $700 billion financial bailout package now being used to steady Wall Street's shaken foundations.

Banks and other financial institutions that take part in the plan are prohibited under the legislation from offering their executives golden parachutes.

But some corporate governance activists doubt the effectiveness of such reforms. In France, for instance, none of the golden parachutes that caused a stink in recent years would have been banned under the new rules put in place by Medef, said Pierre-Henri Leroy, president of Paris-based corporate governance advisers Proxinvest.

Colette Neuville of ADAM, a French shareholder association that pushes for corporate governance reform, says the French measures are too little, too late. Neuville says executives are paid more than enough while in their jobs to not need extra millions when they retire, quit or get fired.

She says severance packages need to be banned outright — "or there will be more abuses."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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