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Any hint that European executives are unduly padding their stock portfolios can still inspire public outrage. In France, polls last year showed that 66% of French citizens wanted to own stock options--until the so-called Jaffre affair exploded. That scandal was sparked by oil giant TotalFina's successful takeover of rival Elf-Aquitaine, and the $35 million stock-option package paid to vanquished Elf CEO Philippe Jaffre to bless the union and walk away. Furious French leftists--who derailed earlier government plans to lower the tax rate on stock-option earnings from 40% to 26%--responded with an unsuccessful campaign to hike the tax rate an additional 10 percentage points, to 50%. A subsequent report by two socialist legislators recommended that the option tax rate be lowered, but also proposed new requirements for companies to open the books on executives' compensation--details that most French firms have long preferred to keep secret.
Tougher disclosure laws in countries like France and Germany would go a long way toward easing public suspicion of stock-option grants. It would also bring those countries closer to the more transparent corporate practices of the U.S.--a prospect, admittedly, at which many Europeans still bristle. As the equity-driven start-up wave of the new economy hits the Continent, the use of options by European businesses is bound to increase. And the larger debate will continue to rage: In a time of near ludicrous stock valuations, does anyone really deserve the fortunes gained through stock options? "If you're a new-economy kind of guy you would say yes--the value of the stock is a reflection of the company's worth," says economist John van Reenen of University College London. "If you're more skeptical, you would say that the market's going bonkers and overestimating the value of these firms. I happen to think the market's going bonkers. But I've been saying that for the past 10 years."
--With reporting by Bruce Crumley/Paris, Jane Walker/Madrid and Steve Zwick/Berlin