Executive compensation in France in 2026: fixed, variable, golden parachutes and dual-role mandates

Executive compensation in France in 2026: structuring, securing and taxation

Director compensation is one of the most sensitive topics in French corporate law, at the intersection of corporate, social, tax law and governance. This article presents the methods of fixing, the components of compensation, deferred mechanisms (golden parachutes, top-hat pensions), and the regime of dual mandate-employment combination in 2026.

1. Methods of fixing compensation

1.1 Joint-stock companies (SA)

In a classic SA, the compensation of the chairman, CEO and deputy CEOs is set by the board of directors (Articles L. 225-47 and L. 225-53). In SA with management board and supervisory board, the supervisory board sets the compensation of management board members (Article L. 225-63). The decision must be recorded in the board minutes and specify the amount, frequency of payment and, where applicable, variable elements.

In listed companies, the Afep-Medef code imposes reinforced rules: compensation policy voted annually by the general meeting (ex-ante vote), vote of the meeting on compensation paid (ex-post say-on-pay vote), detailed publication in the governance report.

1.2 SARL

The manager's compensation is set by ordinary collective decision of the partners (Article L. 223-18). It may appear in the articles (statutory amendment required for any evolution) or in a separate decision (recommended to facilitate subsequent adjustments).

1.3 SAS

The SAS offers the greatest contractual freedom. The articles freely determine the methods of fixing: collective decision of partners, decision of the president, decision of an ad hoc committee. In the absence of statutory specification, case law holds that the decision falls to the partners.

1.4 Formalism

Any decision to fix or revise compensation must be formalised in minutes dating the attribution. Payment of compensation without prior decision exposes the director to a restitution claim and may be qualified as misuse of corporate assets (Article L. 242-6 for SA, L. 241-3 for SARL). Subsequent regularisation by ratifying decision is admitted under conditions.

2. Components of compensation

2.1 Fixed compensation

Fixed compensation constitutes the basic component, paid monthly or according to an agreed frequency. It must be proportionate to the functions exercised, the responsibilities assumed and the financial situation of the company. Manifestly excessive compensation exposes to qualification as misuse of corporate assets (joint-stock companies and SARL) or abuse of majority.

2.2 Variable compensation

The variable portion is indexed to performance indicators: turnover, operating result, EBITDA, gross margin, ESG/CSR indicators, customer satisfaction, retention rate. Criteria must be objective, measurable and established prior to the evaluation period, failing which they may be requalified as an abusive practice. In listed companies, criteria must be included in the compensation policy approved by the meeting.

2.3 Benefits in kind

Benefits in kind (company car, housing, ICT) are subject to social contributions and personal income tax based on their value assessed according to URSSAF scales or their actual value. Their attribution must be authorised by the corporate decision.

2.4 Attendance fees (compensation for activity)

Attendance fees, renamed "compensation for activity" by the PACTE Law (Article L. 225-45), are attributed to directors and supervisory board members. The global envelope is set by the general meeting, with the board then freely distributing among its members taking into account effective participation.

2.5 Free share allocation plans and stock options

Free share allocation plans (AGA, Articles L. 225-197-1 et seq.), stock options (Articles L. 225-177 et seq.) and BSPCE warrants constitute major levers of alignment of director interests and retention. Their taxation and social treatment are strictly framed and have been subject to recurrent evolutions.

3. Combining corporate office and employment contract

3.1 Validity conditions

Combining a corporate office and an employment contract within the same company is admitted under three cumulative strict conditions:

1. Real and distinct job from the office: the employment contract must correspond to technical functions clearly separable from general management functions. A director exercising solely management functions cannot claim combination.
2. Legal relationship of subordination: the employee must be placed under the hierarchical authority of a distinct person, endowed with the power of direction and sanction. This condition is delicate for SAS presidents or SA CEOs, who are at the top of the hierarchy.
3. Distinct compensation: compensation under the employment contract must be distinct from that of the office and proportionate to the technical functions exercised.

3.2 Specific regime in SA

Article L. 225-22 of the Commercial Code prohibits directors from holding an employment contract with the company, unless the employment contract predates the appointment. This rule aims to preserve the independence of the board. The CEO and deputy CEOs may combine under common-law conditions.

3.3 Advantages and risks

Combination opens rights to: Pôle emploi unemployment cover (under the employment contract), protection against dismissal (procedure and indemnities), access to employee savings schemes (incentive, participation, PEE, PER Collective), portability of insurance guarantees.

Risks are: requalification as a sole mandate by URSSAF (with restitution of unduly paid unemployment contributions and loss of rights), qualification as misuse of corporate assets in case of excessive compensation, challenge by minority partners.

4. Deferred compensation and regulated agreements

4.1 Golden parachutes

Contractual end-of-mandate severance (golden parachutes) provided by mandate contract or articles is subject, in joint-stock companies, to the regulated agreements procedure (Articles L. 225-38 et seq. for SA, L. 227-10 for SAS). Prior board authorisation is required, followed by communication to the statutory auditor and approval by the general meeting.

4.2 TEPA Law framework in listed companies

In listed companies, the TEPA Law of 21 August 2007 and the Afep-Medef code strictly frame deferred compensation of corporate officers: objective and pre-established performance conditions, quantitative ceilings (generally two years of fixed + variable compensation), exclusion in case of departure for serious misconduct or personal reasons, advisory shareholder vote (say-on-pay).

4.3 Top-hat pensions

Defined-benefit pension schemes (Article 39 of the General Tax Code, "top-hat pensions") constitute a complement to retirement guaranteeing a determined pension level. European Directive 2014/50/EU and the law of 6 August 2015 introduced strict conditions: performance conditions, annual ratchet, capping, transparency. The tax and social regime has been significantly tightened for attributions after 2019.

4.4 Non-compete indemnities

The indemnity paid in consideration of a post-mandate non-compete commitment is subject to the same rules: authorisation in compliance with regulated agreements, justification of the commitment by a legitimate interest of the company, proportionality of the indemnity to the geographical, material and temporal scope of the obligation.

5. Taxation of director compensation

5.1 Personal income tax

Compensation paid for the office is taxable:

• Salaries and wages for salaried-equivalent directors (president of SAS, minority manager of SARL, chairman, CEO and deputy CEO of SA), with a flat 10% deduction for professional expenses (capped) or option for actual expenses;
• Article 62 of the General Tax Code for majority managers of SARL: taxation according to salaries and wages rules but with specificities on the deduction of mandatory social contributions and professional expenses.

5.2 Dividend taxation

Dividends received are taxed at the flat tax (PFU) of 30% (12.8% IT + 17.2% social levies) or, on global and irrevocable option of the tax household, at the progressive IT scale with a 40% reduction and deduction of part of the CSG. For majority managers of SARL, the fraction of dividends exceeding 10% of capital is also subject to self-employed contributions.

5.3 Specific contributions

Deferred compensation (golden parachutes, top-hat pensions) is subject to a social levy and specific contributions tightened by successive laws. The specific employer contribution on defined-benefit pensions can reach 24% to 32% depending on the regimes.

6. 2026 trends and best practices

Several orientations mark practice in 2026:

• Strengthening of say-on-pay: strict application of ex-ante and ex-post vote in listed companies, with increased challenge by institutional investors;
• ESG criteria in variable compensation: increasing integration of environmental, social and governance indicators in the variable portion, driven by the CSRD directive and investor expectations;
• Framework of compensation gaps: obligation to publish the ratio between average director compensation and that of employees (Article L. 22-10-9 for listed companies);
• Increased scrutiny of regulated agreements: multiplication of disputes based on lack of prior authorisation or inaccuracy of the statutory auditor's special report.

Conclusion

Director compensation in 2026 requires precise articulation between the requirements of corporate law (formalism, regulated agreements), social law (contribution regime, dual mandate-employment combination), taxation (IT, PFU, social levy) and governance (say-on-pay, Afep-Medef code for listed companies). Securing compensation decisions, consistency with the company's financial situation and rigorous documentation are essential to prevent disputes.

Mac Mahon Avocats advises directors and companies on the structuring of compensation packages, drafting of corporate decisions, securing of regulated agreements and management of compensation litigation.