On Oct. 11, France's lower legislative chamber passed a bill that tightens restrictions on executive stock options. To become law, the measure must still pass the senate, which is scheduled to consider the bill in early November.

In addition to tax breaks for companies that issue free shares to rank-and-file employees, the bill would limit executives from exercising part of their options during their tenure. The measure leaves it up to the company's board of directors, or the supervisory board at companies with two-tiered boards, to determine what percentage of option packages must be held while the executive is in office--as long as the option incentives are properly disclosed, according to Agence France-Presse.

The share ownership legislation that applies to listed companies is one of a series of measures promised by Prime Minister Dominique de Villepin to promote "economic patriotism" among investors and reduce French companies' vulnerability to foreign hostile takeovers, according to the Associated Press (AP).

Initially, the legislation, as introduced by opposition legislator and former Prime Minister Edouard Balladur, called on shareholders to decide on what proportion of options were to be subject to the holding requirement. This provision was strongly opposed by the French employer association, Medef.

The Minority Shareholders Defense Association (ADAM) said it would continue to push for stockholders to have a direct say on the conditions attached to any option grants, just as they now have the right to approve the issuance of stock options. "Ever since stock options came into being, company boards have proven themselves incapable of tackling their abuse," Colette Neuville, ADAM's executive director, told the AP.

The measure follows public and investor complaints over executives' stock option entitlements, as well as the timing of some of their transactions.

Perhaps the most spectacular was the sacking of Noel Forgeard, the co-CEO of the European Aeronautics Defense and Space (EADS), in June following revelations that he sold millions worth of shares a few weeks before the announcement of production delays on the A380 Airbus.

The French financial markets authority, AMF, which is investigating the case, alleged Forgeard made a 2.5 million Euro ($3.6 million) profit on the options sale, and each of his three children made a profit of 1.4 million Euro ($1.75 million) two days later. Several other senior EADS executives made substantial profits on their option sales at that time, according to The Times of London. A spokesman for EADS said those involved "had no specific information" about the production delays when they sold their shares, The Times reported.