YOU SAID “IMPROVING GOVERNANCE”?

The General Meetings season is coming to an end but there is a sense of unfinished business, due to the reconsideration of numerous issues accepted by all and in particular by major institutional investors:

• Separation of the functions of Chairman and CEO: at a time when risks facing businesses are increasing, the combination of these functions is becoming normal. But can it reasonably be justified that the Chairman & CEO is also responsible for strategy implementation and control? Can the appointment of a Lead Independent Director without powers or personal liability towards third parties be an improvement in governance? An example in the banking sector which is in fact a counter-example: Société Générale combined the functions in 2009 while at the same time Switzerland made it compulsory that year for financial operators to separate these functions!

• Appointment of independent directors: the proposed definition of the independence of Directors in the Vienot report over ten years ago has still not made much headway in our French context. And, while in the US there is practically no Directors who are also bankers, France stands out on account of its record level of qualified bankers who are also independent directors!

• Rampant take-over: this year again, several cases of takeover without payment of the relevant price have raised concerns amongst investors regarding the difficulties faced by minority shareholders to oppose such strategies. For instance isn’t the current situation at Saint Gobain, Accor, Carrefour a cause for concern?

• The right of minorities to present resolutions: this year again one company, namely Société Générale, has refused to include a resolution on the agenda (it was Total’s speciality with regard to employees…) although it was not contrary to French laws. This type of rejection can only justify the more radical positions adopted by some minority shareholders who are refused the most fundamental of rights: that of asking the opinion of shareholders as a whole!

• Directors' remuneration: In 2010, Publicis takes first place when it comes to transparency over remunerations. It refused to present as a regulated-party agreement an agreement for on additional remuneration of €25m which is profit-based and payable at the retirement of Maurice Levy, whose retirement is continuously postponed! Unfortunately Directors’ remunerations are still a prime target for the media… and surveys show that it is a very sensitive issue.


Some will argue that there is no immediate danger, that, in these times of crisis, businesses need to consolidate their system, that governance of French companies is today one of the best in the world. But what are we to understand from the fact that Franck Riboud (Danone) and Henri de Castries (AXA) both absolutely legitimate have been re-elected with only 80% of the votes while their assistant CEO’s (Emmanuel Faber and Denis Duverne) have been re-elected with 99% of the votes. It is due to their capacity as the Chairman & CEO, or to the remuneration level which is frequently criticised in the media?

While businesses today need all their shareholders to face current challenges and in particular to protect themselves against the risks of rampant takeover, we are surprised to see that many companies still do not take into account the main governance principles recommended by investors by relying for example on double voting rights, although the Saint Gobain case has proved that these rights have promoted rampant takeover.

The principles of good governance are known to all. Our companies’ Boards of Directors should let themselves by guided by these principles if they want to have the support of all their shareholders.