The French Financial
Markets Authority (AMF) recently published the report of its working group set
up to propose recommendations for improving dialogue at the general meeting.
As an investor, we
were very concerned about the preliminary report, on which we were asked to
comment. In fact, the working group, which was composed mainly of corporate issuers’
representatives and their close advisers, published a preliminary report that
did not bode at all well for the final report. Luckily, a large number of
investors expressed their concerns about several of the recommendations and put
forward their own suggestions for improvement, which were taken on board by the
regulator.
Of all the
recommendations included in the final report, we applaud the fact that the AMF unequivocally
affirmed the importance of an open and transparent shareholder democracy, the
need for intermediaries (proxy voting agencies) to facilitate investors’ analysis
of draft resolutions and the importance of encouraging dialogue with all
shareholders, including the smallest ones, after the initial recommendations to
a certain extent called these principles into question.
Several of the
recommendations mark real progress, but one in particular, although it may appear
to be a technicality, strikes us as being by far the most significant, namely the
AMF’s call for reform of the regulated related-party agreement procedure.
The current regulated
related-party agreement procedure is unique in France since it enables the
links between a company and its Board members to be identified and helps
investors to pinpoint potential conflicts of interest. The law requires
statutory auditors to publish a report on new agreements concluded during the
financial year that fall outside the scope of the company’s “ordinary
activity”. The shareholders are invited to vote on these agreements, even if
their vote is merely a consultative one.
In its report, the AMF
proposes that all new and existing regulated agreements between a member of the
Board of Directors and/or the company to which he belongs or which he
represents, on the one hand, and all the other companies in the listed group
(parent and subsidiaries), on the other hand, be taken into account when
significant amounts are involved in the agreement.
These proposals, if
they are incorporated into the legislation, will greatly enhance transparency
through the identification, in complete transparency, of all major transactions,
notably with subsidiaries, that are currently beyond the control of the
shareholders.
The report does not
go as far as to recommend a non-consultative vote. Nevertheless, the fact that
it enables all existing agreements to be identified, which is not currently the
case, is a major step forward for shareholders.
Let us hope that this
report will be implemented as soon as possible, triggered perhaps by the new
government or the arrival of the new AMF chairman.
Olivier de Guerre
Chairman of PhiTrust
Active Investors
