Over the past few years, the internationalisation of many French companies has led them to develop successful strategies that have enabled them to be among the best performers in their category. Several of these companies now find themselves in a paradoxical situation: even though they are still considered as French, they have operations in a large number of countries on every continent, none of which accounts for more than between 10 and 15% of their revenues. At the same time, their French shareholders account for between 20 and 25% at most of their shareholder base, and this percentage is declining steadily, due to the policies implemented by various governments for many years.
To meet the demands of their employees and their customers, the management teams are increasingly international, while some companies adopt the culture of every country where they operate; they are Chinese in China, Indian in India, and American in the US, etc. Meanwhile, digital technologies enable executives to manage an international group by conference call without being there (Jean-Pascal Tricoire, the Chairman and Chief Executive of Schneider Electric, who is based in Hong Kong, describes himself as a “nomad”).
Some of these companies, which have no regional or national roots, no longer have any major shareholders from one country or region. Their Board of Directors’ meetings are naturally held in the various countries where the company operates (in order to gain a better understanding of the company’s challenges and risks, and to be closer to customers), while General Meetings will be held on the Internet in the near future, so that all shareholders can take part.
At this point, a company will naturally become supranational; it will have no nationality and will naturally seek to operate in an environment that is as favourable as possible, whether from a tax standpoint (which is the case now) or from a corporate governance standpoint (which will be the case tomorrow). There is a major risk of abuse for the benefit of a minority shareholder, the company’s management team, suppliers or customers, etc. In such a situation, only the Board of Directors will be able to act as a counterweight. But will it be able to?
In fact, this movement is already underway; where investors and even legislative authorities are concerned, it does not matter that a company’s listing is now separate from its status or registered office. Who worries that the rights of Arcelor Mittal’s shareholders in Luxembourg are infinitely more restricted than the rights of shareholders in companies listed in Paris?
Germany and Switzerland understand this issue well; the first country has imposed a sizeable proportion of employee representatives on Boards of Directors, while the second requires that companies that want to be listed in Switzerland hold at least half their Board Meetings in Switzerland. France and Europe urgently need to set simple rules so that companies that are listed in Europe hold their Board Meetings in Europe, and comply with corporate governance best practices in order to avoid abuses that will otherwise inevitably occur.
Olivier de Guerre
PhiTrust Active Investors