The "Florange" law voted in this year implemented double
voting rights at Paris-listed French companies for all shareholders who have
held stock for more than two years.
The action was taken without any real consultation with investors and
for the sole purpose of protecting French companies by strengthening the
control of reference shareholders and employees. It is a reaction to the low
level of capital currently invested in French stocks by French investors.
The policy is once again intended to remedy a shortcoming in our system
(lack of pension funds, very high shareholder taxation, etc.) and the fear that
companies will be taken over by foreigners...It's true that, against all
expectations, the most recent creeping takeovers have been carried out
by...French investors...remember Carrefour, Vivendi and others.
In practice, investors are only entitled to double voting rights if they
are registered and, therefore, recognised as such by the company. While the
benefit of the initiative is quite clear for companies, in reality, the net
effect is that foreign institutional investors, as well as French UCITS, are
locked out for administrative reasons tied to the complexity of registered
ownership.
In fact, the measure dissuades many long-term investors who will not
register and benefits those who want to retain control, thereby reinforcing
inequality among shareholders.
In the long run, many international investors will stop investing in
French companies because of the measure, making access to capital more
difficult for our companies.
French law entitles us to request that General Meetings remove double
voting rights from the by-laws. It's important that we be aware of this and
that we ask companies to eliminate double voting rights from their by-laws (as
some have already done) in order to rebuild a true shareholder democracy for
the benefit of companies.
We must mobilise quickly and we must ask companies to move in this direction.
Olivier de Guerre
Chairman of PhiTrust Active Investors
