Summer always provides the opportunity to reflect upon the months gone by, particularly the major governance issues arising during 2014-2015, before getting back to work at the end of the summer break. We would like to mention some of the key themes which are still of concern today.
- Double voting rights: the French Finance Minister, Emmanuel Macron, was promoting multiple voting rights at the end of August at the MEDEF business confederation summer university, in defence of French companies and strategies implemented by their managers and employees. However, he did not mention the fact that Holcim took control of Lafarge, without paying a premium, because the company was almost fully-controlled by two shareholders thanks to their double voting rights. No one seemed bothered either that Vincent Bolloré, a minority VIVENDI shareholder, has been able, through owning double voting rights, to take control of the supervisory board and also of Canal Plus, as a pawn in his global strategy in France and Africa, thanks to its cash reserves, which were not returned to shareholders, despite the fact that the group’s main business was sold without shareholders being consulted...and that he is making further investments in Italian telephone operators once again...
- Remuneration: The partial sale of Alstom to General Electric occurred at a time when the company was “faltering” as it was facing a US corruption law suit (leading to Alstom paying a EUR 700m fine). Alstom’s CEO Patrick Kron is receiving severance pay although the company is accused of corruption and the strategy he put in place has failed. Is this justifiable with regard to employees and shareholders? Similarly, it has come to light that Michel Combes was negotiating his appointment at Numericable and his exit from Alcatel-Lucent at the same time (which is normal). However, is it acceptable that the board decided, after he announced his departure, to shorten the qualifying period for obtaining Alcatel-Lucent shares to 2 years in the company, whereas the project presented at the shareholders AGM included a qualifying period of 3 years?
- Environment: The COP 21 convention is rousing many people and not just the politicians. Many companies are preparing schemes to demonstrate that they too are aware of the stakes and their responsibilities. We have seen that the top 100 US companies have committed to investing USD 1.4 trillion over several years, which is an enormous sum. However, in terms of the investment each company intends to make during the next few years, this total amount seems almost ridiculous. This is without taking into consideration the company managers who have expressed off-the-record doubts over climate change really existing, or being serious enough to bother implementing truly innovative policies which would help limit the impact of their industrial activity or services.
As part of our responsibility as shareholders, we must recognise that this type of action or reaction is not normal and should lead to any board of directors which allows such practices being chastised. A board of directors is elected by shareholders and a Chairman is answerable to shareholders and employees for the decisions taken by the management. Over-proximity incurs the risk of a company being governed solely to serve certain interests. It is the board of directors’ duty to act in the interest of all parties and they should put their tenure to the vote, if certain of their decisions appear flawed.
Meanwhile, a board of directors cannot act without active shareholders, many of whom still believe that this is not their role and prefer remaining simply as financial investors. However, we can achieve nothing alone but together we can influence management policy and help them take the right decisions. Join us!
Olivier de Guerre
PhiTrust Active Investors