REFORME DES RETRAITES
ET PRIVATISATION
L’expérience d’une Proxy Firm
OCDE
Paris Sept 22. 1999
PROXINVEST,
the first continental proxy firm
focuses on
independence
expertise : in depth legal and
financial research,
technology : First Web Full Proxy
Station (88 resolutions, 60 criteria)
A very favorable regulatory framework
for a self-correcting democratic proxy
practice
Full shareholder legal power
«L’assemblée générale est
souveraine»
Full shareholder legal power
AGM approval of accounts, dividends,
related party transactions, mergers ...
 No change in the by-laws or in the capital
structure without a 2/3 approval of the
extraordinary meeting
 Disclosure : BALO meeting agendas, COB
tested Reference Document
 No underwater rights issuances without PR
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...offering rather time to management
than obstacles to the shareholders
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6 years maximum terms for Directors and
Auditors
Possible Poison pills subject to the approval of
the Shareholders
Possible Double Voting Right provision
Possible vote limitations / unlimited
partnerships
...but no more than a third of Executive
Directors at the Board
The 1995 Viénot Code
Insist on a difference between the company’s
interest and the shareholers interests
Defense of the PDG structure
Defines independence of directors
Ban cross-shareholding and cross-directorship
Limits external directorships to five for ED
Three commitees (independent for audit
and remunerations)
A new set of Guidelines from the
French Asset Management
Association
following the 1995 Viénot Code
the
AFG-ASFFI Code
June 30. 1998
the AFG-ASFFI Code
requests more (I)
board to serve the interest of all
shareholders
 diligent proxy voting
 ban on underwater options
 compensations and fees adjusted to
performance

the AFG-ASFFI Code
requests more (II)
limit number of directors to 16
 independent directors clearly defined
 three independent committees
 more dedicated directors: limits multidirectorships to 3 mandates for nonindependent directors
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The 1999 Viénot II Code
Shortening of the Directors mandates to 4 years
Yearly monitoring of the Board’s work
The Board and the committees should be
made of a third of independent directors
July .1999
Proxy voting in France

Block your shares days before the meeting
– The 5 days legal blockage allows to sell
– Put a general request to your custodian
Obtain documents or use local service
 Execute and Send by yourself the proxy
cards or your delegation of vote to reach the
company or its bank 3 days before latest

Modernizing French Practice,
increasing taste for equity...
Withdrawal of the State: Eramet, CNP, Crédit Lyonnais, GAN...
 Reduction of Cross-Shareholdings
 Still Endogenous and Cross Directorships
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Still many Double Voting Right provisions : 56% of
the 250 French listed companies, 67% of CAC 40
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Still almighty PDGs...
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But only 15 big listed companies are really locked
(SCA, 10 years double voting rights, vote limitations, golden shares)
The BNP Soc Gen Paribas
open battle
could not have occurred in Germany
Netherlands or Sweden or Swizerland
Looking at the French Privatized
Companies Corporate Governance :
not yet superior
 16
out of the CAC 40
Companies are privatized
Comparing their Corporate
Governance Features (I)
Number of Directors : 16 comparing to 14.5
(CAC 40)
 Number of non independent directors: 12.2
(76%) comparing to 10.7 (74%)
 Number of women : 0.5833 comparing to
0.5853
 Number of shareholders : 552000 comparing
to 337 000

Comparing their Corporate
Governance Features (II)
Double voting right : 8/24 (33%)
comparing to 29/ 40 (72%)
 Vote limitations (Ceiling or SCA) : 5/24
(21%) comparing to 10/40 (25%)
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Comparing their Corporate
Governance Features (III)
Split Chairman CEO : 3/24 (12%) instead of
11/40 (27%)
 Specialized committees : 1.9583 v.1.9512
 Audit committees : 22/24 (91.7%)
comparing to 34/40 (85%)
 Remuneration Commitees : 21/24 (87.4%)
comparing to 35/40 (87.5%)
 Nomination Committee : 6/24 (25%)
comparing to 8/40 (20%)
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Privatized companies are targets
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8 out of 24 have been acquired or merged in
the last years : UAP, AGF, Suez, Eramet,
Paribas, Pechiney, Rhône Poulenc, Elf...
Why privatized companies are
targets ?
Some lack of clear entrepreneurial
objectives : Suez, AGF, Saint Gobain,
CNP...
 Lack of private markets culture at the top:
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Only 2 CEO out of the 24 companies have never been associated with
the public service or governement, 20 have made most of their carreer
in poublic service
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General lack of equity culture : subsidized
shareholding (rebates, low IPO)
Why privatized companies are
targets ?
LOW INTERNATIONAL COMPARATIVE
VALUATION :
 WEAK FRENCH EQUITY MARKET FOR
LACK OF EQUITY INVESTED SAVINGS
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French shareholders become
vote selective : examples
keep active the capital increase authorizations
in time of public offer: 97% before 1996,
96% in 1996, 94% in 1997, 91% in 1998
 global capital increase authorizations without
preemptive right : 99% before 1996, 98%
in 1996, 97% in 1997, 96 % in 1998
 approve dividend reinvestment plan: 99.7%
before 1997, 99.6% in 1997, 99.1% in 1998
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but still approve shareholder
unfriendly proposals : examples
election or reappointment of controversial
directors (99.50% in 1998...99.?% in 1999)
 mergers and financial operations : KingfisherCastorama Dubois merger, or Lagardère 1999
doubling of the unlimited partner fee : 97%
 vote limitations and poison pills : Rhône
Poulenc 1999 failed on its poison pill but
passed its vote limitation
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A need for ACTIVE
COMMITTED
SHAREHOLDING
PENSION FUNDS ARE NEEDED TO FUND
FRENCH PENSIONS
 THE ONLY OPPORTUNITY FOR
PARTICIPATION IS TO VOTE PROXIES
 NEW PENSION FUNDS AND EMPLOYEE
OWNERSHIP SYSTEMS SHOULD LEARN
TO VOTE

www. proxinvest .fr
the French Link
PROXINVEST