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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
  • financed by its initiator VIP and other sponsors with a background of “Equity and Advisory” interests.

VIPsight International

Welcome to VIPsight Europe - France



Pierre-Henri Leroy  


5 November 2021

Proxinvest longstanding call for governance reform at French company Lagardère SCA now implemented

Watchful of the respect of shareholders’ rights, Proxinvest had always regretted the protective governance regime (“Société en Commandite par Actions”) adopted by Lagardère because of the unequal treatment between shareholders, leading to excessive and costly managerial protectionism and an implied governance discount on the company’s value.

Following the engagement of some key shareholders supported by Proxinvest, Lagardère’ general meeting held on 30 June this year resulted in the adoption of new articles of association and a new governance structure that are more favourable to investors. Proxinvest then welcomed the ” significant governance improvements that have been long sought“: the new right of the board of directors to appoint and dismiss its executive officer, the end of the general partner’s veto right on amendments to the articles of association, a strategy now defined by the board of directors, a remuneration policy defined by the board of directors, the end of the special dividend for the general partner and the end of a costly related-party agreement with Lagardère Capital Management, the family holding of Arnaud Lagardère

These changes in the articles of association and governance have transformed Lagardère’ shareholder attractiveness. The basic rules of accountability towards shareholders have finally become fully applicable. The end of the management entrenchment mechanism has restored  the mechanism of public offer  Vivendi’s proposed takeover bid project for Lagardère thus reflects this return to the usual market rules and offers a substantial premium to Lagardère shareholders who would like to tender their shares.

Proxinvest is pleased to contribute to defending the values of good corporate governance and shareholder democracy for more than 25 years.

Proxinvest has been the only French voting advice agency, or “Proxy firm”, for 26 years, specialising in general meetings, corporate governance and shareholder engagement. Its strategic ambition is to become the reference player in Corporate Governance for investors in Europe.



11 September 2021

Phitrust Active Investors France 2021 Voting and Engagement Report

The 2020 AGM season will remain in the minds of all shareholders. In more than 15 years, the context has evolved, awareness is growing particularly on the impact of the activity of companies on our environment, on their social responsibility, on their role in the city, and in a world where some of them have become actors as powerful as some states.

Laws and decrees have required them to publish extra-financial reports. Long-term investors have put pressure on them, aware that only companies that integrate these criteria will create value. Here too, the law has required major fund managers to report on the way they integrate ESG criteria and the impacts of their management. Shareholder engagement is now finally recognized as the most successful form of SRI by Novethic (July 2020).

But for both companies and investors, the law is not enough. It is intentionality that is at the heart of the matter. We’ve been in tough discussions with Total Group executives for more than 10 years. In recent months, after a demanding meeting, they have decided to propose to the shareholders that the environmental and social responsibility of directors be included in the articles of association. The intentionality of Total’s management team is at work here, and it is committed.

The same is true for asset managers. Here again, it is the intentionality of the investor – and shareholder – that is central. This is what we did again this year when we publicly asked companies in a position to pay dividends to devote part of their income to the creation of support funds for their ecosystem, which has been so weakened by the unprecedented crisis we are experiencing.

In this 2020 edition of its voting and engagement report, Phitrust proves once again this year the importance of the dialogue that the management company maintains with the leadership of major companies.

> Main themes of engagement carried out this year by our SICAV, stages of dialogue and public initiatives with Renault (governance) Vivendi (governance and remuneration), Total (environment), PSA-FCA (merger between equals – governance and conditions of the merger) – Engie (organization of governance) and Vinci (shareholder democracy).

> Lessons to be learned and points of vigilance for the future.

We are exercising our responsibility as shareholders. Particularly today when, in this deep crisis, we must be collectively constructive for the future.


<click here> complete version (PDF) 



15 June 2021



Following the Danone’s recent governance crisis, five corporate shareholders, Phitrust, Mirova, Ircantec, CAVP and OFI AM, together holding more than 0.7% of the capital, have obtained the inclusion of an item on the agenda of the General Meeting of April 29 – in accordance with the current legal provisions. The objective was to allow each director to express his or her strategic vision for the Group, in particular by developing his or her personal contribution on environmental issues and his or her approach to the organization of a balanced governance.

The response given during the AGM of April 29, 2021 was made in different ways:

1/Implicitly, both by the Chairman (Gilles Schnepp) and the Lead Independant Director (Jean-Michel Severino), who both referred to the Board’s commitment to pursue the implemented strategy – in particular the Local First plan and the status of a mission-driven company – ,the ongoing recruitment of the Chief Executive Officer, and a review of the composition of the Board of Directors with the central idea of not increasing the number of Board members (14).

The recent governance crisis at Danone has highlighted both formal dysfunctions and fundamental disagreements within the company’s Board of Directors.

2/Explicitly, at our request, by:

> Cécile Cabanis (Vice-Chairman of the Board) – whose mandate was only renewed at 82% – who resumed the central principles of a mission-driven company, in line with the company’s culture and “raison d’être”,

> Serpil Timuray on environmental issues and the reduction of carbon impact,

> Michel Landel, who addressed the governance issues mentioned above.

We regret that Franck Riboud, former CEO of the Group, did not speak. We also regret that we were unable to question Pascal Lamy, Chairman of the Mission Committee, even though he stated that he had obtained assurances from the new Chairman both on the principles of this “mission” and on the continuation of its implementation in the Group’s operations.

The vast majority of the resolutions (23 out of 28) were adopted with scores above 90%, which seems to show that shareholders support the entire project presented by the Board of Directors.

Nevertheless, social or societal issues were not mentioned as such, which shows the priority today for the group to rebalance its growth, to return to a higher level of profitability and to find ways to face its own environmental challenges (notably the treatment of waste and residues generated by its products).

It is clear that past issues of dissension, or even dysfunction (lack of confidentiality) within the Board – which have been in contradiction with the principle of collegiality, often repeated during this Assembly – have been totally missing from the presentations of successive speakers.

It will be interesting and necessary to keep an eye on the results of the organization of the new governance, whether through the choice of the future Chief Executive Officer or through the recomposition of the Board of Directors.


15 June 2021

Suez -Veolia: Proxinvest continues its action for shareholders' rights

by Proxinvest

Proxinvest, the leading independent French and European proxy advisory agency, stresses again the paramount importance of shareholders' rights and proper functioning of the market in view of the latest developments in Veolia's public offer for Suez.

As early as September 2020, Proxinvest expressed its opposition to the creation of a Dutch foundation to Suez, outlining in particular the need for a prior consultation of the shareholders convened in the General Meeting. Proxinvest has therefore taken note with satisfaction of the position of the Autorité des Marchés Financiersdated April 2, 2021 underlining that the modifications made to this foundation undermine in particular the principles of transparency and market integrity.

Following the AMF position, several commentators have questioned the compatibility of the powers attributed to the board of directors of a company targeted by a takeover bid under the provisions of the "Florange Act" with the applicable stock market regulations. Proxinvest is ready to bring its contribution to this key debate for the Paris marketplace.

Finally, Proxinvest has received a request for information from the European Commission regarding the exercise of the voting rights attached to the Engie block at the next Suez general. Through its responseto this request as well as through its next actions until the Suez general meeting, Proxinvest will continue to ensure full compliance with shareholder’s rights.



27 February 2021

The Case of the Century – The French Administrative Court Issues a Groundbreaking Ruling on State Responsibility for Climate Change

by Gibson Dunn

In response to a claim brought by several environmental advocacy groups (the Associations), which sought to obtain the recognition of the French State’s failure to act in response to climate change, the Administrative Court of Paris (the Court) ruled, for the first time in French law, in a judgment of February 3, 2021, that such a liability action against the State was admissible, that the ecological damage alleged by the Associations was established and that the French State was partially responsible for it. The Court ordered a further investigation in order to determine the measures that it could enjoin the French State to adopt to repair the highlighted damage and prevent its aggravation.

I. Context of the ruling rendered by the Court

The Court’s ruling comes in the wake of several rulings by the Conseil d’Etat, the French highest Administrative Court, which reveal an intensification of control and compliance with the State’s obligations in environmental matters in general, and in connection with climate change in particular.

In a ruling of July 10, 2020, the Conseil d’Etat found that the Government had not taken the measures requested to reduce air pollution in 8 areas in France, as the judge had ordered in a decision of July 12, 2017. To compel it to do so, the Conseil d’Etat imposed a penalty payment of 10 million euros for each semester of delay, the highest amount ever imposed to force the State to enforce a judgement taken by the Administrative judge (CE, Ass., 10 July 2020, Les Amis de la Terre, no. 428409).

In a Grande Synthe ruling of November 19, 2020, the Conseil d’Etat ruled for the first time on a case concerning compliance with commitments to reduce greenhouse gas emissions. Indeed, the city of Grande-Synthe referred the matter to the Conseil d’Etat after the refusal of the Government to comply with its request for additional measures to be taken to meet the goals resulting from the Paris Agreement. The Conseil d’Etat first ruled that the request of the city, a coastal city particularly exposed to the effects of climate change, was admissible. On the merits, the Conseil d’Etat noted, firstly, that although France has committed to reducing its emissions by 40% by 2030, in recent years it has regularly exceeded the emission ceilings it had set itself and, secondly, that the decree of April 21, 2020 postponed most of the reduction efforts beyond 2020. According to the High Administrative Court, it is not necessary to wait until the 2030 deadline to exercise control over the State’s actions since the control of the trajectory that the State has set itself is relevant in ecological matters. Before ruling definitively on the request, the Conseil d’Etat asked the Government to justify, within three months, that its refusal to take additional measures is compatible with compliance with the reduction trajectory chosen to achieve the objectives set for 2030. If the justifications provided by the Government are not sufficient, the Conseil d’Etat may then grant the municipality’s request and cancel the refusal to take additional measures to comply with the planned trajectory to achieve the -40% target by 2030 (EC, November 19, 2020, Commune de Grande-Synthe et al., no. 427301), or even impose obligations on the French State. According to the information provided by representatives of the Conseil d’Etat, the decision could be taken before Summer 2021.

Moreover, in a ruling of January 29, 2021, the Versailles Administrative Court of Appeal referred a question to the Court of Justice of the European Union to determine whether the rules of the European Union law should be interpreted as opening up to individuals, in the event of a sufficiently serious breach by a European Union Member State of the obligations resulting therefrom, a right to obtain from the Member State in question compensation for damage affecting their health that has a direct and certain causal link with the deterioration of air quality (CAA Versailles, January 29, 2021, no. 18VE01431).

II. Reasoning steps followed by the Court

First, the Court ruled on the admissibility of the action for compensation for ecological damage brought by the Associations against the French State. In order to recognize the Associations’ status as victims, the Court had to acknowledge the existence of a fault, damage and a causal link between the fault and the damage.

First of all, it recalled that in application of article 1246 of the French Civil Code “Any person responsible for ecological damage is required to repair it”. Implicitly, the Court considered that this provision is applicable to the State. Article 1248 of the French Civil Code provides that “The action for compensation for ecological damage is open to any person having the capacity and interest to act, [such as] associations approved or created for at least five years at the date of the institution of proceedings which have as their purpose the protection of nature and the defense of the environment”. After having examined the purpose in the Associations’ by-laws, which mention the environment protection and sometimes explicitly the fight against climate change, the Court considered that their liability action was admissible.

Second, the Court had to rule on the existence of ecological damage, bearing in mind that such damage consists of “a non-negligible damage to the elements or functions of ecosystems or to the collective benefits derived by mankind from the environment” (Article 1247 of the French Civil Code). In this respect, it should be emphasized that the Conseil Constitutionnel considered that the legislature could validly exclude from the set-up compensation mechanism, the compensation for negligible damage to the elements, functions and collective benefits derived by mankind from the environment (Decision no. 2020-881 QPC of February 5, 2021). Consequently, it is up to the courts to determine, on a case-by-case basis, according to the facts of the case, what the notion of “non-negligible damage” covers.

In order to characterize the existence of non-negligible damage, the Court first relied on the work of the Intergovernmental Panel on Climate Change (IPCC), from which it concluded “that the constant increase in the average global temperature of the Earth, which has now reached 1°C compared to the pre-industrial era, is due mainly to greenhouse gas emissions [resulting from human activity]. This increase, responsible for a modification of the atmosphere and its ecological functions, has already caused, among other things, the accelerated melting of continental ice and permafrost and the warming of the oceans, resulting in an accelerating rise in sea level”.

It also drew on the work of the National Observatory on the Effects of Global Warming, a body attached to the Ministry of Ecological Transition and responsible in particular for describing, through a certain number of indicators, the state of the climate and its impacts on the entire national territory. The Court found that “in France, the increase in average temperature, which for the 2000-2009 decade amounts to 1.14°C compared to the 1960-1990 period, is causing an acceleration in the loss of glacier mass, particularly since 2003, the aggravation of coastal erosion, which affects a quarter of French coasts, and the risk of submersion, which poses serious threats to the biodiversity of glaciers and the coastline, is leading to an increase in extreme climatic phenomena, such as heat waves, droughts, forest fires, extreme rainfalls, floods and hurricanes, which are risks to which 62% of the French population is highly exposed, and is contributing to the increase in ozone pollution and the spread of insects that are vectors of infectious agents such as dengue fever or chikungunya”.

In light of all these elements, the Court considered that the ecological damage claimed by the Associations had to be considered as established.

Third, the Court had to identify the obligations of the States in responding to climate change in order to, in a second stage, rule on possible breaches in relation to these obligations.

The Court considered that it arose in particular from the provisions of the Paris Agreement of December 12, 2015, as well as from European and national standards relating to the reduction of greenhouse gas emissions, that the French State had committed to take effective action against climate change in order to limit its causes and mitigate its harmful consequences. From this perspective, the Court recalled that the French State had chosen to exercise “its regulatory power, in particular by conducting a public policy to reduce greenhouse gas emissions emitted from the national territory, by which it undertook to achieve, at specific and successive deadlines, a certain number of objectives in this area”.

The Court then examined compliance with the greenhouse gas emission reduction trajectories that the State had set itself in order to determine whether it had failed to meet its obligations. To do so, it relied in particular on the annual reports published in June 2019 and July 2020 by the High Council for the Climate, an independent body whose mission is to issue opinions and recommendations on the implementation of public policies and measures to reduce greenhouse gas emissions of France. In its two reports, the High Council for the Climate noted that “the actions of France are not yet commensurate with the challenges and objectives it has set itself” and noted the lack of substantial reduction in all the economic sectors concerned, particularly in transportation, agriculture, construction and industry sectors.

The Court concluded that the French State should be regarded as having failed to carry out the actions that it had itself recognized as likely to reduce greenhouse gas emissions. The guilty failure to meet its commitments was thus characterized, as was the causal link between that failure and the ecological damage previously identified. The Court therefore considered that part of that damage was attributable to the failure of the French State to act.

Fourth, the Court had to rule on the modalities of reparation of the ecological damage. Under the terms of the law, this was to be carried out primarily in kind. It is only in the event of impossibility or inadequacy of the reparation measures that the judge sentences the liable person to pay damages to the plaintiff, such damage being allocated to the reparation of the environment.

The Court considered that in the state of the investigation of the case, it was not in a position to determine the measures “that must be ordered to the State” to repair the observed damage or to prevent its future aggravation. He therefore prescribed a further two-month investigation in order to identify the measures in question.

Fifth, it sentenced the State to pay each of the Associations a symbolic sum of one euro as compensation for the moral prejudice it had caused them by not respecting the goals of reducing greenhouse gas emissions.

III. Follow-up to the Court’s ruling

The Court’s ruling, which sentences the State for not having implemented the necessary measures to achieve the greenhouse gas emission reduction targets, is a landmark decision in French law.

The second ruling that will be rendered following the two-month additional investigation ordered by the Court could constitute another historic decision if the Court were to enjoin the State - as the terms of the Ruling seem to imply - to implement a number of specific measures aimed at achieving the expected reduction targets, if necessary within a set timeframe. When this judgment comes into effect, possibly before the 2021 Summer, it will then be necessary to examine the impact of the measures that would thus be ordered on the economic sectors and companies likely to be affected.

At this stage of the proceedings, it is not possible to determine whether or not the French State will decide to appeal the ruling rendered by the Court to the Administrative Court of Appeal of Paris. If the latter were to uphold the ruling, the French State could then appeal to the Conseil d’Etat. A final decision on the issue at stake in this case could thus only be made in several years’ time.

The Court’s ruling could also have the immediate effect of modifying the provisions of the “Bill to combat climate change and strengthen resilience to its effects” which will be debated in the French Parliament from the end of March 2021. During the discussion, parliamentarians in favor of strengthening the provisions of this law could rely on the Court's ruling to motivate and justify their position.


16 February 2021


by PHITRUST -Denis Branche / Olivier de Guerre

Les investisseurs présentsdans la Sicav Phitrust Active Investors France, actionnaire de Danone depuis 2003,se sont réunispour faire le point sur la crise de gouvernance très médiatisée de Danone. Ils ont tenu à faire part de leur incompréhension face aux demandes expriméespubliquement par certains actionnaires et par les «fuites» faisant état dedissensions dans le Conseil d’administration.

Gouvernance: La séparation des fonctions n’est-elle qu’un prétexte?

1/ Historiquement,la société Danone a toujours privilégié la réunification des fonctions (PDG), couplée depuis plusieurs années avec la nomination du Directeur Général Déléguécomme administrateur.(1)

2/ Dans une société de droit français à Conseil d’administration, la décision de séparer ou de réunir les fonctions de Président et de Directeur général est prise par le Conseil. En 2017, le Conseil d’administration de Danone,présidé par Franck Riboud, a décidé de réunir à nouveau ces fonctions (séparées depuis 2014) pour les confier à Emmanuel Faber. Toute décision de changement de cette organisation revient donc au Conseild’administration, qui est le seul à même de décider de la séparation ou non des fonctions.

3/ Depuis 2003, Phitrust a insisté auprès de nombreux dirigeants d’entreprises du CAC 40, dont ceux de Danone, sur l’importance de séparer les fonctions de direction dans les grands groupespour des raisons d’équilibre et de répartition claire des pouvoirs. L’existence d’un Administrateur réfèrent chez Danone est néanmoins un facteur certain de contre-pouvoir. Ce rôle est d’autant plus fort que sa fonction etson rôle sont inscrits dans les statuts plutôt que dans le règlement intérieur. En 2020, Phitrust a renouvelé auprès du PDG de Danone la nécessité d’inscrire le rôle de l’administrateur référent dans les statuts lorsde la prochaine Assemblée générale.

4/ Tout membre du Conseil d’administration est tenu à la confidentialité des débats au sein du Conseil. Les informations distillées dans les médias sur des «dissensions» au sein du Conseil de Danone quant à la stratégie menée par son PDG ne peuvent qu’interpeller sur les causes et les objectifs de ces «fuites», qui de fait déstabilisent l’entreprise. Divulguer des lettres privées envoyées par des actionnaires au Conseil d’administration, alors que la direction générale est dans une période où elle ne peut s’exprimer pour y répondre, conforte cette idée d’une manœuvre déstabilisante.

Légitimité des décisions stratégiqueslargement approuvées jusqu’à ce jour en Assemblée Générale

1/ Le plan de transformation «Local First», évoqué publiquement depuis 2015, a été approuvé par le Conseil d’administration de Danone et annoncé le23 novembre 2020, soit il y a 3mois seulement. Il semble donc que les critiques formulées à l’égard de ce plan sont,soit sans fondement réel si ellessont émises par des actionnaires récents (ce plan n’ayant pasencore produit ses effets), soit sans légitimité si elles sont émises par des membres du Conseil qui ont «challengé» ce plan et l’ont adopté.

2/ Danone subit dans son activité «Eau» un ralentissement très fort liéà la crisesanitaire, qui ne remet pas en cause la pertinence de ce pôle à long terme mais pèse sur les résultats de la société aujourd’hui. Par ailleurs, le virage stratégique pris par Danone sous l’impulsion d’Emmanuel Faber (notamment avec l’acquisition de WhiteWave en 2017), même s’il n’est pas encore pleinement concrétisé dans les résultats de l’entreprise, se révèle être un axe de croissance durable. Cette stratégie a été validéepar le Conseil d’administration et l’ensembledes actionnaires en Assemblée générale.


Appuyer les stratégies de long terme est précisément ce que Phitrustmet en œuvre depuis 2003 avec les dirigeants des entreprises du CAC40. Cetterelationest fondée sur un dialogue long et parfois difficile. Actionnaire de Danone depuis 2003, Phitrust a toujours entretenu un dialogueet une écoute mutuelle constructive, même si cela a dû donner lieu à des dépôts de résolution en Assembléegénérale.

Etre actionnaire responsable,c’est accompagner la nécessaire transition environnementale et sociale des entreprises. Le groupe Danone asu procéder au cours de son histoire à des virages stratégiques importants,porteurs de croissance durable,et cetout en respectant les intérêts de l’ensemble de ses parties prenantes (et notamment ses salariés et actionnaires). La vision stratégique proposée par le Conseil d’administration de Danone,et validée par la très grande majorité des actionnaires,est pionnière depuis de très nombreuses années et vise à réconcilier l’entreprise avec les enjeux sociaux et environnementaux des territoires dans lesquels le groupe intervient.

L’AG 2021sera l’occasion de débattre avec sérénitéet plus de recul sur ces enjeux fondamentaux et surla vision à long terme qui les englobe. Aux actionnaires de valider ou non la vision présentée par son Président-Directeur général et le Conseil d’administration.


(1)16 février 2021*la séparation Président/Directeur général est mise en place pour faciliter la transmission avec la nomination d’un Directeur général appelé à devenir Président quand le prédécesseur part à la retraite.



22 December 2020

City Of Paris Is Fined 90,000 Euros For Naming Too Many Women To Senior Positions

The city of Paris has been fined 90,000 euros for an unusual infraction: It appointed too many women to senior positions in the government.

In 2018, 11 women and five men became senior officials. That meant 69% of the appointments were women — in violation of a rule that dictated at least 40% of government positions should go to people of each gender.

In remarks on Tuesday to the capital's governing body, Mayor Anne Hidalgo said she would deliver the check to the Ministry of Public Service herself — along with the women in her government.

"So there will be many of us," she said.

Since 2019, French law provides a waiver to the 40% rule if the new hires do not lead to an overall gender imbalance, Le Monde explains. That's the case for the city of Paris, according to the newspaper: Women still make up just 47% of senior executives on its government. And female city officials are paid 6% less than their male counterparts.

But the rule change comes too late to avoid the fine.

"It is paradoxical to blame us for appointments that make it possible to catch up on the backlog we had," Antoine Guillou, the mayor's deputy in charge of human resources, told Le Monde.

Hidalgo, a member of the Socialist party who was first elected mayor in 2014 and was reelected this year, says the aim is to resolve an existing imbalance toward men.

"Yes, we must promote women with determination and vigor, because the delay everywhere in France is still very great," she told the Paris Council. "So yes, to promote and one day achieve parity, we must speed up the tempo and ensure that in the nominations there are more women than men."

"In Paris, we are doing everything to make it a success, and I am very, very proud of a large team of women and men who carry together this fight for equality," Hidalgo added.

Amélie de Montchalin, France's Minister of Public Service, lamented the fine and called the provision "absurd."

"@Anne_Hidalgo, the cause of women deserves better!" Montchalin tweeted. "I want the fine paid by Paris for 2018 to finance concrete actions to promote women in the public service. I invite you to the ministry to raise them!"


14 September 2020

ENGAGEMENT ACTIONNARIAL - Les investisseurs responsables face aux dilemmes des AG 2020


"L’engagement actionnarial désigne le fait, pour un investisseur, de prendre position sur des enjeux Environnementaux, Sociaux et de Gouvernance (ESG) et d’exiger des entreprises visées qu’elles améliorent leurs pratiques dans la durée. Ces exigences sont formulées via une démarche struc-turée comprenant un dialogue direct avec l’entreprise et un suivi sur le long terme."Certains acteurs utilisent aussi le terme d’« actionnariat actif » (stewar-dship en anglais). L’objectif de l’engagement actionnarial est de sensibi-liser l’entreprise à des risques ESG pour lesquels ses actionnaires l’estiment insuffisamment préparée et à faire pression pour qu’elle modifie sa stratégie afin d’y faire face. Il répond à une logique d’escalade (voir graphique) qui s’adapte aux réactions des entreprises ciblées.

<click here>

ENGAGEMENT ACTIONNARIAL - Les investisseurs responsables face aux dilemmes des AG 2020 (PDF)



24 June 2020


Pierre-Henri Leroy, Founder and Chairman of France’s leading proxy agency Proxinvest, has sold a controlling stake to Alain Demarolle.

For 25 years, Proxinvest has been the sole independent proxy firm in France promoting effective corporate governance practices & shareholder democracy in numerous situations such as Renault, Lagardère or Casino among many others. Proxinvest is also the managing partner of ECGS, the European corporate governance service network.

Alain Demarolle has a close to 30 years global track record including 20 years on financial markets and 10 years as a French senior Government official. An Inspecteur des finances he served in the French Treasury, from 2005 to 2007 as the Economic and Financial Advisor to the Prime Minister of France and then advised the French Minister of Finance Christine Lagarde on Sovereign Wealth Funds. He held various senior financial positions in New York & London, at Salomon Smith Barney, and also as a Partner with Bear Stearns (2002- 2005) and Eton Park International a global multi strategy fund (2007-2010). He also served as Chairman of LCH Clearnet SH (2014-2016).

According to Pierre-Henri Leroy: “I welcome Alain Demarolle as the new controlling shareholder of Proxinvest. More accountability & transparency is needed by all stakeholders to ensure the financing of the real economy and of the financial sector”.

Alain Demarolle added: “It’s an honour to follow Pierre-Henri Leroy at Proxinvest. In full respect of its independence & key principles, I will endeavour to further develop Proxinvest as a key player on the French and European markets”.

Alain Demarolle has been elected today as Chairman of the Board of Proxinvest. Also joining the Board are Sonia Criseo, Regional Head World Agency France at Euler Hermes, Jean-Philippe Hottinguer Chairman of the Supervisory Board at Banque Hottinguer and Pierre Mongin Senior Advisor of Greenhill and Co, former CEO of RATP and Deputy CEO of ENGIE. Olivier de Guerre, Chairman of Phitrust and Vincent Kaufmann, Managing Director of Ethos Service SA, remain Members of the Board.

Loïc Dessaint has been confirmed as Chief Executive Officer of Proxinvest and will continue to lead the Proxinvest team.


27 April 2020


For several years (in 2011 and 2016 in particular), Phitrust has conducted an active dialogue with Total’s executives on the environmental and social impact of the company's activities. Itsobjective this year was to obtain a formalization of this dialogue in respect with multilateral agreements (the Paris Agreement) and changes in French legislation (the Pacte Law).

By accepting a change that Phitrust requested, which will be proposed to the Shareholders' General Meeting of May 29, 2020 in the 14th resolution (amendment of the Article 14 in the legal status defining the powers of the Board of Directors), the Total’s Chairman and Chief Executive Officer andthe Board of Directors formalize their commitment to take into account major environmental and social issues.

Although the Pacte law amended the French Civil Code’sArticle 1833 ("the company is managed in its social interest, taking into consideration the social and environmental issues of its business"), it was important that:

1/ Total include environmental and social issues in itslegal status;

2/ the Board of Directorspowers be extended to the determination and implementation of the activity taking into consideration these social and environmental issues. This implies a de facto responsibility of all directors to take these issues into account.

Including environmental and social responsibility in the missions of the Board of Directors represents a major change:it goes beyond the sole issueof reporting, which, although necessary and important, can evolve over time in terms of indicators or objectives. Above all, this involves the groupto integratethe urgency of certain issues -particularly environmental ones -into its vision and strategic orientations.

We hope, however, that Total's management will take a further step in this direction by explicitly linking these issues to the objectives of the «Accord de Paris».

The process undertaken with TOTAL is one of several initiatives that are motivated by the same goal of improving the governance of the oil company.

With Phitrust Active Investors France mutual fund’s investors, we will pursue our demanding but confidentdialogue with Total’s managementand the implementation of our shareholder’ rights.In this way, we will keep on encouraging theTotal’s Board of Directors to address environmental and social issuesconcretely and at a steady pace.



18 April 2020

Phitrust’s resolution project at the Vivendi AGM

The shareholders of the mutual fund (Sicav) Phitrust Active Investors France have taken the decision to submit a resolution project at Vivendi’s Annual General Meeting on April 15th 2019.

Since 2015, Phitrust has insisted on Vivendi’s non-satisfactory governance. Today, the company’s governance is “reversed” and does not comply with the logic of having a separation of powers. This separation of management functions had been voted by shareholders at the AGM in 2005 with the creation of a Supervisory Board and a Management Board. Indeed, in a dual governance structure with a Supervisory Board and a Management Board, major shareholders should be represented at the Supervisory Board, and the Group’s operational management should be members of the Management Board. In fact, Vivendi’s current governance structure is the opposite of what good governance practices should be.

The Supervisory Board, appointed by shareholders, is chaired by Mr. Yannick Bolloré, who is also the Chairman and CEO of Havas Group, which is one of Vivendi’s subsidiaries. Therefore, Yannick Bolloré has the responsibility of “supervising” Vivendi’s Management Board to which he must himself report as the Executive Director of one of the most important subsidiaries.

Furthermore, two managing directors of the Group, Bolloré, Mr. Gilles Alix and Mr. Cédric de Bailliencourt, are both members of Vivendi’s Management Board, without having key experiences of the business specificities of Vivendi. It therefore seems complicated for Vivendi’s Supervisory Board to oversee the representatives of its major shareholder…

In general terms, concerning potential conflicts of interest that can be generated by business relationships between the companies Vivendi and Bolloré, it would be in an interest of good governance that the Supervisory Board of Vivendi appoints an independent Chairman.
Phitrust calls upon shareholders to join this resolution project asking for the anticipated end of Yannick Bolloré’s mandate as a member of the Supervisory Board at the Annual General Meeting on April 15th 2019.


[Impact Actionnarial] Projet de résolution de Phitrust à l’AG de Vivendi

Les actionnaires présents dans la Sicav Phitrust Active Investors France ont pris la décision de soumettre un projet de résolution à l’assemblée générale de Vivendi du 15 avril 2019.

Depuis 2015 notamment, Phitrust insiste sur l’organisation non satisfaisante de la gouvernance de Vivendi. La gouvernance de la société fonctionne aujourd’hui « à l’envers » et ne répond pas à la logique de séparation des pouvoirs, validée par les actionnaires à l’assemblée générale de 2005 avec la création d’un Conseil de surveillance et d’un Directoire. En effet, dans une structure de gouvernance duale à Conseil de surveillance et Directoire, la place des grands actionnaires est de siéger au Conseil de surveillance et la place des dirigeants opérationnels est d’être membre du Directoire. Vivendi pratique exactement l’inverse.

Le Conseil de Surveillance, nommé par les actionnaires, est ainsi présidé par Monsieur Yannick Bolloré, alors que ce dernier occupe aussi la fonction de Président-Directeur Général d’Havas, filiale de Vivendi. Ainsi Yannick Bolloré a-t-il la responsabilité de « surveiller » le Directoire de Vivendi auquel il doit lui-même rendre des comptes en tant que dirigeant d’une des plus importantes filiales.

Par ailleurs, deux dirigeants du groupe Bolloré, MM. Gilles Alix et Cédric de Bailliencourt, siègent en tant que membres du Directoire de Vivendi, sans expérience clé sur les métiers de Vivendi. Il semble délicat pour le Conseil de surveillance de Vivendi de contrôler des représentants de son actionnaire principal…

D’une manière générale, au regard des conflits d’intérêts potentiels que peuvent susciter les relations d’affaires entre les groupes Vivendi et Bolloré, il semblerait de bonne gouvernance que le Conseil de surveillance nomme un Président indépendant.

Phitrust invite donc les actionnaires à s’associer à son projet de résolution demandant à l’Assemblée générale du 15 avril 2019 la fin par anticipation du mandat de M. Yannick Bolloré comme membre du Conseil de Surveillance de Vivendi.



2 March 2020

Following the Carlos Ghosn case let us dismiss also the auditors of Renault & Nissan

The independent auditors are the pillars of the financial markets, for their job is to monitor the fairness and legality of the companies accounts and activities.

Financial concentration created powerful multinational firms but also sometimes allowed for self-dealings and misbehaviors at the top. Independent auditors, because they offer also many others services to management, sometimes ignored or even covered-up these failures which endanger the profitability or even the survival of these groups.

The Renault-Nissan self-dealing case, illustrated by the Versailles video, and confirmed by recent press updates, was an extreme and unexpected case : Nissan turned against its former chairman and CEO for potentially criminal acts which the company auditor, the Japanese branch of EY, had, according to the Japanese press,  known for long :

While these already settled with the SEC for about 140 M$ mis-reporting, it appears appropriate to restore the accountability of auditors, as these audit firms are the only protection of the shareholders, employees and directors, but also consumers.This petition therefore calls for their eviction and the putting into play of their responsibility.

As stakeholders of Renault SA we hereby request the French State, the AMF, the Board of directors and the workers Council of Renault SA to consider the legal dismissal of the two acting auditing firms of Renault SA and Nissan Motors, EY and KPMG before the next general meeting of the Renault shareholders to be held on June 12  2019 in Paris.



“For the protection of the Renault employees, clients, shareholders and Directors, and in line with articles  L823-6  and  L823-7 of the Code de commerce, we shareholder(s) of Renault SA, the owner of 43% of Nissan, h's employees, clients and shareholders we hereby request the French State as first shareholder of the company, the French Autorité des Marchés Financiers the Board of directors of the company to proceed as soon as possible with the court request for the dismissal  under the "récusation" process  of article L823-6 or under the "relèvement judiciaire" of article L823-7 of the two independent acting audit firms appointed by the Board and the shareholders of Renault, ERNST & YOUNG Audit ( EY) and KPMG Audit (KPMG),.“


The reason of this request is the likeliness of negligence as these auditors failed to control or detect that a number of the alleged transactions of the management of both Renault and Nissan groups were arranged with related parties while some remuneration items for the CEO were not disclosed to investors in breach of the auditors and the automotive companies disclosure obligations.

All the hereunder mentioned alleged transactions or remunerations should have been subject to the French legal public disclosures  and/or to the French related party transactions approval proceedings, but were not. Most of them were known by the auditors, and many of them could have been suspected and prevented by appropriate actions allowing directors and shareholders of the companies to act.     

Responsibility of the independent auditors of the Renault-Nissan Alliance group.

The major audit firms generally boost that their international network is a benefit for their multinational clients and for the shareholders of these companies. EY is the independent auditor of both Renault and Nissan Motors, a 43% Japanese subsidiary of Renault, and KPMG is joint-auditor at Renault.  

On November 19, 2018, Nissan Motor Co., Ltd disclosed that the company’s Representative Director and Chairman Carlos Ghosn and Representative Director Greg Kelly had for years underreported compensation amounts in Tokyo Stock Exchange securities reports to reduce the disclosed amount of these compensations. Over the past decade, Nissan reported paying its president Carlos Ghosn ¥1 billion per year in compensation, but in truth, Nissan paid Mr. Ghosn an additional ¥1 billion per year in the form of deferred compensation, but failed to disclose these payments in the company’s publicly filed financial reports, and that as a result, Nissan underreported its CEO true pay over the decade by an estimated ¥10 billion. 

Nissan Motor Co., Ltd. also disclosed on the same day other “significant acts of misconduct” by Ghosn, including personal use of company assets. 

According to the Japanese Asahi Shimbun newspaper (see hereunder:  REUTERS November 28, 2018  “Auditor had questioned Nissan on payments to Ghosn”) , the auditor of Nissan Motors, Ernst & Young ShinNihon, a member of the EY world network,  indicated to have questioned several times since 2013 the Nissan management about different transactions including the purchase and renovation of luxury houses by a € 70 million cash rich Dutch subsidiary of Nissan  Zi-A Capital BV, a shell company chaired by Carlos Ghosn until 2012. A home in Lebanon was purchased in 2012 for $9.5 million and renovated at a cost of $7.2 million.

EY ShinNihon had been auditor for Toshiba Corp. and Olympus Corp. during financial scandals at the two Japanese companies in recent years. EY as one of greatest audit firm in the world must be aware worldwide of the French rules concerning related party transactions.

Under the French article L 823-12 independent auditors should inform the general meeting of shareholders or the Board any irregularity or inaccuracy they have observed during their mission  Under the article L 225-38 that   “Any agreement that intervenes directly or by an interposed person between the company and one of its general Directors, one of its directors, one of its shareholders with a fraction of voting rights exceeding 10% (..) must be subject to the prior authorization of the board of Directors ”  and must be  included in a special  listing signed by the auditors to be later approved by non-beneficiary shareholders at the annual general meeting.

This real-estate transaction was clearly never reported by the Nissan and Renault chairman Carlos Ghosn or his aides in the special report signed by EY for Renault directors and shareholders. EY knew it, “questioned Nissan’s management several times” but did nothing else   either to stop these transactions or to proceed with le legal authorization proceedings.  

A series of significant acts of misconduct reported by the press   

It appeared since in the press that several other major transfers for the direct or indirect benefit of Carlos Ghosn have been undertaken through different subsidiaries or co-subsidiaries of Nissan Motors and/ or Renault SA.

1/ For the CEO  himself, according to the press, the Japanese prosecution alleged:  

-          the transfer to Nissan of Foreign exchange contracts carrying 1.85 billion yen in unrealized losses from  a personal investment contract then following a retransfer of the contract back to him in February 2009, the payment by Nissan Middle East, a Nissan subsidiary based in the United Arab Emirates, of 1.3 billion yen to a company owned by Khaled Juffali between 2009 and 2012.  

-          a $8.8 million payment made in 2018  by a 50-50 venture between Nissan Motor Co. and Mitsubishi Motors Corp., set up in 2017 in Amsterdam a special undisclosed transaction bonus,  

-          a payment $5 million to himself the Oman dealership, Suhail Bahwan Automobiles (SBA), from a 15 million transfer by a Nissan subsidiary called Nissan Middle East based in the United Arab Emirates from December 2015 to July 2018.

-          the rental, purchase and/or  renovation for his exclusive personal use of luxury housing  including a house in Lebanon and apartments in Amsterdam, Paris, Tokyo and  Rio de Janeiro for an estimated USD one million yearly charge.

-          and the hiding of unreported differed pay amounts by Nissan of  $43 million (5 billion yen) in compensation for 2010-2015 about 1 billion yen ($9 million) each year that he had arranged to receive later

2/ For his son Anthony Ghosn, the indirect benefits from the transfers to Suhail Bahwan Automobiles (SBA) of funds which, according to the Asahi Shimbun, in part ended up at GFI a Lebanese personal company which from 2015 to 2018,  offered $27.5 million in financial assistance to a company Shogun set up  in the United States

3/ For his sister Claudine Bichara de Oliveira the benefit of yearly substantial cash payments totaling  $1.7 million from the Japanese automaker and the permanent residence in a Nissan beach front apartment in Rio de Janeiro.

4/ For friends and relatives : according to the press sixteen mostly Lebanese VIP friends with his sister were invited by Carlos Ghosn to the Rio carnival in February 2018 for total expenses exceeding USD 100 000. Besides, the French and Lebanese press had reported the occurrences  the celebration of a personal anniversary in 2016  in the castle of Versailles, as recognized by Renault on February 7. 2019, and of a gala dinner on March 9 2014 for Carlos Ghosn 60 th. birthday for expenses of respectively € 50 000 euros  and € 636 000 paid by the Renault group. 

The Reuters agency reports (February 1st.  2019 “Renault-Nissan payments to political advisers draw scrutiny ”),  several payments made by the Dutch joint venture company  Renault-Nissan  BV lacked transparency and  are under scrutiny.  “Spending on advisers appeared in RNBV accounts as a single line for consultants’ fees, which exceeded 20 million euros in 2015.”  

Under French law, all of these transactions, when relating directly or indirectly to the Chairman and CEO of Renault, Carlos Ghosn, should have been first reported by the Chairman to the Board of Directors and carried by the Auditors in the special report on related party transactions signed each year by the representatives of EY and KPMG for a final approval vote by the general meeting of shareholders. It appears clearly that while EY as a group and KPMG have been aware of several of these transactions managed by Carlos Ghosn for his own direct and indirect benefit none of these were reported to the Directors nor to the shareholders of Renault. The independent auditors of Renault knew of it and, despite of substantial service fees, did not engage appropriate means.


Pierre-Henri Leroy                                      

With special thanks for their support to Baudoin de Pimodan, Yves Thomazo,  Loïc Dessaint, Loïc de la Cochetière, Nicolas Boucant.

May 2019


Reuters November 28. 2018

Nissan Motor Co.’s auditor had repeatedly questioned transactions at the heart of allegations of financial misconduct by former chief Carlos Ghosn but Nissan said they were proper, a person with direct knowledge of the matter said on Wednesday.

Ernst & Young ShinNihon LLC questioned Nissan's management several times, chiefly around 2013, about purchases of overseas luxury homes for Ghosn’s personal use and of stock-appreciation rights that were conferred on him.

But the Japanese automaker said the transactions and financial reporting were appropriate, the source told Reuters on condition of anonymity.

The revelation shows Nissan and its auditor were discussing the transactions, in apparent contrast with Nissan’s contention that the alleged misreporting of benefits for Ghosn was masterminded by Ghosn and a key lieutenant.

A spokesman for EY ShinNihon, the Japanese affiliate of global accounting firm Ernst & Young, said he could not comment on specific cases. A Nissan spokesman declined to comment.

Ghosn was arrested on Nov. 19 as he arrived in Japan. Prosecutors accuse him of falsifying Nissan’s annual reports to understate by about half his total compensation of some 10 billion yen ($90 million) over several years.

The high-profile former executive has denied the allegations, according to Japanese media. Ghosn remains in custody and is unable to speak publicly. He is represented by former prosecutor Motonari Otsuru, according to Japanese media.

Otsuru’s law firm declined to comment on Wednesday, and Otsuru has not responded to requests for comment.

Nissan has largely pinned the blame on Ghosn and Greg Kelly, a former representative director who was arrested along with Ghosn on the same allegations.

“As a result of the investigation, we are certain these two are the masterminds,” CEO Hiroto Saikawa told a news conference on Nov. 19, referring to Ghosn and Kelly. He declined to say whether others at Nissan were involved in the alleged wrongdoing. An internal investigation is ongoing, and Nissan says it is cooperating with prosecutors.

Nissan and Mitsubishi Motors Corp. have removed Ghosn as chairman in the wake of his arrest. The French member of the three-firm alliance, Renault SA, retains him as chairman and CEO.

EY ShinNihon questioned Nissan management about Zi-A Capital BV, asking whether the Dutch unit--which purchased the overseas homes for Ghosn's use--was conducting business in line with its stated aim as an investment company, said the source, who is not authorized to speak publicly on the matter.

The car maker said Zi-A was conducting its business appropriately, the source said. Japanese media have valued the transactions at more than 2 billion yen.

Similarly, the source said, the auditor asked whether the stock-appreciation rights--which are like stock options but pay out in cash if a share rises to a certain price--should be declared, but Nissan replied that was not necessary. Japanese media say the rights were worth some 4 billion yen.

EY ShinNihon had been auditor for Toshiba Corp. and Olympus Corp. during financial scandals at the two Japanese companies in recent years.





17 December 2019



Phitrust has written to the Chairman of Groupe PSA concerning the proposed merger with Fiat Chrysler Automobiles (FCA Group), questioning the financial, as well as environmental, social and governance (ESG) aspects of the project, therefore questioning its implementation in the current state.


These questions are grouped around 3 major issues:

1. The parity initially proposed does not reflect the reality of the strengths and weaknesses of both groups. It was made on the basis of a 50/50 merger, erroneous by principle as a merger between equals does not exist. The parity of this merger is also unsatisfactory in its calculation, taking into account the relative value of the two groups with the intended asset disposals and distributions, as well as their situation in industrial (and social …) terms. Phitrust questions the level of readiness of both companies in order to face the challenges of the future European, as well as international environmental regulatory standards, and challenges in the automotive sector as a whole.

Phitrust requests that, in order to respect the balance between the parties, the merger parity or announced distributions be reviewed.

2. The proposed transfer of registered office in the Netherlands would in fact introduce a deterioration of shareholders’ rights and a decline in governance. This deterioration concerns, in particular, the end of the representation of employees on the Board of Directors, the maintenance of unequal voting rights, as well as other restrictions on minority shareholder’s rights (higher threshold for filing resolutions, stronger capital protections) in Dutch law.

Phitrust therefore requests that the head office of the future entity be located in France and subject to French law.

3. In case of refusal of the transaction by Groupe PSA shareholders in Extraordinary General Meeting (EGM), Phitrust expressly requests that the possible compensation for breach of contract, be simply canceled.

Since the announcement of this merger, Phitrust is surprised by the bad news leaked on the market. These news concern a lawsuit against FCA for corruption (which would be orchestrated by General Motors on the US market) and the risk of fines. In addition, tax penalties concerning the acquisition of Chrysler could affect FCA in Italy due to the significant amount of the fine.  

All this reflects the image of a poorly prepared operation, carried out in a hurry (following the setback suffered by that envisaged with Renault), and which at this stage leaves far too many unresolved issues in order for this merger to be accepted in the state by Groupe PSA shareholders during the Extraordinary General Meeting dedicated to this project.

Phitrust hopes that the Groupe PSA executives will have heard these questions and will provide answers before presenting this major transaction to the shareholders’ vote at the General Meeting.



12 December 2019

Proxinvest publishes its twentieth third report: “Annual General Meetings and shareholder activism – 2019 season”

(Hans-Martin Buhlmann and Jose Ignacio Sanchez Galan after VIP remarks in 2019 Iberdrola AGM)

Restrained General meetings

While the “Place de Paris” (i.e stakeholders on the French listed market) wonders about the potential framework regarding shareholder activism, Proxinvest’s report on General Meetings displays that in fact General Meetings of French companies remain very controlled. In point of fact, 57.6% of voting rights exercised in the 315 General Meetings analyzed by Proxinvest were in the hands of reference shareholders (36% in the CAC 40), explaining why only 0.64% of resolutions were not adopted.

Only 42 resolutions were rejected, reaching its lowest level in six years. Once again this year, thanks to reference shareholders’ double voting rights, 17 resolutions were adopted when they would have been rejected without them.

This year, the average opposition rate to resolutions reaches 5.03% of the votes cast, a 13% decrease compared to the previous year. Part of this phenomenon is the result of Companies respecting Proxinvest’s voting guidelines (decrease of 5% of Proxinvest’s recommendation of “oppose” rate), even though efforts need to be remained: Proxinvest had yet to send alerts to its clients to over 4 out of 10 resolutions.

Hans-Martin Buhlmann

Strong criticism of remunerations in the CAC 40

Minority shareholders were more contentious in the CAC 40 (+ 9.8%) than in the SBF 120 (-19.4%). For instance, critiques have increased on executive remuneration, where the average approval rate went from 89% to 86.9%. Some practices of excessive remunerations of CEO’s in the CAC 40 were notably criticized by minority shareholders during General Meetings: Bernard Charlès (Dassault Systèmes), François-Henri Pinault (Kering), Douglas Pferdehirt and Thierry Pilenko (TechnipFMC), Carlos Ghosn ( Renault), Leonardo del Vecchio and Hubert Sagnières (EssilorLuxxottica), Maurice Lévy (Publicis).

The 2019 season of Annual General Meetings was particularly marked by the first rejections of the binding vote of shareholders on the remuneration of directors introduced by the “Sapin 2 Law”. Jean-Charles Malcor at CGG did not receive his exceptional compensation with 61% of votes against. In the same way, the new remuneration policy of CGG’s General Manager with 56% of votes against, was rejected. Furthermore, Renault’s previous CEO Carlos Ghosn was unable to receive his annual bonus with 89% of votes against.

This year, Proxinvest was astonished that Vivendi changed the fixed compensation of the CEO, and moreover Valeo changed the measurement period of the performance conditions concerning free share plans, both without the approval of a General Meeting. Issuers should not disclose information that could influence shareholders’ votes during General Meetings, and then over time not comply with these agreements, which would then become misleading market information.

Shareholder concerns regarding the dilution risk

Beyond executive compensation, the most contentious issue in Europe according to the European network of Proxinvest (ECGS i.e European Corporate Governance Services), the topics that caused the most votes against from shareholders at French General Meetings are notably related to agreements signed with related parties (5 rejections), anti-takeover bids and the risk of dilution during capital increases without preferential subscription rights (19 rejections). The willingness of companies to dilute their shareholders in place by excluding them from new capital increases is all the more concerning as a recent decree increased the possible discount of 5% to 10% below the market price, a real award paid through shareholder dilution…

Further long-term shareholder engagement

The 2019 season was marked by a revival of shareholder engagement. Thus, beyond the flagship cases of shareholder activism, Proxinvest noted an increase in the number of external proposals at General Meetings. During the season, the number almost doubled compared to the previous 2018 season totaling 39 external proposals. Even if not approved, the proposals for the revocation of Denis Kessler by CIAM at SCOR or the very high score of appointments of independent directors by Phitrust and Comgest at EssilorLuxxottica have led to debates on the “Place de Paris”. Article 198 of the PACTE Law and the publication on 28 November 2019 of its decree on the long-term engagement of shareholders will only encourage investors towards their responsibility to engage and cooperate.



7 November 2019

Proxinvest publishes its twentieth report « Executives’ compensations in the SBF 120 »

A contrasting 2018 financial year for executive compensation: moderation in the SBF 120 and drift in the CAC 40

Proxinvest’s annual report on 2018 executives’ remunerations shows a 4% decrease on the average total remunerations of executives in the SBF 120; it reached EUR 3.6 million in 2018.

This moderation is not found in the sub-sample of very large French companies. The average total remunerations of executives in the CAC 40 increased by 12% in 2018 (+6% on a constant sample basis), and reached EUR 5.8 million, breaking a new record since the 2008 financial crisis.

As a reminder, Proxinvest’s report values all elements of executive compensation granted for the 2018 financial year (fixed remuneration, annual bonus, fees, benefits in kind, stock options and free or performance shares valued at their date of allocation, cash incentives and other indirect forms of remuneration).

While fixed compensations dropped by 2% in the SBF 80, the 3% increase in the CAC 40 concerning fixed remunerations, above inflation, is too brisk. Furthermore, Proxinvest notes that stock-options are fading in the remuneration packages (2% of the total) and an extensiveness of free shares (34% of the total). These shares are usually attached to performance conditions (“long-term incentives”), but often lead to the allocation of considerable amounts.

Once again, Proxinvest’s study concludes that there are no justifications for the increase of remunerations in the CAC 40, both in terms of shareholder performance, and in terms of social cohesion. In 2018, Proxinvest noticed a 6.2% drop in cumulative net profits within the CAC 40, on a constant sample basis, and a 8% decrease in the CAC 40 Dividends reinvested index. While the French “PACTE Law” will require companies to disclose the gaps between executives and employees’ average compensations (“CEO Pay Ratio” or “Ratio d’Equité”), Proxinvest notes that the increase of the remuneration of executives in the CAC 40 is three times faster than employees, in 2018 as well as for the 2014-2018 period.

The excesses observed on a small quantity the top-ranking executives explain the increase of the average remuneration in the CAC 40

The average remuneration of EUR 5.8 million for executives in the CAC 40 had not been reached since 2003 and, for the second year in a row, exceeds the maximum socially acceptable remuneration of 240 times the French minimum wage(“SMICs”) defined by Proxinvest, representing approximately EUR 5 million. Curiously, in 2018, 22 SBF 120 executives (16 in the CAC 40) were above the ceiling recommended by Proxinvest against 29 in 2017 (including 19 in the CAC 40).  In the same way, the median of the remunerations in the CAC 40 decreased by 12% reaching EUR 4.1 million, indicating that the deviation is mainly due to the remuneration of a few executives among the highest paid.

The Chief Executive Officer of Dassault Systèmes, Bernard Charlès, is still on the top of the rank with a total remuneration of EUR 33.1 million, according to Proxinvest (EUR 22.9 million according to the Company). A 34.6% increase thanks to a very generous allocation of performance shares, whose valuation was restated by Proxinvest.

In second place, François-Henri Pinault, Chairman and Chief Executive Officer of Kering, whose exceptional grant of performance units, with no performance conditions attached, amounted to EUR 5.81 million, as well as an assistance agreement with its holding Artémis amounting to EUR 5.08 million. Hence, his total remuneration amounts to EUR 17.3 million (+75.7%) according to Proxinvest (EUR 12.2 million according to the Company). 

Carlos Ghosn, former Chairman and Chief Executive Officer of Renault and former President of Nissan, is in third place with EUR 14.3 million (+ 12.1%). Carlos Ghosn did not receive any variable remuneration for the 2018 financial year from Renault since the resolution regarding his remuneration was not approved (on recommendation of the Board) during the annual general meeting held in June 2019. Furthermore, he was deprived of both retirement and performance shares. As to Nissan, the total remuneration disclosed for the year ended 31 March 2019 amounted to EUR 13.3 million. The Ghosn case made it clear that he had the absolute authority to set his own remuneration at Nissan, and could therefore decide on this increase regarding his fixed remuneration. The case also exposed a lack of transparency towards shareholders, and the ability to control indirect benefits received by related parties.

Douglas Pferdehirt, now Chairman and Chief Executive Officer of TechnipFMC, comes in fourth place with a total remuneration amounting to EUR  11.7 million (+ 10.7%), whereas the company has net losses of USD 1.7 billion, but also a 16% decrease of its total revenues, a 61% decrease of the share’s market price since the merger, and a very depraved social context. Once again, he was awarded compensation instruments such as options and restricted shares, with no performance conditions attached. A common practice in the United States, but that does not comply with the French AFEP-MEDEF Code.

Jean-Paul Agon, Chairman and Chief Executive Officer of L’Oréal, is fifth in the ranking at EUR 9.5 million, a slight decrease of -0.5%. It should be noted that Jean-Paul Agon has the highest fixed remuneration in the CAC 40 (EUR 2.2 million), and the highest expected pension scheme (EUR 1.57 million) of the CAC 40.



20 June 2019

Décompte des votes en AG : le coup de gueule du gendarme boursier

Par Laurence BOISSEAU - LesEcho

L'AMF regrette que les travaux de rédaction du guide pour améliorer le fonctionnement des AG aient été engagés seulement par l'industrie financière, et qu'ils ne soient pas terminés. Le régulateur préconise un dispositif qui veille à ce que seuls soient pris en compte les bulletins de vote valides, c'est-à-dire horodatés et signés.

Le gendarme des marchés perd patience. Depuis des années, il se préoccupe du traitement des votes en assemblées générales (AG), qu'il juge non sécurisé. En 2018, les événements lui ont donné raison.  Douze sociétés du CAC 40 et quarante du SBF 120, soit une sur trois,ont publié des résultats de vote faux . Et ce, à cause de problèmes informatiques chez BPSS (BNP Paribas Securities Services) chargée de collecter les votes des actionnaires. Chez Vinci, les erreurs de décomptes des voix ont même changé le sens des votes.

Un dispositif préventif

En octobre dernier, l'AMF (Autorité des Marchés Financiers) a alors exigé que soit élaboré très vite un guide méthodologique de traitement des votes en AG pour définir des règles communes. Ce guide devait servir de dispositif préventif. Il devait aussi être rédigé par tous les acteurs de la place concernés (les banques, les organisations patronales et les émetteurs). Mais rien de très concret n'a été fait pour l'instant.

Selon nos informations, Claude Nocquet, présidente de la Commission Epargnants (une commission dont la mission est d'éclairer le collège de l'AMF, organe de décision), a tapé du poing sur la table. «Etonnée qu'aucune suite concrète n'ait alors été donnée à ce projet, la Commission Epargnants (..) a eu la surprise d'apprendre que des travaux de confection du guide avaient été bien engagés, mais par l'AFTI (Association des professionnels des titres) seule, et qu'ils n'étaient pas terminés » a-t-elle écrit à l'Association en question, regroupant l'industrie du post-marché et des métiers des titres. Ce courrier du 11 juin, que les Echos se sont procurés, a aussi été envoyé à l'ANSA (Association Nationale des Sociétés par Actions), aux organisations patronales (Afep et Medef) et aux groupes du CAC 40 pour qu'ils se mobilisent sur le sujet.

L'AFTI reconnaît avoir pris du retard qu'elle essaie de rattraper. Elle prévoit une consultation de place à la mi-juillet, juste avant les vacances d'été et espère être prête au deuxième semestre.

Des pratiques contraires aux dispositions légales

«La Commission a vu une première ébauche du guide qui l'a fort déçu. N'est prévu aucun dispositif pour éviter des erreurs dans le décompte des votes. Or, des contrôles effectués révèlent parfois des pratiques contraires à la loi, avec des bulletins de vote comptabilisés alors qu'ils ne sont pas valides», explique une source proche.

Claude Nocquet, bien connue sur la place de Paris _ anciennement conseiller de la cour de cassation et présidente de la commission des sanctions de l'AMF, elle siège aujourd'hui au Collège du régulateur _ demande donc avec fermeté que le guide impose certaines pratiques.

Parmi elles, l'horodatage dès réception des bulletins. La loi précise que les formulaires reçus moins de trois jours avant l'AG ne peuvent être considérés comme valides. Or, dans beaucoup de sociétés, les bulletins ne sont pas horodatés mais sont quand même pris en compte alors que personne ne sait s'ils sont arrivés dans les délais. « On peut craindre la survenance de tris opportunistes entre de tels votes selon qu'ils vont ou non dans le bon sens », s'inquiète Claude Nocquet. 

Par ailleurs, « des  formulaires non signés sont souvent comptabilisés alors qu'ils ne devraient pas l'être ». L'AMF demande donc à l'AFTI un dispositif pour que ces bulletins soient systématiquement rejetés.

Dévoiler l'identité des actionnaires non-résidents

Autre pratique requise : les émetteurs devraient demander aux intermédiaires de dévoiler l'identité des actionnaires non-résidents pour le compte desquels ils interviennent. Aujourd'hui, les investisseurs étrangers votent très souvent via un intermédiaire. Et c'est uniquement ce dernier que connaît l'émetteur.

Enfin, dernier point, l'AFTI devra proposer des méthodes pour faciliter le calcul et la vérification de la validité des résultats des votes.



4 May 2019

ESSILORLUXOTTICA - It’s a critical time for all shareholders to move things forward

General Meeting - May 16, 2019


The proposals, presented by a group of global institutional investors, to appoint two independent Board members to resolve the governance deadlock at EssilorLuxottica is continuing to gain traction amongst shareholders and leading proxy advisory firms.

The two proposed directors, Wendy Lane (Resolution A) and Jesper Brandgaard (Resolution B), who have already been publicly supported by Baillie Gifford, Comgest, Edmond de Rothschild AM, Fidelity International, GuardCap AM, Phitrust, and Sycomore AM, now also receives the support of global proxy advisory firms Institutional Shareholder Services (“ISS”) and Glass Lewis as well as the local French proxy advisory firm, Proxinvest. 

More specifically, Glass Lewis and Proxinvest have supported both Board members whilst ISS only supported Wendy Lane (Resolution A). ISS’s unwillingness to engage with the two Board members proposed and its recommendation on Jesper Brandgaard’s (Resolution B) appointment is both unfortunate and lacks enough rationale given the obvious and immediate need to improve the governance at EssilorLuxottica.
The Lead-up to the Governance Deadlock

In January 2017, following an agreement between Essilor and Delfin S.à.r.l (the majority shareholder of Luxottica and the holding company of Leonardo Del Vecchio), the EUR 54 billion combination of equals was announced. Like other long-term shareholders, we were supportive of the nil premium combination based on the premise that the merger of equals would be: (1) delivering on the significant potential to create shared value by bringing together two complementary European companies in the optical sector; (2) governed efficiently through specific arrangements; and (3) delivering quantified synergies within the medium term.

As part of the Combination Agreement and the Board's internal rules, Essilor and Luxottica agreed that until 2021 (referred to as the “Initial Term”) they would share equal governance weight within the Board (with eight members proposed by Essilor and eight members proposed by Delfin) as well as in the combined Company’s leadership by Chairman and CEO (i.e. Leonardo Del Vecchio) and Vice-Chairman and CEO (i.e. Hubert Sagnières). 

After agreeing on equal governance weighting during the merger process, both parties have since publicly accused each other of trying to gain the upper hand for EssilorLuxottica’s leadership. Leonardo Del Vecchio claims that the Combination Agreement was violated notably by the appointment of four managers coming from Essilor while Hubert Sagnières has accused Leonardo Del Vecchio, who is also EssilorLuxottica’s largest shareholder through Delfin, of creeping control by publicly announcing in November 2018 his desire to appoint Francesco Milleri (CEO of Luxottica) as the combined entity’s CEO.

The disagreement between the two parties has since escalated when Delfin initiated an arbitration request before the International Chamber of Commerce (ICC) in March 2019 and Essilor requesting that the Paris Commercial Court bring in an outside mediator to unblock the situation and allow the board to function again and make decisions in April 2019.
The Motivation Behind Our Proposals 

The legal proceedings, which experts suggest may take ICC up to two years to reach an opinion (which the defeated party then has the option to appeal), reflects the potential longevity and severity of the disagreements between Leonardo Del Vecchio and Hubert Sagnières.

A prolonged governance deadlock will undoubtedly weaken the Company’s reputation, employee morale, ability to attract qualified candidates for the role of CEO to lead the integration efforts and delivering on communicated synergies. The current situation is undoubtedly worrying analysts and investors, evidenced by the Company’s underperforming share price.

At this critical time of post-merger integration, it is essential that the Board set a tone at the top to progress EssilorLuxottica’s future stability. The Board, in its current form, is clearly unable to address the apparent governance crisis due its set-up of equally divided camps representing the two legacy businesses and the lack of truly independent members to safeguard the interests of all shareholders of the combined entity. At this critical time of post-merger integration, organizational culture is extremely important. We believe setting the right culture starts from the boardroom by promoting the attitudes and behaviours that will help achieve the full potential of this merger. As such, it is essential for EssilorLuxottica’s Board to define and manage a culture that facilitates constructive interactions between its members, which we believe our proposed Board nominees will contribute to positively. Therefore, we feel that it is necessary for all shareholders to support the two Board nominees we have proposed to fix the governance deadlock.  
Two Independent and Experienced Board Nominees to Improve Boardroom Dynamics and Drive a Consensus-Driven Approach to Decision-Making

Wendy Lane and Jesper Brandgaard (bios below) were selected following a rigorous search process that looked for certain characteristics that were needed to make EssilorLuxottica’s Board function again. More specifically, our goal was to find candidates that: (1) had a global mindset and ideally not French nor Italian to improve the diversity of nationalities in the Boardroom; (2) had no relationships with either Essilor nor Luxottica, or with their respective representatives, to focus solely on the long-term interests of the combined entity; (3) had board and committee experience; (4) had been exposed to CEO selection processes; (5) had a strong reputation for their integrity; (6) had a diplomatic but resolute personality; and (7) had sufficient time to allocate to their role on EssilorLuxottica’s Board. 

These two Board candidates are not being proposed only to unlock the current deadlock but to ensure that the debates and the dynamics within the boardroom gain in quality and fluidity, especially in trying to introduce a good spirit between all Board members. With the appointment of Wendy Lane and Jesper Brandgaard, we believe the risk of error on difficult voting decisions would be significantly reduced through the improved quality of the exchanges within Board and help drive consensus for the interests of all shareholders. 

Wendy Lane commented that “Having recently come through the merger-of-equals of Willis Group Holdings and Towers Watson & Co., which had very different cultures one from the other, the integration involved all of the issues EssilorLuxottica is struggling with— CEO selection and succession, C-Level team, operations, differing legacy compensation schemes, and half of the board members from each legacy company – which I can leverage on.” Jesper Brandgaard added that “My experience at large Nordic companies, both in an executive and non-executive capacity, provides a solid platform for my active participation at EssilorLuxottica, drawing upon my extensive stakeholder management experience obtained in a Nordic boardroom setting, where a majority of decisions are based on achieving broad consensus at board level.”
Your Full Participation and Support for our Board Nominees will Unlock Value

On 24 April 2019, the Board recommended, not on a unanimous basis, to oppose our proposed Board members (Resolution A and B) suggesting that, if approved, would result in a breach of the Combination Agreement. We strongly dispute this interpretation of our proposals because the Combination Agreement binds only Delfin and the former Essilor Board and not the shareholders. General meeting of shareholders is sovereign and provides shareholders to vote on any legally proposed shareholder proposal, including proposals to appoint board members. 

We underline that our proposals should not be viewed as an attack on the Company but as an effort to provide a solution to a problem. The integration risks inherent to radically different corporate cultures and a potentially dysfunctional governance were largely underestimated and there are countless examples of equal partnerships not delivering value, which we do not want EssilorLuxottica to experience. Wendy Lane and Jesper Brandgaard does not aim to disrupt the Board’s current functioning, which is currently at a stalemate, but looks forward to providing independent perspectives and improving its functioning to facilitate a successful integration of the two businesses.

We recommend all shareholders to support Wendy Lane and Jesper Brandgaard’s nomination to the Board (Resolutions A and B). Though fully independent from our proposal, we welcome Valoptec’s proposal to nominate Peter Montagnon, a globally recognized governance expert, to the Board (Resolution C). All three Board nominees could viably join the Board under the Company’s Articles of Association.



29 April 2019

Phitrust submits written questions for the Vivendi’s AGM

Over the last few years, Phitrust believes that Vivendi’s governance is not satisfactory. In preparation of the AGM on April 15th, Phitrust has sent several written questions at the Annual General Meeting concerning the following issues.

I. On the allocation of functions and responsibilities: Mr Yannick Bolloré is both Chairman of the Supervisory Board and the Chairman & CEO of Havas, a wholly-owned operational subsidiary of Vivendi. Therefore, it appears that there is a significant conflict of interest. In addition, two Managing Directors of the Bolloré group, Gilles Alix and Cédric de Bailliencourt, are both members of the Management Board. Vivendi’s Supervisory Board is therefore in a position of control over the representatives of its major shareholder, who also have an executive role in the controlled company.

Phitrust is also surprised by the absence of women within the Management Board’s seven members. In comparison, the Supervisory Board is composed of six women among twelve members.

II. On double voting rights and the take-over of Vivendi: Phitrust has once again shared its point of view concerning double voting rights, which only serve shareholders willing to take control of a company without having to launch a takeover bid. This seems quite obvious in the case of the Bolloré group. As part of the sale of UMG (Universal Music Group), Vivendi has announced a NCIB program (Normal-Course Issuer Bid) followed by a cancellation of 25% its own shares. The Bolloré group could once again ask a derogation to the French financial markets authority (Autorité des Marchés Financiers – AMF) concerning the obligatory takeover bid, being considered as a “passive threshold crossing”. Therefore, the Bolloré group would become Vivendi’s major shareholder without having to launch a takeover bid, at the expense of minority shareholders. The Bolloré group controlling Vivendi and playing a strong role at the Annual General Meeting, it therefore seems that the takeover would be orchestrated and should require a takeover bid.

III. On the remuneration of the Chairman of the Management Board: The Supervisory Board has not implemented the remuneration policy approved by the 2018 Annual General Meeting. The fixed remuneration of 1.2 m€ increased to 1.4 m€, representing an increase of 200,000€ compared to what was initially voted. In addition, this remuneration policy did not authorise the payment of an exceptional compensation of 390,000€ to the Chairman of the Management Board.

IV. On the regulated agreements and commitments: Phitrust has asked for clarification concerning the regulated agreements and commitments between the Bolloré group, its holding companies or its subsidiaries, with Vivendi group entities.

Furthermore, Phitrust regrets the formalism of the convocation to the Annual General Meeting: the narrow timeframes due to a late AGM notice, as well as the modalities for the filing of resolutions and written questions, which consequently limit the right to expression of shareholders. Phitrust has alerted the French financial markets authority (AMF) concerning all these issues. Phitrust hopes that Vivendi’s executive management will bring precise and detailed answers to these questions, which would be greatly appreciated by all shareholders and institutional investors.


14 March 2019

Vivendi Annual General Meeting April 15th 2019 RESOLUTION PROJECT

The shareholders of the mutual fund(Sicav)Phitrust Active Investors France have takenthe decision to submit a resolution project atVivendi’s Annual General Meeting on April 15th2019.

Since 2015, Phitrust has insisted on Vivendi’snon-satisfactory governance. Today, the company’s governance is “reversed” and does not comply with  he logic of having a separation of powers. This separation of management functions had been voted by shareholders at the AGMin 2005 with the creation of a Supervisory Board and a Management Board. Indeed, in a dual governance structure with a Supervisory Board and a Management Board, major shareholders should be represented at the Supervisory Board, and the Group’s operational management should be members ofthe Management Board. In fact,Vivendi’s current governance structure is the oppositeofwhatgoodgovernancepractices should be.

The Supervisory Board, appointed by shareholders, is chaired by Mr.Yannick Bolloré, who is also the Chairman and CEO of Havas Group, which is one of Vivendi’s subsidiaries. Therefore, Yannick Bolloréhasthe responsibility of “supervising” Vivendi’s Management Board to whichhe must himself report as the Executive Director of one of the most important subsidiaries.

Furthermore, two managing directors of the Group, Bolloré, Mr.Gilles Alix and Mr.Cédric de Bailliencourt, are both members of Vivendi’s Management Board, without having key experiences of the business specificities of Vivendi. It therefore seems complicated for Vivendi’s Supervisory Board to overseethe representatives of its major shareholder...

In general terms, concerning potential conflicts of interest that can be generated by business relationships between the companiesVivendi and Bolloré, it would be in an interest of good governance that the Supervisory Boardof Vivendiappoints an independent Chairman.

Phitrust calls upon shareholders to join this resolution project askingforthe anticipated endof Yannick Bolloré’s mandate as a member of the Supervisory Board at the Annual General Meeting on April 15th2019.


6 February 2019

Actionnariat salarié : donner enfin le droit de vote en assemblée générale

Hans-Martin BuhlmannLes assemblées générales sont l’occasion pour les actionnaires de s’exprimer sur les résolutions présentées par les directoires ou les conseils d’administration d’entreprise. Or le vote de ces résolutions en assemblée comprend une anomalie, un conflit d’intérêt majeur dont l’impact est devenu croissant avec le développement de l’actionnariat salarié et du droit de vote double.

En effet, dans les fonds d’actionnariat salarié, comme dans les fonds diversifiés d’épargne salariale détenant une fraction de titres de l’entreprise, les représentants de la direction d’entreprise, qui peuvent détenir statutairement jusqu’à 50% des sièges des conseils de surveillance du Fonds Commun de Placement d’Entreprise (FCPE), participent à la détermination de la position sur les résolutions. Ils se trouvent donc en conflit d’intérêt, juges et parties, entre leur mission de représentation de l’intérêt des salariés actionnaires et celle de représentants de l’entreprise qui soumet les résolutions.

Cette anomalie permet à de nombreuses résolutions présentées par la direction d’être adoptées en assemblée générale du simple fait du poids des droits de vote détenus par le FCPE. Par ailleurs, elle empêche les salariés actionnaires de faire connaître leurs désaccords avec la direction de l’entreprise aux autres actionnaires. Imagine-t-on un seul instant que l’abstention d’un seul député puisse permettre au Gouvernement de faire adopter un projet de loi contre l’avis de tous les autres ? C’est pourtant cette mécanique qui prévaut dans les fonds d’actionnariat salarié : une seule abstention d’un représentant des salariés et c’est la résolution de l’entreprise qui est adoptée !

Un amendement parlementaire, porté par Stanislas Guerini en séance d’examen de la loi Pacte, mettait fin à cette anomalie. Cet article 59 Ter du projet de loi Pacte adopté à l’Assemblée Nationale prévoit que « pour l’exercice des droits de vote attachés aux titres émis par l’entreprise, les opérations de vote ont lieu hors la présence des représentants de l’entreprise. ». L’exercice des droits de vote des salariés serait enfin réservé aux représentants des salariés actionnaires dans les fonds d’actionnariat d’entreprise sans ingérence de la direction.

Force est de constater que cette évolution bienvenue ne passe pas auprès des directions d’entreprise qui utilisent les fonds d’actionnariat salarié pour bénéficier d’un socle de voix captives. Lors du séminaire du Cliff* du 17 décembre 2018, l’Association française des entreprises privées (AFEP) a exprimé sa crainte d’une fuite des investisseurs si cette disposition était maintenue et la Commission Spéciale du Sénat a consécutivement supprimé cette disposition.

Représentants d’investisseurs responsables, nous ne pouvons que nous élever contre cet argument sans fondement. Mettre fin à cette forme d’autocontrôle des dirigeants sur le vote de leur propre assemblée générale est plutôt de nature à rassurer les investisseurs sur la bonne gouvernance des entreprises françaises. Les salariés, comme tous les actionnaires, doivent pouvoir exprimer librement leur vote. Attachés à leur entreprise et à son devenir à long terme, ils ne constituent pas une menace. Les investisseurs responsables et minoritaires souhaitent au contraire qu’ils puissent s’exprimer comme tous les actionnaires, en se faisant une opinion sur les décisions proposées au vote. Et si, suite à cette disposition, le besoin d’expliquer mieux la stratégie de l’entreprise aux représentants des salariés se faisait sentir plus vivement, le dialogue social n’en serait que plus riche, un dialogue social indispensable à la bonne gestion des entreprises dans lesquelles nous sommes investis.

Signataires : Olivier de Guerre, président de PhiTrust, Pierre-Henri Leroy, président de Proxinvest, Alexis Masse, président du Forum pour l’investissement responsable

Photos: VIPsight.eu/Hans Martin Buhlmann ceo VIP eV


2 February 2019

Marie Brizard voit flou !

Ce jeudi 31 janvier 2019 se tiendra, sous haute tension, l’Assemblée Générale statuant sur les comptes de 2017. Depuis l’exercice 2017, l’entreprise se trouve dans de grandes difficultés financières, ce qui a provoqué de vives inquiétudes chez ses créanciers et une renégociation des conditions de remboursement de sa dette. Aujourd’hui, la société envisage de faire appel à son actionnaire majoritaire (29.48% du capital) et concurrent, COFEPP (La Martiniquaise), pour se recapitaliser. Cette recapitalisation provoquerait un contrôle de fait du capital et par extension du conseil d’administration.

I - L’impossibilité de clôturer les comptes de 2017 à temps

Début 2018, la société a annoncé avoir lancé un audit sur l’ensemble des processus commerciaux et comptables dans sa filiale en Pologne. Cet audit a notamment conduit la société à retraiter ses chiffres d’affaires trimestriels et annuels 2017. En raison de ces retraitements, les comptes n’ont pas pu être arrêtés dans les délais légaux et la société a dû demander une dérogation au Tribunal de commerce pour tenir son Assemblée Générale portant sur les comptes 2017 après le 30 juin 2018.

La situation s’est encore dégradée durant l’été 2018, du fait de l’activité polonaise de l’entreprise qui peine à se redresser et d’une chute des marchés américain et français. Ainsi, sur les six derniers mois le cours de l’action a baissé de moitié et sur un an a été divisé par cinq pour atteindre 2,6 €, fin janvier 2019.

La situation financière de la société s’est donc rapidement et assez sévèrement dégradée.

II - Une recapitalisation par l’actionnaire majoritaire menaçante

Les importantes difficultés financières que Marie Brizard Wine & Spirits a rencontrées en 2017 et 2018 a forcé la société à se recapitaliser. Cette recapitalisation menace les actionnaires minoritaires dans la mesure où COFEPP grimperait au capital de telle manière qu’il contrôlerait le capital et qu’il détiendrait 53% des sièges du Conseil si l’option principale est approuvée. Cette opération est d’autant plus problématique qu’elle pourrait bénéficier d’une dérogation à la procédure d’OPA obligatoire par l’AMF. Ainsi, d’une part le principe d’égalité des actionnaires serait bafoué, et d’autre part, les actionnaires minoritaires ne pourront se prévaloir des mêmes conditions de cessions de leurs titres.

Bien que cette recapitalisation soit déclinée en deux options, les actionnaires minoritaires se verraient fortement dilués dans les deux cas.

Dans l’option principale, l’augmentation du capital serait réservée à COFEPP à hauteur de 37,712 millions d’euros et l’ensemble des actionnaires se verrait attribuer gratuitement un BSA par action ancienne détenue. Cette option permettrait un apport en numéraire de 45 millions d’euros par COFEPP après exercice des BSA. Si cette opération se réalise, alors COFEPP détiendrait 47.05% du capital, ce qui représenterait 46.85% de droits de vote.

Dans la seconde option, l’augmentation serait avec droits préférentiels de souscription à hauteur de 35 millions d’euros, ouverte à l’ensemble des actionnaires. Une émission d’obligations remboursables pour  29,5  millions d’euros serait toutefois réservée à COFEPP. Cette deuxième option permettrait un apport en numéraire de 32,5 millions d’euros par COFEPP sans préjudice de la souscription d’autres actionnaires. Suite à cette opération, deux situations peuvent se présenter :

- Si COFEPP souscrit à 75% de l’augmentation de capital à un prix de 2,5 € par action, l’actionnaire détiendrait post-augmentation de capital 48.54%  (48.31% de droits de vote).

- Si COFEPP souscrit à, cette fois-ci, 10.5% de l’augmentation du capital au prix de 2.5 € par action, alors l’actionnaire détiendrait 40.08% du capital (39.93% de droits de vote).

L’opération pourrait, dans un cas comme dans l’autre, être préjudiciable pour les actionnaires minoritaires dans la mesure où la détention de 40% du capital dans une société cotée permet, par présomption,  de prendre le contrôle de la société. Ainsi, quelle que soit l’option proposée, le capital passerait d’une structure dispersée à une structure contrôlée, ce qui aura nécessairement des conséquences sur le Conseil.

Par ailleurs, la société a eu recours à une mauvaise pratique de gouvernance en insérant dans une même résolution (n°28) les deux options, d’autant que les opérations proposées sont plutôt complexes. Notons également que Diana Holding (13,81% des droits de vote actuellement) s’est engagée à voter en faveur des résolutions visées par cette option principale. Ainsi, avec COFEPP (29,28% de droits de vote), ces résolutions ont d’ores et déjà reçu le soutien de 43,09% des droits de vote. En prenant l’hypothèse d’un taux de participation à l’AG de 65% (moyenne des 2 dernières AG), ces résolutions devraient recueillir à minima 66% des voix.

III – Le mécontentement des actionnaires fortement exprimé à l’Assemblée

Les actionnaires ne sont pas en reste puisque MBWS est à l’origine d’une communication financière litigieuse concernant ses prévisions qui a fait l’objet d’une demande d’enquête auprès de l’AMF le 5 juillet 2018 à l’initiative de l’association ADAM et le 5 octobre 2018 sur des éléments complémentaires par l’association ASAMIS pour diffusion d’informations trompeuses.

Des actionnaires individuels ont décidé de faire entendre leur mécontentement lors de la prochaine Assemblée générale en proposant seize résolutions externes, qui n’ont pas été agrées par le Conseil. Une majorité d’entre-elles portent sur la révocation des administrateurs, que nous soutenons du fait de leur défaillance incontestable et de leur incompétence en matière de nomination de garants d’une bonne gestion. Les actionnaires proposent également d’amender les deux options. D’une part, ils veulent éviter la prise de contrôle par COFEPP du Conseil, sans même avoir été payés un juste prix. D’autre part, ils veulent augmenter le prix de l’augmentation du capital et de conversion des obligations car ils considèrent que COFEPP est déjà suffisamment favorisé dans cette opération. Nous soutenons leurs résolutions dans la mesure où nous nous opposons déjà aux résolutions relatives à ces deux options de recapitalisation. Leur inquiétude d’un contrôle de fait du COFEPP et du Conseil est compréhensible.


20 November 2018

Will Ghosn self-dealings all lose the ground conquered by Renault?

Pierre Henri Leroy

Will the abuses of Carlos Ghosn’s personal power all lose the ground conquered by Renault ?

The question arises from reading the amazing newcomer of Japan this Monday, November 19, 2018.

The chairman of Nissan and of the Renault-Nissan-Mitsubishi-Avtovaz Alliance has been arrested in Japan for various reasons mentioned in an incredible press release from Nissan dated the same day: the Japanese company, a subsidiary of 43% of the Renault group currently under a self-limited control by the RENAULT SA Board, indicates having responded to a whistleblower’s complaint about the behavior of Renault Chairman and CEO Carlos Ghosn and his managing director Greg Kelly as Chairman and Director of Nissan, primarily for misrepresentation of Carlos Ghosn’s remunerations to the Japanese Sock Exchange.

Nissan added that many misrepresentations by Carlos Ghosn have been discovered including personal use of social assets. Nissan said that it was cooperating with the Japanese prosecution and was willing  to continue to cooperate with other members ofthe Alliance Renault and Mitsubishi. According to Nissan,  the CEO of Nissan HirotoSaikawa will request the Nissan Board of Directors to dismiss Carlos Ghosn as chairman and Greg Klly as Director because of these clear violations of the their dutiesas directors.

For many years, Carlos Ghosn has been at the top of the Proxinvest ranking on executive compensation for French companies, with an average of 12.7 million euros a year since 2009, including payroll at Nissan, which had been held hidden, despite many questions of Proxinvest to the company , its directors and to the AMF.  For a  long time, the ECGS Managing partner , whose research reports are available on RESEARCHPOOL had alerted investors about the excesses of the personal power of Carlos Ghosn at Renault and requested the regulator to intervene on this issue of the transparency of remuneration received by the chairman of the Alliance.

At Renault’s Annual General Meeting of shareholders in April 2016, the chairman of Proxinvest challenged the Renault directors on their waiver in favor of Nissan’s on the appointment and the compensation of Nissan’s chairman and directors, a waiver then subject new related party agreement with Nissan finally approved by the AGM. He also publicly challenged Chairman Ghosn on his personal lack of exemplarity.

This general meeting had finally surprised by refusing to approve in a non-binding vote the remuneration of the Chairman and CEO of the group. Proxinvest was invited in the fall of 2016 by the compensation committee of Renault to expose its analysis of this situation. Two questions from Proxinvest, one about Carlos Ghosn’s possible compensations  in Russia and the other about his personal tax regime, were relayed by the chairman of the remuneration committee, Patrick Thomas, but they received then no answer from the attending Renault SA management team.

A few months later, just before the 2017 annual general meeting , another pay scandal broke out following the revelation by Thomson Reuters of a bonus scheme, a project finally denied by Carlos Ghosn himself, a special distribution plan of 80 million euros out of expected group synergies among senior and executive officers of the Alliance, bonuses to be awarded exclusively under the sole supervision of the chairman of the Alliance.

The dramatic nature of a brutal indictment of the chairman of Renault and the breach of trust between Carlos Ghosn is the general direction of Nissan can only distress and worry shareholders admiring the success of this formidable automotive alliance.

The directors of Renault, highly admiring the qualities recognized qualities by their chairman, seems over the years to have been complacent about the tremendous dynamism of this multilingual tycoon,   easily accepting the successive departure of potential successors able to replace him, such as Messrs. Pelata or Tavarès, the latter even left to quit and join freely the immediate competitor Peugeot SA … Worse the directors, sacrificed in 2016, with some complacency of the State, their own responsibility and the power of Renault’s board of directors to vote freely at the Nissan’s board, chaired by Carlos Ghosn: the Renault’s representatives at the Nissan Board could not and still cannot fully exercise their duty as directors at Nissan.

Poorly rated by the Proxinvest Corporate Governance Rating in recent years, Renault should very quickly adopt a more democratic and transparent governance while restoring the international and unitary culture that Carlos Ghosn had created. A Board of directors must meet quickly to appoint an independent Chairman of the Board to provide light and ensure continued management and a relationship of trust with partners.

Bloomberg writes enigmatically this November 19th, “If Davos was a man it would be Carlos Ghosn.” Is it enough to say that the impunity and the fiscal irresponsibility of multinational groups is once again questioned?


8 November 2018

Oppose the 16% growth of Alexandre Ricard’s compensation

While the average CEO compensation in CAC 40 grew by 14% in 2017, according to the compensation report just published by Proxinvest, Pernod Ricard’s Board proposes to increase its CEO’s fixed compensation by 16% for the new FY.  Proxinvest recommend shareholders oppose this growth.

- An inflationary growth

 This 16% growth represents an annual weighted average growth of 4% since the nomination of Alexandre Ricard as the Chairman-CEO in February 2015. This average growth is excessive and greater than the French inflation which has grown by 2.4% since Alexandre Ricard’s appointment. According to Proxinvest’s guidelines, the compensation’s growth shouldn’t be greater than the inflation’s growth.

This 16% increase of the fixed compensation will have a strong inflationary impact on the bonus which cap is based on the fixed compensation (maximum of 180%, € 1,980,000, +16%) and also on the long-term incentives (stock-options and performance shares) which cap is also based on the fixed compensation (maximum of 150%, € 1,650,000, +16%).

- A questionable choice to use “benchmark” for a member of the family managing the company

The company explains that this growth is justified by two external compensation consulting firms.

These firms explain that this growth is just a way to catch up with the compensation given to the CEO in the CAC 40 and the CEO of companies in the Beverages sector.

Yes, the new fixed compensation (€ 1,100,000) is in-line with the new level of fixed compensation of the CEO in the CAC 40 according to the last compensation report made by Proxinvest. However Proxinvest finds odd that Alexandre Ricard, member of the family managing the company, uses a benchmark with other CEOs who aren’t part of the main shareholders. As a member of the family main shareholder, Alexandre Ricard is already strongly committed to the company’s success; therefore, considering his family-based affectio societatis, he could still manage the company while only receiving one or two millions as a total compensation. The use of external compensation consulting firms has become more common in the last few years and has an inflationary impact on the CAC 40 CEOs compensation without real link with their results.

- A growth that strongly diverge from the growth of his employees’ compensation

 In its last report on French listed companies CEOs remuneration, Proxinvest highlights the fact that the average CEO total compensation increase (+14%) is greater than the employees’ (+4%). In Pernod Ricard’s case, the CEO’s 16% increase strongly diverges from the employees’ 1.47% increase since FY 2014-2015.

- A compensation policy short-term oriented

According to Proxinvest, the compensation policy is too much short-term oriented: the bonus’s target represents 110% of the fixed compensation which exceeds our 100%-limit. Moreover, bonus can reach a maximum of 180% of the fixed compensation,  i.e. € 1,980,000. It exceeds our 150%-ceiling.

Lhe long-term incentive can reach a maximum of 150% of the fixed remuneration. Therefore, STI can be greater than LTI; such a structure is not in line with the company and shareholders long-term interests.

Furthermore Proxinvest estimates that stock-options and performance shares performance criteria could be improved and be more challenging. Moreover, an annual measurement of performance, even if made over a 3-year period, is not comparable to a 3-year period measurement and seems less challenging. Proxinvest estimates the share performance comparison criterion is not sufficiently challenging as a performance just above the panel median can allow for a 66%-vesting. As a comparison, in Diageo’s plans, the same criterion would allow for only 20%-vesting.

- Conclusion and Recommendation

As a conclusion, Proxinvest recommend shareholders oppose this growth under item 10 of the November, 21st 2018 Pernod Ricard’s AGM.

Even if the Ricard family will certainly use its multiple voting rights to ensure that this growth is approved, shareholders now shares with the board a responsibility in the CEO’s compensation increase in France since the Sapin 2 law. Therefore, any responsible shareholder have to take position on this matter and have to exercise its right to vote, even if it’s against the founding family.


24 October 2018

Publication of the 19th edition of Proxinvest’s Report “A Review of CEO Compensation in the SBF 120”

Florian Béchaz

- A record year for compensation in France : +10%

Our report on CEO compensation in 2017 revealed record compensation levels. In the SBF 120, Average total CEO compensation amounted to €3.8 million, up 10% from 2016.

In the CAC 40, the average CEO even reached €5 million, up of 14% from the previous year. This amount exceeds our maximum socially acceptable pay of 240 times the SMIC (the French national minimum wage), or €4.87 million. Particularly, 29 CEOs in the SBF 120 surpassed this limit (23 in 2016).

We define total compensation as a measure that includes salary, annual bonus, attendance fees, payments-in-kind, stock options, restricted performance shares, other cash incentives, and other forms of indirect compensation.

Our results are a testament to the generosity of Boards when it came to awarding their CEOs in 2017. Base salaries, bonuses, and restricted shares gained 3%, 6% and 6% respectively across the SBF 120. Interestingly, two-thirds of compensation awards were in the form of short-term compensation.

Our report shows that the important growth of the compensation (14% for 2017 and 22% for the period of 2013-2017 in the CAC 40) is not justified, especially when compared with the creation of value for shareholders and with the evolution of the employees’ compensation.

- The five highest paid CEOs were awarded over €10 million each

The CEO of Dassault Systèmes, Bernard Charlès, heads the list with a total compensation of €24.6 million (€15.8 M according to the company), mainly due to performance shares granted.

Not far behind was Gilles Gobin, founder and Managing Partner of Rubis. Contributing to his largesse was a €18 million share price-linked dividend (3% of annual increases) to compensate him for his dual role as General Partner (he controls two privately registered companies which serve as General Partners). This windfall comprised the lion’s share of his total compensation of €21.1 million. Since 2016, Proxinvest urges the company to modify the calculation method written in its bylaws.

Third in the raking is the controversial Carlos Ghosn, Chairman and CEO of Renault and Nissan. Following the rejection on his remuneration during the 2016 general meeting, the board has decided to decrease his compensation. Despite this decrease, his 2017 total compensation reached €13 M, including €5.6 M from Nissan. This latest slightly decreases despite the fact that he is no longer an executive officer of this company. Moreover, the targets set by the Board regarding his annual bonus (ROE, Free Cash Flow) are incredibly low.

Paulo Cesar Salles Vasques, CEO of Teleperformance until October 2017, received a termination package of €9 M and his total compensation for 2017 (only 10.5 months of duty) reached €12.2 M.

TechnipFMC makes our coveted list in fifth place with Douglas Pferdehirt, its CEO, boasting a total compensation of €10.6 million, up 88% since the merger. This post-merger increase, as the Chairman’s, is totally unacceptable considering the group’s performance since the merger (the share price dropped by 23.8%, the company has now a net loss of $65.3 M, while the company had a net income of $311.3 M in 2016 and the cash-flow decreased by 83%).

Moreover Douglas Pferdehirt has been granted some long term incentives (fixed shares and options) without any performance conditions. This poor US practice Is not in line with the AFEP-MEDEF code.

- The Performance barometer, an innovation of the Proxinvest report

For the first time, Proxinvest presents a barometer which ranks the SBF 120-index companies according to their performances (based on their shareholder creation value (TSR = share price + dividends) and on their financial performances (revenues, EBIT, earning per shares and the operating cash-flow creation). This analysis shows that, between 2014 and 2017, there is no correlation between evolutions of CEO compensations and performances. In eleven companies, we even noted that the CEO remuneration increased by more than 10% while they are among the poorest performers.

- To solve a late self-regulation by the companies

The growth of the CEO compensations in the large French listed companies does not help to reconcile the French people with companies as the new PACTE law tries to do. The requirement to communicate the evolution over five years of the CEO pay ratio should create a new intra-group framework which would be less inflationary (if the chosen criteria are relevant (Workforce in France and in the World).

The new change in the AFEP/MEDEF code (it is now not allowed to pay a non-compete agreement when the CEO retires and/or is 65) implemented following the heated public debate on George Plassat’s termination package (which he finally waived in june 2018) clearly shows that the French self-regulation on executives departures’ conditions always arrives too late to avoid the public scandal.  

Hence, to prevent future scandals, Proxinvest proposes some changes in the AFEP-MEDEF code: executives’ termination payments should not be greater than employees’ allowances; therefore, Proxinvest proposes to cap executives’ termination payments to a maximum of one year of annual compensation (vs 2 years allowed in the actual code).

Moreover, the AFEP-MEDEF code should comprise the prorata temporis principle so that remuneration to be granted (bonuses and long-term incentives) when the executive leaves the company are in line with the actual contribution of the executive and the time he spent in the company.


27 September 2018

PACTE bill : Proxinvest supports amendments introduced by the Responsible Investment Forum FIR to the future PACT bill on companies

Pierre Henri Leroy

The major bill on companies, as announced by Emmanuel Macron and Bruno Le Maire , the PACT bill, comes this month of September in discussion in Parliament.

The Responsible Investment Forum (FIR) presented 9 amendments which we support, and were partly inspired by the work of Proxinvest. It includes :

- the promotion of loyalty shares or warrants, a far better shareholder loyalty instrument aiming at replacing the double voting right clause

- the restauration of the independence of the voting of the shares held by employees and managed by the ESOP Boards supervising employees funds (FCPE) , where currently one half of the members are representing management

- the restauration and publication on request of the list of current related party transactions passed under normal conditions: this might reduce  possible undisclosed self-dealing abuses.

- reduction of the French legal threshold for the presentation of AGM resolutions  down to 3% instead of 5% of the capital or even to any group of  to 100 shareholders

- better representation of investors within the College of the AMF including two more members to be selected among employee shareholders representatives and one more among individual shareholders representatives

- the confirmation by the listed company after its AGM to any individual shareholders requesting it, of the final casting of his individual vote : in France as in many other countries banks constraint the vote instructions to travel within the banking chain, thereby refusing any direct contact between the investors and the issuer.

Finally there is aserious concern with the promotion by this PACTE bill of protective “shareholdesr foundations”: the objective of the promoters was clearly aiming at perpetuating family of main shareholder’s control over listed companies while minimizing tax contribution. Another use of such private foundations or trusts might be to avoid the sharehodlers control or information over the top management pay, to be held only in the hands of an almighty CEO such as was denounced in 2017 at Renault…. Shareholders will be well advised to watch carefully the risk for the company to finance and use through such “foundations” new anti take-over and other poor governance devices.



26 September 2018

Atari: a case for voting against the approval of accounts

Pierre Henri Leroy

http://www.proxinvest.fr/wp-content/uploads/2018/09/Pong.jpg“An overstatement of the net income and shareholders’ equity of € 345 K ” the auditors of ATARI  (ATA – FR0010478248 / Paris) have expressed rare reservations on the annual report of the company.  This overstatement is estimated to exceed 15% of the March 2018 full year group earning but the turnover is also overstated by some € 406 000 from the 15% investment in Infinity Networks Ltd.   Independent Auditors Deloitte,, represented by Guillaume Villard, and  JLS Partners, represented by Julien Wajsbort, have expressed reservations on these two points.

Proxinvest considers that the comapny’s audit committee has not performed well,actually in line with a lack of independence of one of its two members, M. Zyngier, a significant shareholder with a special business connection to the company for licencing contacting paid 91 000€ by Atari last year.

Accordingly, Proxinvest advised investors against several resolutions of the forth-coming AGM  of September 28   (Club Marbeuf, Paris 8ème) and wrote to the Chaiman & CEO and first sharehodler Frédéric Chesnais.  

Monsieur le Président,

Proxinvest, société de conseil aux investisseurs institutionnels et actionnaire au nominatif de la société ATARI, a constaté que vos commissaires aux comptes émettent des réserves sur les comptes.

Ces derniers estiment que votre chiffre d’affaires et votre résultat net sont surévalués. Cette surévaluation porte sur des montants significatifs comparativement au résultat net part du groupe comptabilisé pour l’exercice.  

Dans ce contexte se pose la question de la confiance de vos actionnaires dans les instances de gouvernance d’Atari, en particulier la capacité du Comité d’audit à réaliser ses travaux de façon totalement indépendante.

Actuellement le comité d’audit est composé de deux membres, dont Alexandre Zyngier, actionnaire de votre société, mais aussi prestataire de celle-ci via sa société Batuta Capital Advisor LLC.

Le comité d’Audit a t-il auditionné les commissaires aux comptes dans le cadre de son travail d’examen des comptes sociaux et consolidés relatifs à l’exercice clos le 31 mars 2018?

Ainsi, dans ce contexte de réserves des commissaires aux comptes, ne serait-il pas pertinent et préférable que le comité d’audit soit composé exclusivement d’administrateurs libres de tout conflits d’intérêts et disposant des capacités nécessaires pour exercer les travaux du comité d’audit ?

Pourquoi le conseil d’administration n’a-t-il pas fait preuve de plus de prudence dans la comptabilisation de sa participation de 15% de Infinity Networks Limited et de la créance avec cette même société?

Pour quel motif enfin était-il envisagé dans un premier temps qu’une fraction de 10% de l’intéressement lié aux ventes de tokens (la crypto-devise qui sera utilisée par INL pour le fonctionnement de la plateforme de blockchain) revienne à M. Chesnais ?

Veuillez agréer, Monsieur le Président,..

Loïc Dessaint, directeur général



2 July 2018

Innate Pharma’s shareholders reject the double voting right provision



20 June 2018

Georges Plassat, Carrefour’s former Chairman & CEO gives up to shareholders pressure

Pierre Henri Leroy


20 April 2018

ECB legitimate worry about governance : an open letter to Danièle Nouy

by Pierre-Henri Leroy , chairman, Proxinvest

While the future of Deutsche Bank worries the ECB following the departure of the CEO John Cryan replaced by Christian Sewing, Société Générale must seek a new Deputy CEO to replace Didier Valet.

Société Générale, after its participation in the rigging of the Libor rate between 2007 and 2009  earned it a sentence transacted for nearly a billion euros in May 2017,  added three other concerns, a violation of the US embargo on Cuba revealed by Le Monde in 2014,  still unpaid,, and a charge for fraud at the expense of the Lybian LIA fund and  cheating on its refinancing rate as transmitted between May 2010 and October 2011 by its Finance Department to the Libor rate manager Thomson-Reuters…

“Negligible, peanuts, trifle , bagatelle” some will say: “our European banks are solid and irreproachable”. “Although the financial impact of litigation can not be determined with certainty, the bank has in its accounts as of December 31, 2017 a litigation provision of € 2.3 billion in accordance with IFRS. Within this provision, approximately 1 billion euro equivalent is allocated to IBOR and LIA. ”  indicated Société Générale.

The bank also confusedly admitted this March 15, 2018 that the US Justice Department had requested the resignation the Deputy CEO of the Société Générale, Didier Valet, until then likely successor of President Frédéric Oudéa and, like the latter, former CFO of the group … The “survival lies” of the bank between 2008 and 2011 in the turmoil of subprime business and Kerviel case,  allows as suggested by the bank  for  “differences of appreciation” …  Dura lex sed lex”, nothing will do, it is neither legal, nor cautious, nor undoubtedly moral, to save his bank and his bonus by abusing colleagues, customers and depositors …

Our European Central Bank, which seems satisfied with the universal banking model from the point of view of systemic risk, is rightly concerned about the governance of our banks.

This is good time since bank remunerations are expected to explode for 2017 : Deutsche Bank has paid bonuses for a total amount of 2.3 billion euros for 2017, four times more than the previous year, despite a new year of loss. net profit, amounting to 751 million euros. Ironically, the top executives of Deutsche Bank,  will have no bonus, except the departed CEO  who leaves with 8.7 million euros  including retirement, after three years of losses in a row and a annual salary of 3.4 million euros … It is true that the stock price of Deutsche Bank has fallen 60% for five years, while the stacking of its risks worries the interbank market … Several other large European bankers will personally exceed EUR 10 million in revenue, and the ECB may legitimately, as it says  , “ worry that bankers are taking undue risks to earn more.” last news is that following Mr. Cryan’s firing a handful of Deutsche Bank top executives in Frankfurt and London decided to quit.

It is up to the shareholders of these banks to question these remunerations, but it is also up to French and European regulators and politicians to question the origin of so easy wealth of bankers.

The market activities of universal banks such as Deutsche Bank and Société Générale are based on the low weighted credit cost granted by the explicit and implicit guarantee of the States, a guarantee clearly undue since most of these transactions, especially when they do not relate to exchange rates or interest rates, have little or nothing to do with the funding of the economy.  A surrealistic paradox is that, following the Moscovici law in France, the speculative operations for the French banks’ own account, those that generate these risky profits, should have been, according to the law,   confined to a wholly-owned subsidiary of their group: a regulatory comedy that our bankers do not even bother to play! In fact, our government and deputies have enabled the big banks, under this perfect parliamentary hoax, to keep fully their speculative trades under the invaluable guarantee of all taxpayers. In this lax general framework, which we owe to the mediocrity of successive policies, the European Central Bank is satisfied with the tools at its disposal: the stress tests on the declared risks on the one hand and the incantation to the best governance on the boards of directors of banks on the other hand.

La Tribune reports on April 16 that the ECB has asked the potential cost of the settlement of its trading positions to Deutsche Bank, which had been considering for several months to reduce the sails of its trading. According to the ECB this is an insignificant exercise of “review of the costs of progressive reduction” … On the governance and composition of bank boards, Mrs. Danièle Nouy, ​​President of Supervision at the European Central Bank insisted recently on the good selection of top level directors in limited number, better availability and  independence …  (see European Central Bank Conference on Banking Supervision  “Governance expectations for banks in a changing financial environment”, Frankfurt 22 March 2018,  “Good governance for good decisions”)

“Board members need to be independent thinkers “.

Mrs. Nouy even tells us that her services are capable of appreciating the independence of mind of the directors in their assessments of supervised banks  … “We recommend independence of mind in our fit and proper assessments, for instance. As part of the ongoing supervisory dialogue, we also assess whether a bank’s internal governance and risk culture are most relevant to such independence. ”

Let us wish you good luck!

It is touching to observe the persistent faith of the supervisors – is this naivety or cynicism? – in the highest skill and the highest integrity of the bank directors to limit the crises produced by the very complex structures of these financial groups.

But, Madam, it  is simply the underlying model that produces this uncontrollable explosive mixture of conflicts of interest and greed. The example of the very serious involvement at various levels of BNP Paribas in the formidable fraud Madoff, even though at several levels of the same group was shouting “wolf”, demonstrates the unmanageable nature of universal banks. Neither the best governance in the world, nor the intellectual capacity of the best French Polytechniciens and Inspecteurs des finances, nor the personal involvement of the most honest of them will do anything about it.

Certainly, the ECB is pushing here excellent governance ideas such as more direct contact between the directors of each bank and the control and credit functions, the alignment of remuneration with the “risk appetite” framework. “-, on better data quality and systematic aggregation of risks.

The ECB tells us that the current challenges for the banking world of declining profits, the development of new technologies and the new competition are testing the banks’ governance framework. “These current challenges put governance frameworks to the test.”

But is not this a serious error of analysis on the part of the supervisor? Is it not rather the internal model of universal banks, based on conflicts of interest, free fuel fo trading and unfair competition, which limits the effect of better governance efforts?

You concluded your presentation on the seriousness and the severity of the ECB’s risk-based mission for European banks, including numerous and costly aspects, such as the dialogue between supervisors, on-site inspections, thematic missions and deep-sea dives “, the use of the STAR portal for stress tests, and finally the severe process of authorizing new entrants …

But how will we be reassured?

Certainly governments have buried in recent years any challenge to this inefficient, explosive and unfair banking system. But it belongs to supervisors of central banks and other market regulators to question the general banking framework:  Benoit Coeuré, member of the Executive Board of the European Central Bank, did in the past  question the bank universal banking model.

Madam, as ​​supreme European supervisor you wisely ask banks’ boards of directors “to maintain a culture of debate that values ​​the diversity of points of view”.

Is it not, Madam, the opportunity to debate at the level of the ECB the impact of  a virtually zero credit cost for interbank speculation in Europe?



14 April 2018

LVMH sous assistance


Ce jeudi 12 avril 2018 aura lieu l’assemblée générale de LVMH au Caroussel du Louvre à 10h30.

Bernard Arnault, Président du groupe, fort de ses excellents résultats 2017 et d’une croissance organique du chiffre d’affaires grandiose, ne devrait pas connaître une assemblée générale tumultueuse.

Mais qui sait que ce géant du luxe et des spiritueux, forts de ses résultats, a absolument besoin d’assistance? 

En effet, depuis le 31 juillet 1998 une convention de prestations d’assistance, modifiée par avenant le 30 mai 2016, permet à LVMH de bénéficier de diverses prestations d’assistance, principalement, dans les domaines de l‘ingénierie juridico- financière, du droit des affaires et de l’immobilier, services fournis par la société Groupe Arnault SEDCS, groupe contrôlé par la famille Arnault, qui compte un certain nombre d’experts dans leur domaine. Sur l’exercice 2017, LVMH a versé à la société Groupe Arnault SEDCS au titre de cette convention la somme de 5 520 000 euros hors taxes. Sur dix ans, c’est ainsi 53 millions d’euros qui auront été payés par LVMH à Groupe Arnault pour ces prestations de service (5,52 M€ en 2017 et 2016,  5,46 M€ en 2015, 5,38 M€ HT en 2014 5,3 M€ en 2013, 5,2 M€ en 2012, 5,1 M€ en 2011, 5,0 M€ en 2010, 4,9 M€ en 2009 et 4,8 M€ en 2008).

Depuis de nombreuses années, Proxinvest dénonce le manque de transparence de LVMH concernant cette convention. La société apporte toutefois depuis quelques années davantage d’informations dont le nombre de salariés concernés. Regrettablement la Société fixe un montant total à verser plutôt que fixer un montant par heure de service fourni, qui permettrait aux actionnaires de mieux comprendre le prix par heure de travail des prestations et ainsi les augmentations des montants versés au fil des années.

Cette convention explique très probablement la contestation récurrente des actionnaires minoritaires sur le vote du rapport spécial sur les conventions réglementées (relations avec les parties liées), rapport tout de même largement approuvé à 87% puisque le groupe familial de contrôle participe au vote malgré sa position de principal intéressé bénéficiaire, considérant probablement que sa holding, la Financière Jean Goujon, actionnaire direct de LVMH, n’est pas intéressée à la convention. 

La page 293 du Document de référence 2017 présente pourtant un organigramme éclairant sur la structure actionnariale de contrôle : 

Autre sujet où le conseil d’administration de LVMH ne répond pas à la grogne des actionnaires : la rémunération des dirigeants.

En effet, depuis la mise en place du vote sur les rémunérations (que ce soit de façon consultative ou contraignante), les rémunérations chez LVMH sont très contestées par les actionnaires. Lors de l’assemblée 2017, les avis consultatifs sur les rémunérations 2016 de MM. Arnault et Belloni n’ont recueilli que 79,01% et 79,09% d’approbation respectivement, soit une forte contestation. Si l’on s’intéresse au vote des seuls minoritaires, ce sont probablement seulement 21% d’entre qui ont soutenu les propositions faites. Une telle contestation, de plus répétée depuis plusieurs années, est un véritable signal envoyé par les actionnaires minortaires à la société. Or ni celle-ci, ni le conseil, ni le comité des Rémunérations (et donc son Président) n’ont réagi. Proxinvest estime que Charles de Croisset, Président du Comité des Nominations et des Rémunérations, porte une part de responsabilité du peu de réaction de la société quant à la contestation des actionnaires sur les rémunérations des dirigeants. Son renouvellement en résolution 7 fait donc l’objet d’une recommandation de vote négative de Proxinvest.

La Loi Sapin 2 a ses limites lorsque le dirigeant est également actionnaire de contrôle et peut donc voter en faveur de sa propre rémunération.

A noter sur ce point la recommandation du code Middlenext qui mériterait d’être reprise dans le code AFEP-MEDEF ou via une disposition légale plus incitative :

R 12 : Relation avec les « actionnaires »
Contexte : Le conseil s’assure que les conditions du dialogue entre les« dirigeants », les « administrateurs » et les « actionnaires » sont réunies avec, par exemple, une organisation de l’assemblée générale qui la rend matériellement accessible à tous. À l’issue de l’assemblée générale, le conseil se penche sur le résultat des votes. Dans les sociétés à capital contrôlé il porte une attention toute particulière aux votes négatifs en regardant, entre autres, comment s’est exprimée la majorité des minoritaires et en tire les enseignements avant l’assemblée générale suivante.”

Alors que la Loi PACTE cherche à réconcilier les français avec l’entreprise en modifiant le code civil, cela risque de rester compliqué lorsque l’on constate la hausse de plus de 40% de la rémunération totale de Bernard Arnault qui passe à 8M€ selon la société en 2017. Sur la même période, les charges de personnel moyennes par salarié ne progressent que d’un peu plus de 1%… 

Ordre du jour de l’AG LVMH 2018 et recommandations de vote Proxinvest

Le rapport Proxinvest :



20 November 2017

Pernod-Ricard : riding high on the coattails of strong financial results


11 November 2017

Today’s Environmental & Social challenges are intrinsically linked

by Olivier de Guerre & Denis Branche

Following the signature of the Paris Climate Agreement in 2015, the 196 signatory countries are in Bonn, Germany, attending the COP23 UN Climate Change Conference presided by the Fiji Islands, one of the smallest countries of the Pacific that is severely concerned by the threat of rising sea levels. Fiji is issuing a warning on the urgency of climate change and has the objective of bringing concrete goals against global warming from this accord. The Paris Climate Agreement has been ratified by 168 countries, including the 28 member states of the European Union. The countries having ratified this accord represent cumulatively 84% of global emissions. According to the United Nations Environmental Program (UNEP), we are heading towards a trajectory where global warming will lead us 3°C above pre-industrial times if signatory countries do not respect their climate goals. The Paris Climate Agreement sets a goal of limiting global warming to “well below” 2°C above pre-industrial times, and ideally to 1.5°C.

Fiji’s Prime Minister Frank Bainimarama, presiding at the Bonn talks, has declared that “The human suffering caused by intensifying hurricanes, wildfires, droughts, floods and threats to food security caused by climate change means there is no time to waste.”

During this week, delegates are working to apply the 2016 Paris Climate Agreement, with one of the primary goals being ending the use of fossil fuels for energy production in the 21st century and switching to clean, renewable energies, such as wind and solar power. According to the International Energy Agency (IEA), coal power still represents a third of today’s global energy production.

The latest report by the NGO Oxfam, ‘Uprooted by climate change: responding to the growing risk of displacement’[1], analyses how of low income individuals are on average five times more likely to be displaced due to natural disasters caused by climate change than high income populations. The report estimates that 14 million individuals in the world’s poorest countries have been displaced, compared to 1 million in developed countries,. Extreme inequality towards climate change affects the most deprived and powerless populations, who are rarely the biggest polluters. Low income individuals, especially women, children and indigenous people are often the most vulnerable to natural disasters. The recent hurricanes in the Caribbean and in the United States have reminded us the extent to which these extreme natural events, amplified by global warming, have such destructive powers.

Despite these observations, this COP23 will be complicated as the newly elected President of the United States, Donald Trump, declared in June this year, his willingness to pull out of the Paris Climate Agreement. The American president wishes to revive domestic coal and shale oil production. However, the United States’ formal pull out of this accord, which President Obama made sure to ratify before the end of his mandate, will not be effective before November 2020, which is at the time of the next US presidential elections. In addition, the American delegacy in Bonn will be represented by Thomas Shannon, a diplomat who declared that climate change is “one of the world’s most important challenges”.

Phitrust is following the discussions taking place at the COP23. Indeed, in our minds, we consider that it is possible to finance innovative projects that are able to reduce pollution, and decarbonize the economy, while also sustaining vulnerable communities by creating jobs, developing skills and training, and rehabilitating individuals that have been excluded by society because of long-term unemployment or personal difficulties. Within the European Union, we can reduce our impact on climate change by investing in those companies that are committed to reducing their negative effect on the environment. Tackling climate change offers an opportunity to create sustainable long-term jobs which will contribute to making our planet a better place in a nearby future. It is therefore necessary to develop tomorrow’s solutions to offer a better world for future generations.


3 September 2017

Havas-Vivendi marriage: Vincent Bolloré’s quest to create a media powerhouse


Following ECGS client request, Proxinvest team wrote a note about the acquisition of Havas by Vivendi which questions the financial and strategic aspects.  

More generally, observers and investors questioned why this marriage was not subject to a shareholder vote. Indeed, in French Law, despite the significant change in Vivendi assets, shareholders are not invited to vote as long as the acquisition is paid in cash (no issuance of new shares). In 2015, the French Financial Authority (AMF) launched a consultation on the sales of assets and it was recommended to hold a consultative vote in such asset sale if the assets are deemed significant (>50%). Proxinvest recommended and still recommends to align the French rules with the UK Premium listing rules and that accordingly a binding vote of the general meeting of shareholders occurs before the adoption of any sale or acquisition of a significant asset. In such vote, a shareholder being a related-party involved in the transaction should not take part to the vote.


24 July 2017

The New Duty to Declare Beneficial Ownership under French Corporate Law

by Gibson Dunn (VIPsight USA)

To Our Clients and Friends: 

As of August 1st, 2017, companies newly created in France will need to declare the identity of their beneficial owners.  For existing companies, the same information will have to be provided prior to April 1st, 2018.

These new rules derive from the Directive (EU) 2015/849 of May 20, 2015 which has already been implemented in several EU countries, such as the UK with the creation in 2016 of the People with Significant Control Register (see Gibson Dunn's Client Alert in this regard at http://www.gibsondunn.com/publications/Pages/The-People-with-Significant-Control-Register.aspx).

The new French rules are provided for in Decree No. 2017-1094 dated June 12, 2017 (published on June 14 – the "Decree").

The Targets of the New Rules and the Notion of Beneficial Ownership

The new rules apply to non-listed companies incorporated in France.  They also apply to commercial companies headquartered outside of France but having an establishment in France subject to registration.

The legal entities falling within the scope of the new duty must obtain the required information on their beneficial owner(s), disclose the information, keep the information up-to-date, monitor any change and update, as appropriate, any disclosure made.

The beneficial owner of a company is usually understood as the individual(s) who own(s) directly or indirectly more than 25% of the share capital or voting rights of the company, or exercise, by any other means, a supervisory power over managing, administrative or executive bodies of the company or over the general meeting of the shareholders.  The Decree is unclear as to how to compute indirect control rights.  For example, in the case of Mr. X owning 100% of the share capital of company A, itself owning 60% of company B which owns 30% of company C, is Mr. X the beneficial owner of company C or should Mr. X be treated as having a (100% X 60% X 30%) 18% interest in company C?  Prudence would recommend considering Mr. X as a beneficial owner of Company C but the issue is debated.

Also, one may wisely integrate the fact that the 25% threshold derives from the Directive (EU) 2015/849 of May 20, 2015 and that the EU Commission is working on a new version of the Directive contemplating a 10% threshold. 

The Filing Procedural Requirements

The CEO of the legal entity subject to the new rules shall file with the clerk of the Commercial Tribunal where the company is registered a document to be attached to the Trade and Companies Register (Registre du commerce et des sociétés), identifying its individual beneficial owner(s).

The document filed shall specify the following information:

1. Information related to the company: legal name, corporate form, registered office and, as the case may be, its unique identification number followed by (i) the mention of the relevant Trade and Companies Register and (ii) the clerk's office where the company or legal entity is incorporated.

2. Information related to the beneficial owner: the name, name used, pseudonym, first names, date and place of birth, citizenship, personal address of the relevant individual(s) and the terms and conditions under which the control is exercised over the legal entity. 

The date on which the individual became a beneficial owner must also be provided.

It is unclear what is meant by the "terms and conditions" [modalités] under which the control is exercised".  One can hope that the registrars of the local Commercial Tribunal will exercise proper restraint in their requests for information in this regard.  Also, one will need to be cautious regarding the description of the "control" over the entity, in order to remain in strict compliance with corporate rules.

Any change making the disclosed information inaccurate or incomplete must be filed within 30 days.

The Disclosure of the Identity of the Beneficial Owners to Third Parties

The Decree provides for a long list of the individuals holding specific offices who are expressly authorized to have access to the information related to the beneficial owner of a legal entity.  As a matter of illustration, judges of the ordinary courts (ordre judiciaire), tax services, customs authorities, French regulators such as the Autorité des marchés financiers (stock exchange watchdog), the Autorité de contrôle prudentiel et de résolution (prudential supervision authority) or Tracfin (anti money laundering authority) have access to the Register for the purpose of their mission. 

In addition, however, it is possible for any person to be authorized to have access to the information by making a request before the specific judge assigned to the monitoring of the register.  The request must be justified but the standard of appreciation of the justification to be provided is unclear.

Also, it must be remembered that the updated version of the EU Directive of May 20, 2015 that the EU Commission is working on provides for a general right of access to the information relating to beneficial owners. 


The President of the relevant Commercial Tribunal can order any legal entity under the Tribunal's jurisdiction to file information related to the beneficial owner(s).  The order can be accompanied by a daily fine (astreinte) payable until fulfillment of the disclosure obligation.  A fine of up to €7,500 may also be imposed in case of breach of the new rules as well as a sentence of up to six months in prison.

*         *         *

As a result of such new rules, agreements such as fiduciary, trust or nominee agreements entered into with respect to shares of non-listed French companies will have to be analyzed in order to identify the beneficial owner of such contractual arrangements.  It will be a significant blow to the confidentiality principle usually applicable to such agreements.  Companies and legal entities subject to these new disclosure rules should assess their disclosure requirements and contemplate implementing monitoring procedures of their direct and indirect shareholding in order to remain current in their disclosure obligations.



26 June 2017

Solocal Group’s CEO and Chairman ousted by shareholders

The commitment of two modest indivisual shareholders at the beginning of May, Pierre-Henri Leroy, the chairman of Proxinvest,and of his wife, with only 12,000 shares corresponding to € 13,000 euros, was enough to trigger this major change.

This had been precisely the target of the shareholders group gathered by Baudoin de Pimodan (pictured here) in SolocalEnsemble, particularly disappointed with the dilutive restructuring finally proposed by the Management and granted by the directors elected on 19 September. The fear of a ceasing of payments forced by the creditors before the Commercial Court and a total disappearance of the shares in progress on this occasion had made a management tremble that remained until the end clinging to the certainty of having Well acted, supported by scattere often incompetent Directors.

Above all, the disappointing performance of the Group’s operating performance led SolocalEnsemble’s resisting shareholders to the conviction that only a new management would be able to restore the company the bar, and that this reform was to begin with the dismissal of the governance  head, Chairman Robert of Metz.

Highly disappointed by the dilutive restructuring proposed by the Management and granted by the Directors elected on 19 September. The fear of a ceasing of payments forced by the creditors before the Commercial Court and a total disappearance of the shares in progress on this occasion  had made a management tremble.

These remained until the end clinging to the certainty of having acted properly, supported by scattered often incompetent Directors.

This was all the more necessary as the latter, as Chairman of the Compensation Committee,

had prepared and had adopted a free share plan for the shareholders to be literally a scoundrel,

a plan that deprived shareholders of up to 6%  of the capital with only performance condition of maintaining the current share price below the official objective of the restructuring and even though the company shareholders had just saved the group by reinvesting € 400m in equity and agreeing for the benfit of  lenders.

In order to save time, Pierre-Henri and Bénédicte Leroy had agreed to assume alonethe burden of presenting three external resolutions:: the dismissal of Chairman Robert de Metz and  of A director long associated withe the LBO investors, Cécile Moulard, plus a serious amendment of the so-called performance shares plan.

See over the site of the association SolocalEnsemble the summary made by Baudoin de Pimodan of this memorable AGM.

Admittedly, the demands for dismissal were not adopted, that of Robert de Metz collecting 21.79% of the votes and that of Cécile Moulard with 15.77%, as the first had prior to the meeting announced his withdrawal by September.

The Board had not been well inspired to refuse the share plan revised by Mr. and Mrs. Leroy, who thus obtained only 34.62% as the plan of the company, still too generous for the managers was finally rejected with 66.36% of the votes. As a result of the greed of some employeesthe group will miss the action plan to hire new talents…

It remains for the shareholders of Solocal Group to wait until the new nominating committee chaired by theDirector and  Nobel fund representative , Philippe de Verdalle, has finally found, with or without the headhunter Heidrick & Struggles, the indispensable competent exemmplary that this great  company so badly needs.



21 May 2017

Say No to CEO’s 59% remuneration increase at VALEO

How should shareholders vote when a company has excellent financial performance, good transparency on executive remuneration but whose total compensation for the Chairman-CEO goes from € 3.3m in 2015 to € 5.3m in 2016, i.e. + 59%?

Simply say NO …

The total compensation of Jacques Aschenbroich, Chairman-CEO of the automotive supplier Valeo, rose 59% to € 5.3 million in 2016, 30% more than the median of the CAC40 index according to Proxinvest.

The automotive sector is now as well known for the optimization of pollution tests as for optimizing the remuneration of its CEOs. Thus, Proxinvest notes that this remuneration is in line with the median of the leaders of the Automotive sector in Europe. It still represents 266 times the French minimum salary and Jacques Aschenbroich thus joins the highly regarded circle of executives whose remuneration exceeds the ceiling of the maximum socially acceptable remuneration of 240 SMIC defined by Proxinvest as of 2005.

While Proxinvest considers that the combination of the functions of Chairman of the Board and Chief Executive Officer is not a desirable governance move, the Board of Directors uses this unfortunate development to justify a 11% increase in base salary. With such monetary incentives to combine CEO and chair positions, there is no need to investigate why France is one of the few countries on the world where there are still combined chairman-CEOs.

The increase in base salary has a direct effect on the annual bonus which is calculated as a percentage of the base salary and capped at 170% fixed, an amount that does not comply with the voting policy of Proxinvest.

Half of the new compensation is composed of performance shares for € 2.7 million.

For this financial year 2016, shareholders have an advisory Say On Pay in resolution 9 in accordance with the AFEP-MEDEF code. For the remuneration to be granted in 2017, shareholders have in France a binding vote in resolution 10 thanks to the Law Sapin 2 but the remuneration policy does not move for 2017. The damage has been done in 2016 and the 2017 total remuneration is likely to remain beyond 5M € according to the new remuneration policy …

Valeo currently has the 34th biggest market capitalization of the CAC40 index, therefore  there is no reason to support such an increase in compensation which would rank Mr. Aschenbroich 10th highest remuneration of the index according to Proxinvest last annual survey about CEOs remuneration in France.

We regret a lack of dialogue and prior consultation by the Lead Independent Director, George Pauget, who also chairs the remuneration committee of Valeo. At the time he was CEO of Crédit Agricole, his decision to acquire the Greek bank Emporiki led to a 9 billion € lose for Crédit Agricole’s shareholders. Maybe the €2M remuneration increase looks like peanuts in comparison with Emporiki disaster…



13 May 2017

Ira Millstein tells us the worries of US CEOs under TRUMP and the need for engaged Directors

Ira M. Millstein is a highly respected figure of corporate America. This great business lawyer has held a building role in the development of corporate governance  at is best, deserving the admiration from both  the Sell and the BUy Side ,  the big issuers such as GM , GE, Pfizer or DuPont and also the most important asset managers and pension funds.   Geoff Colvin of Fortune Magazine ask him at Columbia Law School about his last book, The Activist Director: Lessons from the Boardroom and the Future of the Corporation.

Ira recognizes that following the financial crisis settlement and the two regulation waves of Sarbanes-Oxley and Dodd-Frank big banks felt reassured and dropped their earlier concern for a better governance. Also the usual heard instrincts partnered with the pressure for compliance to produce fairly boring Boards. Ira insists on the urgent  need for corporation to get new highly engaged directors at their Board, knowing their business and willing to know the company in depth, very informed,  more open to the rest of the world and to the demands of the general public.

Activist shareholders, says Ira, are also very useful. They are not always right but they should be always listen to.

Ira is sharing with us  a serious worry about the impredictible Mr. Trump and the need of the CEOs for serious assistance from their Directors.  Ira is  calling for a new breed of “activist” directors who partner with management and reject short-term outlooks, plan a future based on growth and innovation, and take responsibility for corporate organization, strategy and efficiency.


5 May 2017

Vivendi shareholders tackle Vincent Bolloré at the AGM

The extraordinary grip over all of his asset  by Vincent Bolloré was confirmed during the general meeting of Vivendi on 25 April by the adoption of all the resolutions, notably thanks to the double voting right and following very questionable threats against foreign shareholders made in 2015 by Vivendi…

A magician of language, a no-nonsense industrialist and a great financier, Bolloré never ceased to prove his talent. He might succeed at achieving what Jean-Marie Messier failed to s: the convergence of contents and carriers, the alliance between the creation and the media, and the appearance of a unique French media group facing the greatest Americans. With his disturbing but effective financial opportunism, the  problem with Vincent Bolloré is that he does not like to comply with the rules of good governance.

And  even his peers, the big French bosses blame him. Created in 2013, under the pressure of the French  government, Medef and Afep to extinguish the fire of abusive remuneration  new version of the “Code of Government of listed companies”, was written and a High Council of Corporate Governance (HCGE) was created, charged with enforcing the Code and privately admonishing offenders. According to the Les Jours website, which reveived some confidential stories,  the HCGE President Denis Ranque alleged that Vivendi had explicitly objected to Vincent Bolloré, chairman of a supervisory Board at Vivendi: ” You are more involved as a real executive officer than as the chairman of the supervisory Board responsible for overseeing but not managing the company and its group. “No one needs to see Bolloré in a general assembly to find out who caries the sheriff’s star, who is the operational boss and who specifically calls the managers of the various subsidiaries to tell publically he beautiful story of Vivendi.

Vivendi’s minority shareholders in fact strongly sanctioned the leader maximo for its multiple directorships at listed companies, while he was demanding to be  re-elected for a four-year term at the Supervisory Board: his score was only 82.12% and would have been only 62 to 66% of the AGM  votes without the artifice of the double voting right.

More clearly, the Say on Pay vote for of members of the Executive Board subjected to the iron hand of this authoritarian Bolloré paid the price for this poor governance. The remuneration of the Chairman of the Management Board, Arnaud de Puyfontaine (ie € 3.5 million for 2016) was deemed excessive and did not reach 75% of the votes,  as those of MM. Hervé Philippe (€ 2.4 million) and Stéphane Roussel (€ 2.7 million). Ironically, to accept the constant involvement in the management by the Chairman of the Supervisory Boardwould appears to be the essential contribution of these the Executive Board members…

Without the double voting rights Vivendi could no longer increase its capital.

Two years ago, the Bolloré group held 10.20% of the share capital of Vivendi, ie 138,976,805 shares.

On the day of the general meeting held on April 25, the Bolloré group held at least 20.65% of the share capital (257,689,013 of the 1,247,888,683 shares ) and, thanks to double voting rights 40, 6% of the 975 610 998 votes of the ordinary general meeting.

Several resolutions were passed with less than 75% of the votes ie less than 731,708,248 votes and would have got  60% of the votes without the Bolloré Group’s 138,976,805 double voting rights. They apparently almost all passed, even without the presumed vote of general support of the 200 727 450 double voting rights of which the 15 million double voting rights of the plan of the employees. Resolution 14 appointing Yannick Bolloré only garnered 697,709,447 votes, or only 71.52% of the vote: even without the support of the total of 200 million voting rights double its score “naked” would finally have largely exceeded 387,441 774 votes needed for the threshold of 50% of the votes cast.

But the extraordinary financial resolution to increase the capital with DPS for € 750 million, Resolution No. 21, adopted at 70.1% (691,382,945 votes) with the support of Proxinvest, would undoubtedly not have passed since it would then not have reached the 516,537,373 shares required to reach the 66.7% threshold without the double voting right.

Although this very ambitious financial resolution did not seem to be a problem, Proxinvest insists that double voting rights remained a very perverse protectionnist provision.


20 April 2017

Accor’s Board unanimously maintains its double voting right: Proxinvest withdraws its support advice on Nicolas Sarkozy as independent director  and on Sébastien Bazin as Chairman & CEO of Accor.

Phitrust a French activist open fund advised by Proxinvest, has tabled for the Accor May 5th AGM with 13 co-depositing investors weighing 2.3% of the share capital an external resolution (“Resolution A”) for the cancellation of double voting right provision of the company. The Board of Directors just unanimously decided on April 19 not to welcome this resolution and to maintain the double voting right remitted only  to registered shareholders after two years of such holding.

Proxinvest regrets this decision affecting the interests of all shareholders.

It led the proxy firm to further encourage support the Yes vote in favour of the shareholders Resolution A at the May 5th. meeting, but also to alter its recommendations on the vote on some Directors elections. Only the respect for the principle of “one share – one vote” could prevent one of the new major shareholders, notably the Chinese competitor Jin Jiang, who is still for the time being denied a seat on the Board, to weight on the group decisions without having to launch a takeover bid. Actually the two other beneficiaries of this double voting right provision will be the Qatari and Saoudi Accor stakeholders…

Proxinvest, until now, had supported the re-election of the Chairman & CEO Sébastien Bazin and of the recently appointed former president of France Nicolas Sarkozy to the Board of Directors. But this breach of a guiding principle for good governance being bad manner to shareholders democracy, Proxinvest advise investors to vigorously react and to oppose the Directors election.

In a message to Sébastien Bazin, the CEO of Proxinvest, Loïc Dessaint, observed that the CEO’s former verbal commitments to good governance are no longer confirmed and that Proxinvest’s voting policy can no longer support his re-election as CEO.

Similarly, the association of Nicolas Sarkozy to this Board decision against the equal treatment of shareholders tilts the Proxinvest advice against the confirmation of the Former head os State election because his qualification as an independent director is now unfounded.   Proxinvest had at first welcomed the association of a former President of the French Republic Nicolas Sarkozy with the Board of directors of Accor, a French group with a global reach. But the role of the Director is above all to look after the interests of all shareholders and not to protect any preferred or favored shareholder, be they Chinese , Qatari or Saoudi.

Proxinvest also does not support the Accor Say on Pay consultations on the Managing Directors pay (resolutions 12 and 13): following the 2016 warning vote against Sébastien Bazin’s Pay, the company did not improve its information on the package and the  individual achievement rates of the bonus performance criteria are still undisclosed.

As for the new free share plan (or “Co-investment plan”) proposed by the company, an innovative formula subject to a very ambitious course of growth, Proxinvest régrted that such generous plan be implemented in addition to the existing bonus shares  allocations offering  5% ofthe company to the management after three years only.   If this plan had been put in place as an alternative to  the current allowances, it would have better justified the allocation of potentially very high benefits to the parties concerned at shareholder’s expense (resolutions 14, 15 and 26).



23 March 2017

Proxinvest joins investor group to urge SEC not to delay CEO pay ratio disclosure

In the U.S. the CEO-to-worker compensation ratio increased from 20 to more than 300 over the last 50 years (1965-2014) according to the Economic Policy Institute.

Mandated by the 2010 Dodd-Frank law, the requirement to disclose CEO pay ratio went into effect in January and the ratio is expected to be disclosed in many companies’ 2018 proxy statements.

Of course, U.S. CEOs, among the most paid in the world, did not welcome the rule and most of them definitely refused any comparison with the pay level of their own employees. Their  powerful lobby group, Business Roundtable, the association of chief executive officers of leading U.S. companies, chaired by Jamie Dimon, the chairman and CEO of JP Morgan Chase,   has actively lobbied against such disclosure with some success since the  new SEC chairman Piwowar said in February the SEC was seeking comments about whether to delay the rule.

Proxinvest believes that CEO pay ratio disclosure aims to help investors better gauge the reasonableness of CEO pay. Therefore Proxinvest decided to join an investor group with $3Trln in assets to urge SEC not to delay CEO pay ratio disclosure.

The SEC’s pay ratio disclosure rule is thoughtful, balanced, and carefully crafted to provide companies considerable flexibility and makes accommodations to them in complying with the rule, while giving shareholders valuable new information” the groups wrote in the letter.

The new Shareholder Right Directive,voted by the European parliament this month, will oblige companies listed in the European Union to disclose in their remuneration report “the annual change of remuneration, of the performance of the company, and of average remuneration on a full-time equivalent basis of employees of the company other than directors over at least the five most recent financial years, presented together in a manner which permits comparison“. This EU new disclosure is close to the current UK practice.

As clearly explained by the UK Executive Remuneration Working Group established by the UK Investment Association,   “There is growing public disapproval of the absolute levels of remuneration paid to business leaders, as well as growing divergence between remuneration paid to those business leaders and remuneration paid to other employees in the company. The issue of quantum is often the underlying issue behind shareholder and public disapproval of executive remuneration. […] The internal reference point should preferably be the ratio between the remuneration of the CEO and median employee pay, which should then be publically disclosed. Boards must take account of CEO pay relative to market levels, but they must also make sure that their decisions are not dictated by benchmarking alone, as this has significantly contributed to the “remuneration creep”.”

UK, Europe and the US have to move together to restore shareholder, employee and public trust in reasonable executive remuneration practices.



14 February 2017

Oh SNAP! This time you get no voting power!

SNAP Inc., owner of the budding social media platform snapchat, has announced plans to go public capturing the imagination of investors following a year of abysmal technology IPOs in 2016.

With plans to raise an estimated $3 billion from its IPO, market observers estimate that the Company will fetch a valuation of $20 to $25 billion, a healthy premium to its most recent valuation of $18 billion as a private company. According to Dealogic, 26 technology IPOs in 2016 raised $4.3 billion from US exchanges.

Echoing the IPO behaviour of other technology firms, SNAP founders Even Spiegel, 26, and Bobby Murphy, 28, plan to implement a multiple class structure. But unlike their tech peers, they plan to issue shares to the public with zero voting rights, which is considered extreme even by technology industry standards. Google founders Sergey Brin and Larry Page gave themselves disproportionate voting power back during their 2004 IPO allowing them to control almost 60% of voting rights. Mark Zuckerberg of Facebook followed suit in 2012 only to strip investors of their voting rights last year in order to maintain 60% of voting rights while donating substantially all of his shares to his foundation. 

Voting power

SNAP has created a three-tiered share structure.

The company boasts just over 512 million Class A shares, which carry zero voting rights. The founders each hold 21.8% of these shares. Early investors Benchmark Capital Partners and Lightspeed Venture Partners hold 12.7% and 8.3% of these shares respectively with SNAP board member and Benchmark general partner Mitchell Lasky holding a further 12.7%.

Class B shares carry 1 vote per share and are primarily owned by the aforementioned venture capital funds: Benchmark (22.8%), Lightspeed (15%), and Lasky (22.8%). Atop the share hierarchy are Class C shares which are equally owned by Spiegel and Murphy and each boast 10 votes per share effectively giving the young founders 88.6% of voting rights.

Post-IPO, each Class B share transferred will automatically convert to a Class A shares save for a few exceptions. Additionally, Class C shares will convert to Class B shares upon transfer save for a few exceptions, which include the transfer of shares between the founders themselves. Both Class B and Class C shares convert to Class A and Class B shares, respectively upon the death of the holder. Moreover, should one of the founder’s holding of Class C shares fall below 30% of his holding at the time of the IPO or a specific number of shares to be later determined, said shares would automatically convert to Class B shares. And when there are no Class C shares left, outstanding Class B shares will convert to Class A shares, all of which would gain voting power to the tune of 1 vote per share.

Source: S-1 SEC filing

A cursory review of the holdings would reveal that the SNAP founders each enjoy a control premium of almost 2.29 times. In our previous reporting, we defined control premium as voting power as multiple of actual economic interest. A control premium in excess of 1 violates the “one-share/one-vote” principle and enables a concentrated group of shareholders to control the firm.

In a report co-authored by IRRC and ISS, researchers found that controlled firms with single class structures outperformed their counterparts with multiple class structures in the S&P 1500 Composite Index over a 3-year, 5-year, and 10-year performance period ending in August 2012. However, multiple class structures did outperform over a 1-year period. In analysing SEC disclosures between 1990 and 1998, Chad Zutter of the University of Pittsburgh found a substantial discount applied to the initial valuation of dual class structures. He interpreted it as the market’s perception of “a relationship between the extreme entrenchment of dual-class management and firm performance” and concluded that the market tends to overprice said structures around the time of the IPO only to correct as time passes. These findings seem to broadly confirm the conclusions derived from the IRRC/ISS report.

Interestingly, other researchers have adopted a more nuanced view. Thomas Chemmanur and Yawen Jiao’s IPO model revealed that dual class IPOs are more likely to outperform their single class peers when “the reputation of the incumbent is high and the firm is operating in an industry where the difference in intrinsic values between the projects with high and low near term uncertainty is large”. Whether Spiegel and Murphy the true visionaries they are trumpeted up to be is yet to be determined, but the technology sector does offer its fair share of uncertainty and astronomical valuations.

Disenfranchisement did not seem to deter investors in the technology sector in the past, but have the SNAP founders gone too far? In a recent letter to Spiegel, Murphy, and chairman-designate Michael Lynton, the 18 members of the Council of Institutional Investors (CII), which include the California Public Employees Retirement System (CalPERS) and Aberdeen Asset Management, urged SNAP to adopt a single class share structure citing the findings in the IRRC study.

The Corporate Governance Principles for US Listed Companies championed by the Investor Stewardship Group (ISG), a grouping of 16 US and international institutional investors which include Blackrock and Vanguard, has also publicly rebuked dual class structures. The second concisely echoes this sentiment:  “Shareholders should be entitled to voting rights in proportion to their economic interest”. It further calls for boards that currently employ dual class structures to regularly review the benefits of such a practice and to “establish mechanisms to end or phase out controlling structures at the appropriate time, while minimizing costs to shareholders”. Although the ISG does not plan to uphold these principles until January 1, 2018, their message is loud and clear.

Expensive valuation

Talk of SNAP’s valuation has gripped markets. Although an IPO price has yet to be disclosed, analysts are estimating a valuation of $20-$25 billion, a multiple of 62 times FY 2016 sales or 25 times FY 2017 projected revenues. A very expensive proposition compared to the valuations used for some of its peers such as Facebook and Twitter.

Making this generous valuation even more worrisome is the fact that SNAP reported a gross margin of almost -12% for FY 2016 (although margins turned to a positive 7% in Q4 2016). These abysmal margins are due to the fact that, unlike Facebook and Twitter, SNAP outsources its data services to the Google Cloud. Earlier in the year, SNAP signed a 5-year deal with the Google Cloud Platform that requires a minimum payment of $400 million/year to provide the infrastructure vital to keep its Snapchat application running. Twitter, at a similar revenue base, boasted gross margins of 63%.

Other profitability measures do not paint a prettier picture. Adjusted EBITDA worsened by 57% to reach -$459 million in FY 2016 and the Company continues to haemorrhage cash flow, reporting Free Cash Flow of -$678 million, almost double its cash loss in the prior year period. It is no surprise then that SNAP’s valuation is predicated on the anticipation of stellar revenue growth going forward, with estimates that they would reach $1 billion in FY 2017 vs. $405 million last year. Nevertheless, growth in Daily Active Users (DAU) appears to be losing steam, reporting year-on-year growth of 40% in Q4 2016, down from a peak of 65% growth in Q2 2016. Even quarterly DAU growth has fallen to the single digits in the last two quarters of FY 2016. Analysts have not overlooked the potential for Facebook’s “Instagram Stories” to accelerate this trend.

Shareholders should also note that Twitter, trading currently at $18-$19/share, is still almost 50% below its IPO valuation and market observers are sceptical as to whether it can generate the growth necessary to justify a higher valuation. Facebook, after debuting in a disastrous IPO which shed over 50% of its value, has come roaring back, currently trading at 350% of its IPO price, after it definitively proved its staying power.

The stakes are evidently high, and given the extremely volatile nature of young technology companies, it is incumbent upon boards to at the very least give shareholders a say in how their companies are run.

Executive Compensation

Our discussion then turns to executive compensation, where it appears that SNAP executives are being generously compensated for their potential to generate future growth as opposed to actual performance.

Evan Spiegel, who currently serves as CEO collected $2.4 million in compensation in FY 2016 and received no shares as compensation. However, shareholders should note that the Class A shares he received as a dividend for his holdings are excluded from these figures.

The Company has stated that post-IPO, Spiegel will receive a symbolic salary of $1, mirroring that of Mark Zuckerberg and the Google founders. Nevertheless, he is slated to receive an award of 3% of all outstanding shares on the closing of the IPO, or should the valuations being floated be realized, a handsome $600 to $750 million windfall. The award will be paid in the form of Class C shares, making Spiegel the largest controlling shareholder, pushing him well ahead of Murphy in the pecking order.

Last year SNAP made headlines when it poached Imran Khan from Credit Suisse to be its chief strategist, rewarding him with 7 million restricted share units (RSUs) worth an astounding $146 million. Almost all share awards (RSUs and stock options) have a service condition (time spent at the company) and a performance condition. According to the S1 filing, the performance condition is ‘satisfied on the occurrence of a qualifying event, which includes a change in control or the effective date of an initial public offering’.

As of December 31, 2016, SNAP had almost $1.5 billion in employee RSUs that have not yet satisfied the service condition. More troublingly, had the IPO occurred on December 31, 2016, SNAP would have recognized a colossal $1.1 billion in compensation for RSUs that have already satisfied the service condition. The most recent RSUs granted in November-December 2016 boasted a weighted average fair value of $16.33/share. As for stock options granted during the year, the weighted average fair value was $30.19/share, with a strike price of $1/shares. In July 2016, 1,253,028 stock options were granted with an underlying common stock fair value of $31.08/share.

A successful IPO will prove to be an enormous payday for SNAP executives, and given the lack of genuine performance conditions, they may not bear the consequences should a massive correction in the share price take hold à la Twitter.

Much ado about nothing?

If SNAP were to become the next Facebook, dissenting voices will surely be silenced as institutional investors reap the benefits of a higher share price. On the flipside, investors stand to lose quite a bit and will not have the power to change how the Company is being run.

Proxinvest is seriously concerned by the unabashed subversion of shareholder rights at the expense of power-hoarding visionaries, the venture capitalists who enable them, and the opportunistic bankers who hype them. No promise of potential short-term profits should replace shareholder democracy and reasonable valuations.

The question investors have to therefore contemplate is whether accepting excessive non-performance based remuneration and a dual class structure that marginalizes them, is truly worth the risk of investing in SNAP? Time alone will tell.

Imad Barake



12 February 2017

Proxy Season 2017 in France: More responsibility for shareholders in taming executive pay

French website/database Hebdo des AG organized its annual roundtable this week to discuss the fast approaching 2017 proxy season.

The roundtable brings together representatives of leading proxy advisors to voice their concerns and expectations in front of an audience that includes representatives of several corporations that they would be covering during the season. More importantly, it gave Proxinvest the pulpit to set the bar high on corporate governance and hopefully entice companies to adjust their policies accordingly.

Executive compensation, as indicated by financial journal AGEFI, will remain at the heart of the 2017 proxy season when France will become the latest test ground for compensation legislation. Recall that CEO compensation made headlines in France and around the world following the first rejection of a Say-on-Pay resolution since the advisory vote on remuneration was introduced in 2013. The historic vote fell on deaf ears and a defiant Renault upheld the compensation of its controversial chief, Carlos Ghosn.

The ensuing shareholder revolt compelled France’s opportunistic politicians to act prior to a crucial election year. Named after Economy Minister Michel Sapin, the “Loi Sapin 2” was born at the end of 2016 and stipulated a binding ex-ante vote on compensation  for companies listed on regulated markets, starting from proxy season 2017. The objective of the law is for shareholders to give their explicit approval of fixed, variable and exceptional sums that may be granted to corporate officers going forward.

It is, as of yet, unclear how large foreign institutional investors will adapt to this ambitious legislative effort to render CEO compensation more socially acceptable in France. Assuaging fears is the recent approval of CEO Thierry Breton’s ex-ante compensation, when Atos became the first company in the country to put forth a vote along the lines of Sapin 2.What is nevertheless becoming increasingly clear is the failure of Anglo-American investors and their proxy advisors to adapt to market practices in France, whether that be on the subject of compensation or other governance issues.

Case in point is how one in two CEOs earn less than €2.6 million per year, including shares and options. While this figure is considered excessive in France and capped off three decades of steady increases, it is by and large dwarfed by compensation in the US and UK. The huge pay disparity between French executives and their Anglo-American peers demonstrates the very different standards that French society and shareholders hold their top executives to. Non-French investors collectively hold 60% of the biggest listed French companies, giving them considerable power at general meetings and large responsibilities and duties.

Naturally, what startles French society does not bat the eyelashes of these overseas investors and their proxy firms alike. Paradoxically, in recommending shareholder approval of remuneration policies exceeding largely the local practice (generally speaking compensation packages awarding between €5 million and €15 million are generally considered excessive in France), US proxy advisors have contributed to support and legitimize outsize compensation that took French society, politicians, and even some CEOs by storm. The legislation that heralded the Say-on-Pay vote in 2013 as a means to empower shareholders and curtail excessive pay inadvertently became an instrument to the contrary (+20% in CEO’s total pay in 2015 according to Proxinvest annual study on french CEOs pay).

The considerable weight of foreign investors in France’s capital markets can be viewed as a testament to the country’s lack of local sources of fresh capital. In a cruel twist, France’s dearth of funded schemes as a modus operandi for its retirement plans renders it dependent on these very same foreign pension funds that champion such schemes. Faced with such a daunting challenge, it is incumbent upon France to consider the benefits of adopting funded schemes as such structures have a history of investing locally and adopting long-term investment objectives. Not only would such a solution stem the dependence on foreign capital, it would greatly contribute to aligning corporate governance policies with the spirit and letter of the laws intended to promote them in the first place. Indeed, the few French pension funds (ERAFP, Ircantec) seem to be ready to tacle executive compensation issues (83% of votes against at French general meetings by ERAFP, a 100% SRI pension fund with €26bn in assets and 4.5m beneficiaries).

True to form, Proxinvest will be closely monitoring the evolution of the new binding vote on remuneration throughout the upcoming season, with an eye to to extolling the virtues of moderate pay, transparency and alignment with performance. With the new Sapin 2 Law, France is becoming a laboratory of new shareholder rights to curb excessive executive pay. Time will tell whether global investors be ready to use efficiently those new shareholder rights and to finally stop any support to executive pay inflation.


4 January 2017

Monte dei Paschi di Siena: from helping the poor to emptying state coffers

More than seven years after the Great Recession, the bailout saga continues. The failure of the Italian referendum on December 4, 2016 and the subsequent resignation of Prime Minister Matteo Renzi’s government sent markets into a tailspin and stopped Banca Monte dei Paschi di Siena’s (BMPS) restructuring plan in its tracks as understandably jittery investors refused to commit capital. With almost €47 billion in gross non-performing loans (NPLs), the beleaguered bank turned to Rome for a third potMonte dei Paschi di Sienaential bailout since the financial crisis.

On December 7, 2016, the Italian government announced its intention to purchase €2.2 billion in subordinated BMPS bonds currently held by retail investors. As of the morning of December 12, 2016, it was confirmed that the government decree to affect said transaction has been prepared but it has yet to be approved since a new government would have to be formed first. After a weekend of haggling, President Sergio Matteralla asked current Foreign Minister Paolo Gentiloni to form a caretaker government until elections are held. The new prime minister comfortably clinched a vote of confidence in the Chamber of Deputies on December 13 and is set to scrape through in the Senate vote expected to take place in the coming days.  On the same day, the new leader unequivocally stressed that the government would be ready to intervene to guarantee the stability of the financial system. Should a decree be approved in the near to medium term and the blessing of the EU be secured, the subordinated bonds will be purchased and would then promptly be exchanged for shares giving the Italian state a 40% stake in the bank.

While acknowledging that the political process for a bailout may well turn into a protracted fight, and especially after the European Central Bank (ECB) refused their request for an extension to raise the necessary capital, the bank’s top brass decided to double down on their original restructuring plan. Current CEO Marco Morelli hopes to highlight to retail investors that the voluntary conversion of their subordinated bonds would fetch a much higher premium than a forced conversion that would likely take place in a bankruptcy.  Moreover renewed efforts will be exercised to persuade institutional investors to return to negotiating table.

BMPS shares rallied 11% last week after the announcement that a bailout may be in the works only to lose all those gains going into the weekend. The appointment of a new prime minister pushed shares up by almost 8% in the early hours of trading on December 12, 2016.

The road from “piety” to Santorini and Alexandria  

In the late Middle Ages, Franciscan Monks under the auspices of the Catholic Church founded and began operating a series of institutional pawnbrokers. These “Mounts of Piety” provided collateralized loans at affordable interest rates to the poor and more importantly countered the exorbitant rates charged by moneylenders of the day. In 1472, one of these institutions was founded in Siena. This institution continued to evolve over the years becoming one of Italy’s largest retail banks and a symbol of pride for its native Siena. The bank’s then largest shareholder, the Monte dei Paschi di Siena Foundation, which was spun out of the bank in 1995 following its public listing, prided itself on a reputation as “the ATM”, a title it earned thanks to the roughly €220 million it used to donate annually to its city almost a decade ago (the foundation’s stake in the bank has since been wiped out entering 2016 at a meagre 1.6% of capital)[i].

The storied bank’s current malaise traces its roots back to November 2007, when it made the ill-fated decision to acquire Banca Antoveneta. Under the leadership of then CEO Antonio Vigni, BMPS purchased Antoveneta from Spain’s Banco Santander for an eyebrow-raising €9 billion, or €9 million per branch. In hindsight, the transaction proved to be a textbook definition of empire-building as Mr. Vigni aspired to avoid being relegated to a regional player in a largely consolidating banking industry.

Antovenata itself was carved out of the carcass of ABN AMRO after it was jointly acquired in October 2007 by Banco Santander, the Royal Bank of Scotland, and Fortis following an epic takeover battle with Barclays. Alarmingly, the Spanish bank booked an instant 60%, or €3.4 billion, capital gain on the transaction. BMPS partly financed the deal with a €5 billion capital increase and market observers at the time fretted about its “overstretched” balance sheet. Merrill Lynch advised Banco Stander on the original purchase of Antoneveta and then advised BMPS itself on its own subsequent purchase of the asset raising conflict of interest concerns. All told, court documents show that investment banks generated an astounding €200 million in fees advising BMPS on acquisitions and derivatives deals between 2008 and 2011.[ii]

The financial crisis took its toll on the Sienese bank as it reported an astounding €14.7 billion in cumulative net losses between 2011 and 2014. In October 2012, shareholders approved a capital increase of €1 billion to help bolster the bank’s capital position to no avail: in January 2013, the bank received €3.9 billion in emergency loans from the Italian government and shareholders approved capital authorisations of up to €6.5 billion to help BMPS repay its benefactor should it be unable to do so organically. To make matters worse, around the same time the bank was rocked by revelations that it may have misled investors through several controversial derivative transactions that helped it conceal losses.

In what became known as “Project Santorini”, BMPS made a €1.5 billion bet in December 2008 on the value of Italian government bonds it had previously posted as collateral with Deutsche Bank. Essentially, BMPS took a long position in credit default swaps on Italian government bonds, which backfired as Italian 10-year yields went from 148 basis points in November 2008 to almost 570 basis points in November 2011. Ironically, this deal was originally designed to conceal €367 million in losses from an earlier equity swap deal also with Deutsche Bank[iii].  Shortly afterwards, it was revealed that the bank had to book further losses on yet another derivative transaction, dubbed “Alexandria”,  this time with Japan’s Nomura. Both deals were allegedly approved by the Bank of Italy, which was headed by none other than current ECB president Mario Draghi up until late 2011. Nomura finally agreed to settle the Alexandria transaction out of court without admitting any wrongdoing. In the aftermath, BMPS was forced to restate its 2012 financial statements to reflect €730 million in losses from its derivative transactions but was able to report a profit in 2015 thanks largely to the €608 million settlement it received from Nomura.

In October 2014, an Italian court sentenced Mr. Vigni, former chairman Guissepe Mussari (who later went on to head the Associazione Bancaria Italiana, an Italian bank lobby) and former CFO Gianluca Baldassarri to a three year and a half jail sentence for misleading regulators regarding the Alexandria transaction[iv]. Prosecutors successfully argued that the trio hid a document describing how the derivative was linked to the purchase of €3 billion worth of Italian government bonds and hence required a different accounting treatment. The document was found by the bank’s new management hidden in a safe in Mr. Vigni’s former office. The trio appealed and they will stand trial on December 15 along with eleven others from BMPS, Deutsche Bank, and Nomura[v].

Adding further mystery and intrigue to this saga was the fact that David Rossi, former director of communications at BMPS had allegedly committed suicide on March 6, 2013 after jumping from a window on the third floor of the bank’s headquarters. Mr. Rossi’s wife claimed that he had informed his boss, former CEO Fabrizio Viola, two days prior to his death that he did not want to be ‘overwhelmed by this’ and wanted ‘assurances’. In a final twist, Mr. Viola stepped down as CEO on September 8, 2016, a mere week after prosecutors decided to drop charges of market manipulation against him. Another man who may have had intimate knowledge of the derivative transactions with BMPS was former Deutsche Bank chief risk officer William S. Broeksmit, who also allegedly committed suicide by hanging himself in his London apartment in October 2014[vi].

Capital, Capital, Capital!

According the bank’s financial statements, it paid almost €735 million in dividends between 2009 and 2012, right before it suspended its dividend payment. It is disgraceful that one of Europe’s least capitalized banks was allowed by regulators to pay a dividend in the first place.

This trend is unfortunately not unique to BMPS or Italy, for that matter. At a panel discussion in February 2016, Hyun Song Shin, economic advisor and head of research at the Bank of International Settlements (BIS) noted that accumulated dividends for a sample of 90 EU banks between 2007 and 2014 amounted to €196 billion vs. cumulative retained earnings of €310 billion. This implied that capital levels would have been at least 63% higher at the end of 2014 had banks not paid dividends. Italian banks actually paid more in dividends than the cumulative retained earnings they generated during this time frame (€28 billion vs. €25 billion in retained earnings)[vii].

Time and again the BIS has extolled the virtues of higher capital levels. In a working paper in April 2016 it noted that a 1% increase in equity-to-total assets was associated with a 4% decrease in the overall cost of deposit and debt funding which in turn would spur faster credit growth. This funding debunks the conventional mantra regarding the potential monetary policy trade-off between increasing bank lending to spur growth on one hand and ensuring the financial viability of individual banks on the other.  The BIS explicitly stressed that “both the macro objective of unlocking bank lending and the supervisory objective of sound banks are better served when bank equity is high”[viii].

Central banks have only their misguided policies to blame for the clear breakdown of the transmission mechanism between loose monetary policy and bank lending.

The 2016-2019 Business Plan: Panglossian goals

BMPS’ current business plan calls for a massive recapitalisation of its balance sheet and the securitisation of the bulk of its non-performing loan book. The recapitalisation plan targeted a capital injection of €5 billion which the bank intended to largely raise through the swapping of existing subordinated notes for new equity. In this respect, the bank was able to secure roughly €1 billion from institutional investors. However, the likelihood of convincing the retail investors, holding roughly €2.2 billion in subordinated debt proved impossible.

Other fund raising avenues were to come from a private placement and as a last resort from a public offer. Conversations between management and several investors revealed that much of the success of this plan hinged on the adoption of the December 4 referendum. Given its failure, it comes as no surprise that the Italian government decided to fill the hole. According to media sources, the bank was in talks with the Qatari Investment Authority for a €1.4 billion investment. The wealth fund has since backed down as it opted to wait for the formation of a new government.

The securitisation plan entails the sale of roughly €28 billion in gross non-performing loans to a series of securitisation vehicles for €9 billion, a steep discount to gross exposures. One of the securitisation vehicles is guaranteed by the Italian government through its Guarantee on Securitization of Bank Non-Performing Loans (GACS) program and is slated to repurchase up to €5 billion through the sale of senior tranches on the underlying loan pool. The Atlante Fund, a private vehicle sponsored by a hodgepodge of 67 investors with the goal of ‘rescuing’ the Italian banking system, will repurchase a further €1.6 billion through the sale of junior mezzanine notes. Interestingly, Quaestio Capital Management, the fund’s manager released a statement on October 6, 2016 stating that it is not ‘assessing a possible investment in the bank’s [BMPS] capital’.  A large state-sponsored securitization program sounds eerily familiar. Fannie and Freddie anyone?

Many other objectives of the Business Plan would leave even the most optimistic investors sceptical. Net income is targeted to exceed €1.1 billion in 2019 and Return on Tangible Equity (ROTE) is expected to surpass 11%, from its current level of 6.2%. Such a lofty goal in the post-Lehman era is wishful thinking. It is based on the assumption that mortgages will increase by 2.5 times over the next three years and that loan loss provisions will be drastically reduced. A post-restructuring NPL coverage ratio of 40% is still abysmal.

Investors should also brace themselves for the potential for contagion in the Italian banking industry. The failure of BMPS’ recapitalisation plan to gain traction post-referendum does not bode well for its much larger rival UniCredit. Italy’s only “systematically important financial institution” plans to raise €13 billion in capital to shore up its ailing balance sheet: €10 billion is slated to come from new capital and about €2.4 billion will come from the sale of a 32.8% stake in Poland’s Bank Pekao. The fact that it holds an estimated €80 billion in gross NPLs (22% of the entire Italian banking system NPL total) makes the task even more daunting.

Faced with all these challenges, extreme volatility, uncertainty, and even more bailouts may be in store for Europe’s zombie banks. With low to zero growth, stretched fiscal budgets, and a frightening wave of nationalism threatening to rip the continent apart, time is running out for policymakers in Brussels and Frankfurt to find solutions.

Lessons for shareholders

While the onus is on the authorities, and notably the ECB, to ensure that European banks remain adequately capitalised, shareholders have an important role to play as well.

Profits retained by banks help solidify their capital base. It thus follows that any profits that banks do not spend on dividends will add to capital. Unfortunately, we have seen European banks being allowed to pay billions of euros in dividends following the financial crisis when many of them ultimately proved or are proving to be undercapitalised. Relying squarely on the Common Equity Tier 1(CET 1) ratios as a measure of the soundness of a bank is not sufficient. Studies have shown that, after controlling for accounting differences (IFRS vs. US GAAP), risk weights (applied to bank assets) used to calculate risk weighted assets (the denominator for the CET 1 ratio) at European banks are significantly below their American peers largely due to different supervisory approaches (Basel I vs. Basel II measurement tools), regulatory policy decisions, and modelling decisions by the banks themselves. This could very well result in a US bank and its relatively less healthy European counterpart reporting similar CET 1 ratios.

Moreover, investors should also pay close attention to the portfolio of NPLs banks report. Typically, banks ‘set aside’ provisions to cover losses they estimate from their loan portfolio. These provisions are then compared to NPLs in order to determine coverage ratios. Coverage ratios of 100% are not entirely feasible since banks will recover a portion of their NPLs over time, but should nevertheless be sufficient to cover the risk inherent in the loan portfolio. Case in point, coverage ratios at BMPS were 61% in the €28 billion loan portfolio it intends to offload in its restructuring plan, meaning that the bank expected to recover at least 39% or €11 billion of that portfolio. However, these NPLs will be sold for merely €9 billion to securitization vehicles (i.e. implying a lower recovery rate of approximately 33%) which is a testament to how woefully insufficient its loan loss provisions were.

Taking these factors into consideration along with conventional governance issues such as board independence will help investors make more informed decisions at general meetings, particularly when it comes to approving a bank dividend. Shareholders should strive to vote against dividends at banks that are undercapitalized and should pay particular attention to any bank attempting to reinstate a dividend in the post-Lehman era.

As tempting as dividends seem being an integral part of a potent shareholder value maximization philosophy, banks should never be allowed to pay a dividend if it eventually leads to bailouts and several rounds of dilutive capital issuances. They should rather focus on what they were created to do in the first place: lend responsibly; and shareholders should hold them to account.

[i] Sanderson, Rachel. “Siena Faces Life after 500 Years of Monte Dei Paschi Largesse.” The Financial Times (2016): n. pag. Web. <https://www.ft.com/content/f44080ec-57c8-11e6-8d05-4eaa66292c32>.

[ii] Martinuzzi, Elisa, and Vernon Silver. “Bank Born Out of Black Death Struggles to Survive.” Bloomberg News (2013): n. pag. Web. <https://www.bloomberg.com/news/articles/2013-10-24/monte-paschi-born-out-of-black-death-struggles-to-survive>.

[iii] Durden, Tyler. “Deutsche Bank Charged By Italy For Market Manipulation, Creating False Accounts.” ZeroHedge (2016): n. pag. Web. <http://www.zerohedge.com/news/2016-10-01/deutsche-bank-charged-italy-market-manipulation-creating-false-accounts>

[iv] Planigiani, Gaia, and Jack Ewing. “Monte Dei Paschi Di Siena’s Former Executives Sentenced to 3.5 Years in Prison.” The New York Times (2014): n. pag. Web. <https://www.nytimes.com/2014/11/01/business/international/monte-dei-paschi-di-siena-sentencing.html?_r=0>

[v] Sirletti, Sonia, and Sergio Di Pasquale. “Ex-Deutsche Bank Executives Among 13 Charged in Paschi Probe.” Bloomberg News (2016): n. pag. Web. <https://www.bloomberg.com/news/articles/2016-10-01/deutsche-bank-paschi-nomura-staff-charged-over-false-accounts-itr5z2ku>

[vi] Durden, Tyler. “An Inside Look At Two “Unrelated” Banker Suicides Reveals A Fascinating Rabbit Hole.” ZeroHedge (2016): n. pag. Web. < http://www.zerohedge.com/news/2016-10-13/inside-look-two-most-fascinating-banker-suicides-reveals-how-deep-rabbit-hole-truly- >

[vii] Hyun, Song Shin, 2016. Bank Capital and Monetary Transition, Bank of International Settlements: Panel remarks at The ECB and its Watchers XVII conference, 2-3.

[viii] Gambacorta, L., Hyun Song Shin, 2016. Why Bank Capital Matters for Monetary Policy, Bank of International Settlements, Working Paper No. 558, 7-9.



11 November 2016

New French Anti-Corruption Regime  

by Gibson Dunn

To Our Clients and Friends:   

On November 8, 2016, the French Parliament adopted a new major statute on transparency, the fight against corruption and the modernization of the economy, better known as the "Sapin 2 Law", by reference to the first Sapin Law of 1993 which improved transparency in politics and public procurements.

With this new statute, broadly inspired by the US and UK regimes, France intends to comply with the highest international standards in the areas of transparency and anti-corruption. The new statute also has an important extraterritorial reach as it provides French criminal courts with the ability to prosecute acts of corruption committed outside of France.

1. Creation of the French Anti-Corruption Agency. The French Anti-Corruption Agency will replace the current Central Service for the prevention of corruption. It will have extended powers to control application of the new rules and enforce them. The Agency will include an Enforcement Commission ("commission des sanctions") vested with disciplinary powers and the ability to fine non-compliances (which are in addition to the existing criminal sanctions). The Agency will also assist French corporations in implementing the new arsenal by releasing recommendations.

2. Corporations must implement adequate procedures to prevent and detect corruption and trafficking in influence. Corporations (including their subsidiaries), with at least 500 employees and an annual turnover exceeding €100 million, will be required to implement a corruption prevention plan. It will include an internal reporting system, a risk mapping of external solicitations for corruption purposes to which the corporation may be exposed, a code of conduct and training programs for employees most exposed to corruption risks. This risk mapping will be key. It will need to be adapted to the industries and countries in which the corporation operates as well as to its clients, suppliers and intermediaries. It will need to be regularly monitored to take into account changes in business and risks. In addition, appropriate internal control procedures will need to be applied. These will likely require implementation of three types of processes (i) controlling operations, (ii) risks monitoring and managing and (iii) documenting internal controls to ensure compliance traceability. 

3. Reinforcement of whistleblowers' protection. The new statute strengthen the protection offered to whistleblowers. It requires the implementation of reporting procedures maintaining the strict confidentiality of the whistleblower. It offers an increased protection against retaliation. It provides, under certain conditions, whistleblowers with financial assistance. It extends whistleblowing protection to situations where the whistleblower has reported "a serious threat or damage to the public interest" and not only a violation of applicable laws.

4. New extraterritorial reach of French anticorruption laws. The Sapin 2 Law considerably extends the jurisdiction of French criminal courts. It enables them to prosecute acts of corruption committed abroad by anyone who "carries on its business or a part of its business in France". This will need to be taken into account by foreign companies who conduct even part only of their business in France.

This new regime should definitively contribute in further fighting the criminal risk of corruption within French corporations but also foreign corporations conducting part of their business in France.


28 October 2016

Questions about change of control provisions in loan contracts, a poison-pill

The historic general meeting of shareholders at Solocal Group on October 19, 2016 ended in a bizarre waiver of the dismissals requested and of the new Directors nominations presented by the association of individual shareholders RegroupementPPlocal. The threatened company chairman Robert Metz had actually indicated that “a change in the majority of the Board would trigger an immediate compulsory bonds redemption by the company. ” a statement that froze many sharehodlers willing to operate a serous change at the Board.

The shareholders ultimately limited their support for some external resolutions of RegroupementPPLocal association and “only”  dismissed the auditors (Ernst & Young and Deloitte, a premiere! ) , it also rejected the Say and pay resolutions, the restructuring plan and elected three external candidates to the Board

Actually the Chairman  saved his seat thanks to an unexpected argument : the threat of a call on a 350 M€ 2011  outtstanding bond  .

We checked that the information provided by the Chairman was almost accurate and sincere, and, if not, he would come under prosecution for  any false information having produced a demonstrated market manipulation as questioned by Proxinvest’s letter to the company and the AMF.

Solocal Group actually discloses on page 68 of its reference document update :


“The syndicated loan agreement the Company further includes mandatory prepayment provisions including:

- Mandatory prepayment clause applicable in case of change of control of the Company resulting from the acquisition of shares of the Company “

Reads this clause here does not apply to Solocal Group, as the company has no controlling shareholder, but likely another provision involving the majority change at the Board…Actually an early redemption option existed in the outstanding 350 M€ 2011 bond managed then by Goldman Sachs, This one does protect the borrowers against a case of change at the Board, the company must offer to repurchase the bons a 101%…

1.“during any period of two consecutive years, individuals who at the beginning of such period constituted the majority of the shareholder representatives on the Board of Directors of the Company (together with any new directors whose election by the majority of the shareholder representatives on such Board of Directors of the Company as applicable, or whose nomination for election by shareholders of the Company, as applicable, was approved by a vote of the majority of the shareholder representatives on the Board of Directors of the Company, as applicable, then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) ceased for any reason to constitute the majority of the shareholder representatives on the Board of Directors of the Company, as applicable, then in office.” But is this real therat here ?

Such protectionist complex provisions in loan contracts agreements or bond issues, are apparently frequent and they are always signed without any approval of shareholders (except in Belgium), and this raises three questions:

– These are obviously a denial of sovereignty of the general meeting of shareholders  for the appointment of Directors, a principle which seems to be part of public order in France , “d’ordre public”.  If this is the case  all such provisions would be ineffective, and it would be good for all investors, lenders or shareholders, and managers to be aware of it.

– It is also a protection that benefits or concerns at least to the board members that are obviously “interested” or “beneficiaries” in the meaning of the control of related party transactions ; yet these clauses are evidently never submitted to the general meeting of shareholders. This is obviously a serious breach of the related party regulation and constitutes, for us, a cause of nullity at Solocal Group.

– Finally, it is, to say the least, a major element of the governance of a company which should therefore be systematically disclosed in detail in reference document which was not the case at Solocal Group. This market information issue is important and should be requested by the AMF and other regulators of financial markets : can such contractual poison pill not clearly disclosed in their  governance review remain valid for lenders or directors? Actually, in this case the company appears to have willingly mis-led the investors and the lenders by claiming in the chapter XIII of its Governance Review on Items having possibly an incidence on tender offerfor the company shares a strong NO. A question mark for the dismissed auditors as well…

At Proxinvest  do not think that such undisclosed key protective provision  can be applicable.


28 September 2016

Issuers lack of respect on regulated information: Proxinvest alerts the French Financial Authority (AMF)

As part of its monitoring service for investors to help them in the compulsory notification of ownership to the French Financial Authority and to the companies, Proxinvest noted various breaches from French issuers, notably with respect to the key information about the total number of outstanding shares and voting rights. The French Financial Authority, AMF, which is responsible for checking the compliance of the issuers, has been alerted.

Proxinvest noted breaches in the respect of the articles 221-1, 221-3, 223-16 of the AMF General Regulations and of articles L233-8-II and R225-73-1 of the French Commercial Code.

Without timely and reliable information about the total number of shares and voting rights,  investors cannot fulfill their duties to notify their ownership.  This is particularly worrying since there is a risk of financial penalty on officers of the investor as well as a risk of deprivation of voting rights.  It may become very challenging to comply with this obligation due to the short notice for the notification (4 days), a large number of low statutory thresholds in the by-laws (down to 0.50% of the shares or voting rights) and finally due to the high number of companies with double voting rights for registered shareholders.

Proxinvest conducted a limited audit of the French market and identified 22 issuers which do not respect their obligations in terms of release of regulated information. Some French companies are not even aware that a double voting right is now in place in their company following the Florange Act! Another company was obliged to recalculate the voting results after Proxinvest warning.

Financial market can only work properly if everyone respects the rules … It is surely not acceptable to have ownership disclosure duties for investors without providing them with proper information to carry out this duty!


28 June 2016

LSE-Deutsche Börse: Winter is here!

Will the deal survive post-Brexit?

We have all heard executives at both companies tout the benefits of this marriage: creating a global derivatives powerhouse to rival the Intercontinental Exchange (ICE) and CME Group; becoming a leader in post-trade services, and of course a pioneer in market data as the combined entity would own the FTSE Russel, STOXX, and DAX indices.

However, the question on everybody’s mind remains: how will the UK’s historic vote to leave the EU weigh in on the deal? The risks are nothing short of real as executives reiterated ad nauseam in the days following the referendum that the deal will continue as planned. We are not so sure.

In our report published last week, we urged the shareholders of the London Stock Exchange to vote against the merger at the meeting which will be held on the 4th of July. Chief among our concerns was the fact that the deal did not value the LSE at a premium. Case in point is the proposed price of 2,554p/share which was actually at a discount to the unaffected share price on March 15, 2016. In an industry with historic takeover premiums to the tune of 30 to 40%, this ostensible ‘merger of equals’ belies the fact that Deutsche Börse (DB) may lack the financial resources to pay such a premium as noted by market analysts.

Interestingly, for an asset that has been the target of several takeover attempts over the last decade, the Board’s approval of a merger without a premium comes as a surprise and calls into question whether proper due diligence was performed. Providing fodder for our concerns is the fact this is the third attempt at a merger between LSE and DB. Their first dalliance back in 2000 ended when OM Gruppen (operator of the Swedish stock exchange) made a £808 million bid for LSE which was rejected by the company in August of that year. The Germans renewed their efforts in January 2005 by making another cash offer for LSE, this time valued at £1,300 million. Again, the Board rejected this offer claiming that it did not reflect the inherent value in their business. Over the years, DB was not the only interested suitor:  LSE has also rejected bids from Australia’s Macquarie Bank (£1,600 million in December 2005) and NASDAQ (£2,700 million in November 2006). The current merger proposal values LSE at £8,913 million.

We note that ICE considered making a counterbid for LSE in February of this year and there were rumours that even the CME was preparing a bid in what was shaping up to be a Game of Thrones showdown for control over the London exchange. However in May of this year, ICE abandoned its bid citing that LSE executives refused to discuss a buyout, a claim that the company denies. Given the evident attractiveness of LSE to foreign suitors, we urged the Board to demonstrate that it has conducted an exhaustive search for options and prove whether this transaction is truly in the best interest of LSE shareholders.

Even before the so-called ‘Brexit’ vote, European officials publicly expressed their reservations over the deal as pride played a role with officials in both London and the Continent raising concerns over the potential loss of status as a financial hub. French Finance Minister, Michel Sapin, called into question the merits of the deal citing competitive concerns in European financial markets. In this vain, he claimed that the combined entity would be too dominant and could potentially dwarf competition from rivals such as Euronext. Joining the crowd of influential dissenters is Felix Hufeld, the president of the Federal Financial Supervisory Authority or BaFin, Germany’s financial markets watchdog. Earlier this week, in reference to the combined entity’s London HQ, he emphasized that “it is hard to imagine that the most important exchange venue in the euro zone would be steered from a location outside the EU“.

A key argument for the merger’s champions is the cost and revenue synergies post-closing. Whereas they were higher than anticipated by the market, we are concerned as to whether they can be actually achieved with London leaving the EU. At the core of the cost synergies is the harmonization of post-trade platforms (50%) and a combined cost centre (30%). Should the parties to the merger face two different regulatory regimes and be forced to maintain their existing management structures, it becomes abundantly clear that these synergies may not be realised.Moreover, revenue synergies may run into significant roadblocks should the UK and EU fail to negotiate a suitable ‘passporting’ regime that would ensure uninterrupted access to European markets which was the norm pre-Brexit.

Heightened uncertainty does not bode well for the merger and only serves to reinforce our reservations regarding its merits. As we move into unchartered territory and volatile markets over the coming months and even years, executives are in the unenviable position of singing the deal’s praises to both sceptical investors and wary regulators alike. We here at ECGS will not be holding our breath.


30 June 2016

The French parliament adopts the binding the annual Say on Pays vote

The French National Assembly adopted June 14, 2016 a bill making mandatory and binding the annual shareholder vote on the remuneration and benefits of listed companies managing directors. While the Senate could possibly scale down this law, we consider appropriate to reaffirm the principle of agency for the sound governance of corporations.

The controversy over the remuneration of the Renault Chairman & CEO Carlos Ghosn demonstrated the inadequacy of current French governance Say on Pay practices to regulate executive compensation. following the negative vote on the opaque and questionable Ghosn € 15 M. annual compensation, the contempt of the Board deciding to maintain the pay was considered ourtageous.

Proxinvest welcomes the legislative initiative restoring the ultimate shareholders authority over compensation and benefits granted to directors, which should enable to better establish executive compensation on merit and the actual performance, to limit the granting of hidden or unjustifiable benefits, and to ensure social cohesion by a better share of the value created.

The increase of  top executive remuneration has not experienced a respite, despite the financial crisis, the individually granted amounts  continue to surprise. According Proxinvest, executive compensation of the CAC 40 companies exceeded in 2014 the threshold of € 4 million (+ 6%) not including pensions…

The 2016 French season presented a first rejection by a majority of shareholders of the remuneration of a CEO.  The chairman of Renault saw his remuneration, criticized for its lack of transparency, questionable structure and unreasonable amount of 15 million euros (against a reported $ 7.2 million for 2015) received a negative 54 % advisory vote of shareholders. The Board of Directors of the automotive group “took note of the negative opinion of shareholders” but then “approved the continuation of the compensation agreed for the CEO for 2015”. This triggered a sharp public controversy.

In this context, employers’ organizations AFEP and MEDEF decided to give the shareholder vote on executive compensation, “a mandatory, but without going to make it binding, vote” asking the members of the Board tol make a counter-proposal “within a reasonable time” and make it public.

This attitude was for the shareholders and for many observers a problem of contradiction between the ultimate shareholders AGM authority, which according to Article L 225-100 deliberate and approve both the financial statements and the report for the previous year and the  lax and delaying attitude  of the AFEP MEDEF committee.

The French National Assembly has since adopted a new Article L. 225-37-2 of the Commercial Code, imposing CEO pay to be least annually subject to shareholders approval: the resolution shall put to the vote a report that will include details the fixed remuneration, variable or  performance related items of individuals and the criteria for their determination. Besides , with the exception of fixed remuneration, no payment will be made prior to their approval by the general meeting, and whenever the shareholders general meeting does not approve the resolution, the Board shall submit a new proposal at the next general meeting.

This bill, which is in the French legislative tradition of the control of related party transactions benefiting to corporate officers is also now entirely in line with European best practices including British, Dutch or Swiss.

This new article L. 225-37-2 of the Commercial Code creates a power-cons for nature shareholders to reassure investors in French companies and fight against some deviant behavior sometimes seen in executive compensation. Proxinvest therefore welcomes the new rights of control and the new responsibility entrusted to its equity investors customers and encourages the Senate to adopt this draft law.
June 20th. 2016



29 May 2016

Shareholders of RENAULT reject Say On Pay proposal. 1st time in France

For the third “Say On Pay” season  and for the first time in France, the shareholders of a listed company, the car manufacturer Renault, rejected  the remuneration of the chairman-CEO, Carlos Ghosn. His “Say On Pay” has indeed obtained  only 46% of votes FOR.

Proxinvest had called shareholders to block this uncontrolled remuneration of Carlos Ghosn for reasons of lack of transparency and due to a total compensation of € 15m granted by Renault and Nissan which is excessive. Proxinvest congratulated renault shareholders and welcomes this shareholders success and this shareholder engagement should lead to major improvements from the Renault Board of Directors.

In France the vote on remuneration is only consultative according to the AFEP-MEDEF Corporate Governance code even if investors are pushing for the introduction of  a binding vote on the remuneration policy, at least every three years like in the UK.

Unfortunately, the high level of criticism of the related-party agreements signed with the French State and with Nissan (opposition rate of 27% and 16% respectively) was not enough to reject the “stabilization agreements” which are very protective in terms of remuneration for Carlos Ghosn. Indeed, he is also Chairman-CEO of the Japanese Company Nissan Motors and his € 8M remuneration from Nissan is likely to be entrenched for now. (Look at the recent French Civil Employees Pension Fund reaction)

The objectives of the Say On Pay system is to encourage a fruitful dialogue between directors and their shareholders.  Despite  low approval rates of 64% in 2014 and 58%  in 2015, renault directors never implemented a good dialogue with the shareholders. Hope the outcome of this general meeting may change behaviours.  Proxinvest stands of course available for discussion with the members of Renault’s remuneration committee if they want to better understand the rationale behind  Proxinvest negative voting recommendation.


Proxinvest chairman, Pierre-Henri Leroy,  asked question about Carlos Ghosn remuneration, shareholder rights, agreements with French State and Nissan at Renault AGM 2016.







10 April 2016

Sika : why Saint Gobain should withdraw from its foolish attempt

The French glass and building material group had seven years ago a first negative experience resulting from its own potective double voting right statutory provision when Wendel pretended, with about 20% of the Saint Gobain shares , to rule the management… Nevertheless aiming for a tricky acquisition of the successful Swiss Sika, Saint Gobain keeps neglecting the opinions and rights of large communities of employees and shareholders.

Actually, as mentioned earlier on this site, like many Swiss companies, Sika lived under the “protection” of a kind of triple voting right provision which offers to the founder’s family Burckard no less than 52% of the AGM voting rights for an economic ownership of only 16% of the shares held in a private vehicle. Saint Gobain signed the promise to pay some € 2.75 billion, more than twice the stock price, fot this vehicle,  subject to securing the benefit of the majority control by June 30th. of this year.

This resulted in a furious alliance of the majority of the current Sika Board with the so called minority Sika shareholders (including our parntner Ethos,  the Bill and Melinda Gates Foundation, Fidelity and Threadneedle, plus the Sika management at large, all refusing to the French the benefit of the Burckard clause and obtaining until now some success with the Swiss courts…

Actually,  the Saint Gobain attempt is and should remain, in Proxinvest opinion, not sustainable.

Proxinvest always actively opposed to double voting rights and any other protective devices. This Sika case is a perfect demonstration of the perverse impact of such provisions. Besides, Proxinvest engages for a serious reform of the control of related party transactions by the non-beneficiary shareholders: the lack nowadays  of any serious protection of sharehodlers against the self-dealing of a controlling sharehodler should in itself qualify the Saint Gobain strategy as vulgar theft.

At its current purchase price the potential 16% stake in Sika would return a dividend of about 1% of its investment to Saint Gobain. In order to increase the needed cash generation Saint Gobain announced  important “synergies” – a polite word for transfer pricing – and already dares to announce that most of these would be located in the current Saint Gobain group. Given the legitimate opposition of the Sika shareholders the implied strategy of the French is plain plundering.

Actually Pierre-André de Chalendar, the French CEO should try to persuade the spoled kids, the Burckard siblings, to share the control premium with all the other shareholders. Otherwise the lucky outcome of its Swiss franc forex protection taken by the French should be enough return for such an ill minded “strategic operation”.


28 March 2016

French Yellow pages individual shareholders put their company under pressure

Pierre Henri Leroy

In a unique case of general investors mobilisation the individual holders of Solocal Group, a specialist of local advertising, recovering from the KKR led LBO on the  telephone register business of France Telecom, will possibly force the company management but also the French Government and the AMF to act and better protect the minority holders.

Some 602  individual holders of Solocal Group (formerly the Yellow Pages)  have regrouped to face an explainable drop in the share price  which reached 3.50 euros in late February at the bottom of a descent into hell that lasts for years. This trend followed the leveraged acquisition of the France Telecom subsidiary by financiers clustered around the famous American fund KKR for three billion euros. Proxinvest had then bought in 2005 at a price of € 18.82 before regrouping of the shares, i.e.teh equivalent of  € 564 a share which  traded at € 3.60 at the end of February 2016!

These investors secured by  the recurrent nature of Yellow Pages business, full of contempt for small investors had transferred to the company the huge debt they had contracted at the expense of the company listed minority.  But the  unhealthy ambitions later faced with the difficulties of this group to cope with the Internet competition: finally all the shareholders took the loss resulting from poor management values and predatory interests backed by banks. These LBO techniques encouraged by some major banks do much damage and have never seriously reined by regulators.

More recently, helped by strong national position, the company renamed Solocal Group, was able to restore its strategic model, to conquer his place in the internet as great player in local advertising: ultimately in 2014 at  the price of a capital increase at the adjusted price of 15 euros, the company found a positive cash flow and became even profitable. The 2017 maturity of the  € 1.2 billion remaining debtwas no longer a problem, but this deadline probably offered a temptation for some raptors …

Actually the contempt of shareholders was at work at Solocal in 2014 wher poor financial communication dropped deaply the share price in 2015.
A first gruop of 300 holders led by former Chief Euris and EEM CEO , Baudoin de Pimodan, so just wrote a following letter to the Board of Solocal Group, its Chairman Robert Metz and its Director General Jean- Pierre Remy.

Proxinvest has likewise wrote to President Robert de Metz to question the Solocal communication “the cryptic mention of debt negotiations coupled with results that have been damaged by a social risk provisioning that appeared excessive, have discredited  the stock and the company management.”

Once again the AMF is challenged on its treatment of misleading statements by companies and its general lax attitude facing sharehodlers orgnanised  dilution.

Unless the company changes is attitude and better defend sharehodlers with a serious commitment not to open the capital under the 15 euros thershold there will be a lot of action at the AGM of Solocal group.


Paris, 11 March 2016

A l’attention de Monsieur Robert de Metz, Président de Solocal Group

Monsieur le Président,

J’ai relevé dans les documents financiers de la société que  le pool bancaire a accepté de reporter de deux ans l’échéance de janvier 2018 si le refinancement de l’obligation de 350 ME à échéance de juin 2018 était préalablement assuré.

1) Il est de notoriété  que deux prestigieux banquiers d’affaires travaillaient à ce refinancement. Mais il semble qu’ils travaillent d’avantage sur une solution consistant à négocier avec les porteurs de l’obligation et à transformer celle ci (tout ou partie, fonction peut être de la décote avec laquelle ces porteurs sont susceptibles de l’avoir achetée sur le marché) en capital : ce qui , alors, signifierait une dilution des actionnaires actuels sur la base du cours de bourse (celui ci étant la référence quasi obligée pour une augmentation de capital).

2) Vous comprendrez pourquoi les “petits actionnaires” qui représentent plus de 80% du capital , s’émeuvent, à juste titre , du cours actuel de l’action qui est , selon vos propres termes, “déconnecté des chiffres réels”. A cet égard, l’analyse produite par Natixis, le 11 février dernier, suite à la conférence téléphonique de Monsieur Rémy, va dans ce sens puisqu’elle maintient un objectif de cours de 30 euros.

3) La capacité de la société à générer un cash flow conséquent (sauf si la communication de la société avait, dans un récent passé, été trompeuse sur l’achèvement de sa transformation vers le digital) permet d’autres solutions que celui d’une augmentation de capital , ou en tout cas, pas sur la base des cours actuels qui sont inacceptables pour des actionnaires auxquels vos prédécesseurs ont fait souscrire une augmentation de capital , il y a deux ans, sur la base du cours de 15 euros , cours jugé alors suffisamment attractif pour le marché puisqu’elle a été très largement sur-souscrite.
Le communiqué publié à l’issue de cette augmentation de capital est d’ailleurs éloquent sur les perspectives qui s’ouvraient à la société à l’issue de cette opération de “refinancement”.

4) l’afflux de liquidités sur le marché , provenant de la politique de la BCE, devrait permettre une autre orientation qu’une augmentation de capital  – sauf si celle ci était à un cours acceptable par les actionnaires et cohérent avec le passé et les perspectives -.

Si les deux banquiers prestigieux mandatés par Solocal n’étaient pas en mesure d’étudier et de mettre en place une solution à la fois acceptable  par les actionnaires et dans l’intérêt de la société, je vous confirme que je peux  présenter un banquier conseil intéressé par la recherche et la mise en place d’une telle solution.

5) Au regard de l’analyse de Natixis qui confirme l’objectif de 30 euros, l’émission d’une obligation ,convertible sur la base d’une action pour une obligation,dans la fourchette de 200/400 ME au nominal de 17 euros (le prix de souscription des salariés il y a moins d’un an et à peine supérieur à celui de l’augmentation de capital de mars 2014) serait , à mon avis mais qui n’engage que moi et non pas les 600 actionnaires individuels qui  se sont fait connaitre au “This email address is being protected from spambots. You need JavaScript enabled to view it.“, une solution de sortie qui concilierait les intérêts de toutes les parties prenantes au contrat social de la société. Compte tenu du cashflow de la société et de la petite part d’obligation juin 2018 qu’elle a , apparemment , rachetée, la fourchette basse de 200 ME devrait même suffire pour assurer le remboursement des 350 ME à échéance de juin 2018. La société payant actuellement plus de  6% en moyenne sur son endettement, elle a de la marge pour offrir en outre un taux attractif aux obligataires.

6) Les covenants bancaires sont effectivement un frein au développement du chiffre d’affaires de la société. Le pool bancaire est semble t-il , conduit par la BNP Paribas. Si, pour différentes raisons, la discussion est peut être difficile entre la société et le chef de file du pool bancaire, l’intérêt général que présente pour la France le modèle Solocal qui ,encore une fois,  est à mettre au crédit de l’équipe de management qui a su réaliser ce passage vers le digital alors que presque partout ailleurs ce passage n’a pas été réussi, devrait permettre une prise de conscience à un niveau d’autorité qui conduise le pool bancaire à lever ces covenants; covenants d’ailleurs qui, sur le fond, ne sont en définitive que théoriques, le pool bancaire ne pouvant prendre le risque d’acculer la société à la faillite pour défaut de paiement. En cas de blocage, c’est sans aucun doute à vous qu’il reviendra de faire appel à ce niveau d’autorité supérieure.

D’autant plus que l’endettement bancaire de la société résulte d’une opération financière qui a permis à France Telecom de vendre sa participation pour plus  de 3 milliards d’euros et laissé par ailleurs à la charge de la société quelques contraintes comme le maintien du statut spécial de certains salariés ou l’obligation d’imprimer les pages blanches; sans oublier que Solocal est un “bon contribuable”.

Il n’est d’ailleurs pas certain que cette opération qui a consisté à endetter la société pour rembourser l’acheteur , ait été réalisée dans l’intérêt social de la société. Il pourrait être intéressant de voir l’intérêt de certaines parties prenantes au pool bancaire dans la mise en place de cette opération qui s’est faite au détriment de Solocal.

Je mesure , bien évidemment , que votre tâche n’est pas aisée et que vous portez le poids de décisions prises par vos prédécesseurs. Vous comprendrez cependant le désarroi des actionnaires qui ont fait confiance aux organes de direction de la société et qui , sans que rien dans les chiffres ne le justifie, ont vu fondre leur épargne  ; principalement du fait de la communication pour le moins opaque de la société et des doutes qu’elle a créés.

En toute transparence, j’adresse copie de cet email aux 602 actionnaires individuels qui se sont fait connaitre ainsi qu’à Monsieur Benoît de Juvigny, Secrétaire général de l’AMF et à la société Solocal en la personne de son Directeur général , de sa Directrice financière et de sa directrice de communication.

Veuillez agréer, Monsieur le président, l’assurance de ma parfaite considération?

Baudoin de Pimodan


5 February 2016


6 January 2016

Overboarding : progress expected from the new Fonds Stratégique de Participations

Fonds Stratégique de Participations (FSP) is a long-term investment vehicle created by some French insurers (BNP Paribas Cardif, CNP Assurances, Crédit Agricole Assurances (through its insurance subsidiary filiale Predica), and Sogécap (Société Générale Group), later joined byGroupama and Natixis Assurances. They invest jointly in the share capital of a limited number of listed firms. In June 2015, the Fonds Stratégique de participations invested €350M in Zodiac, a French company reputed for its inflatable boats (ZODIAC AEROSPACE (ZC – FR0000125684). 

The Fonds Stratégique de Participations will have a seat on the Board of Directors and will be represented by Florence Parly. Florence Parly is graduated from IEP (Institut d’Études Politiques) and ENA (École Nationale d’Administration). She is deputy CEO of the French railway company SNCF, in charge of Strategy and Finance. She started her career at French ministries, then held political duties before joining the private sector at the French airline company Air France.

She already sits on the Board of two other listed companies (Altran and Ingenico). All-in, she holds an excessive number of time committments according to Proxinvest.  Indeed, while being executive of a non-listed firm (SNCF), the availability required to perform that duty is very high.

The French AFEP-MEDEF corporate governance code recommends that an executive should not hold more than two outside directorships.

While a seat for the Fonds Stratégique de Participations is justified given its investment, Proxinvest, the French partner of ECGS, recommended in its ECGS proxy report to oppose this election to the Board of ZODIAC due to the excessive number of mandates. The Fonds Stratégique de Participations should adopt in the future a clear governance policy to contribute to the best governance practice of the Paris marketplace.


5 January 2016

Proxinvest, this year’s French general meetings have made the 2015 season a banner year for shareholder activism!

The resistance campaign against the Florange law (which reintroduces double voting rights and the possibility to block public offerings) has, essentially, brought  the largest investors together against this degradation of minority shareholders’ rights. The hottest cases have been Bolloré’s rise in Vivendi’s capital against the backdrop of contested communication, like that of the state together with Renault and, finally, the many rejected items at Orange.

In terms of remuneration we have noted the record breaking Golden Hello of Olivier Brandicourt at Sanofi, the strong protest at Danone, and the uncontrolled remuneration structure in Altice and Renault.

The strategic operations of Saint-Gobain and Lafarge in Switzerland have not shown great vigilance from French leaders with regard to minority shareholders’ rights.

Finally, Proxinvest has written several letters to the AMF (Financial Markets Authority) and the CEOs of companies such as, but not limited to, Alstom, Hermès International, Sanofi, Renault, Vivendi and Norbert Dentressangle regarding important communication and transparency towards shareholders issues and the still insufficient respect of minority shareholders.


19 November 2015

Multiple voting rights – illusion of reward of long-term shareholders

France has become a champion of shareholder unequal treatment


Source: Expert Corporate Governance Service (ECGS), Stoxx®Europe 600 Universe

In Italy, a law approved in August 2014 allows listed companies to assign an additional voting right to shareholders who are registered in a “loyalty register” for at least 24 months. It is the same procedure as in France, but in Italy the possibility to introduce the double voting rights must be approved by the general meeting with a supermajority vote of at least two-thirds (or the higher percentage provided by the Bylaws).

In CAC 40 index, only eight French based companies kept “one share – one vote” approach. In Italy, only 16 companies approved the double voting rights: one is a large-cap (Campari) and six are mid-caps (Amplifon, Astaldi, Dea Capital, Hera, Maire Tecnimont and Zignago Vetro). However, several large companies are evaluating the possibility to introduce double voting rights in the next future.

The double or multiple voting rights are often presented as a form of recompense for long-term shareholders. ECGS has contested this type of unequal treatment of shareholders and especially its hypocritical presentation. The use of multiple voting rights or shares without voting rights introduces distortions which allow maintaining a control without holding the corresponding economic interests and, as the result, economic risk. Furthermore, the introduction of double voting rights, commonly based on holdings of share in registered form, likely disadvantages many international and institutional investors as most of the French and non-French investors cannot register their shares due to excessive administrative or financial burdens.

Double voting right does not help to stabilize the capital neither. Indeed, high frequency traders or speculative investors do not care about voting. Only responsible investors voting their shares and not holding their shares under the registration form (“actions au nominatif”) will be (negatively) impacted by double voting rights as they will be diluted in % of voting rights.

It is surely not in the interest of an investor to accept to be diluted in terms of voting rights, even more when this investor has a fiduciary duty.

The « one share – one vote » principle has been supported by investors and theirs associations for a long time, for example by Proxinvest, ECGS, the French Asset management association or by ICGN (International Corporate Governance Network). ICGN also reminded that the registration of shares (“enregistrement au nominatif”) is not compatible with the management of financial assets for institutional investors, especially for non-resident investors.

« One share = One vote » is a longstanding principle of equal treatment of shareholders. It is absolutely necessary to ensure that minority shareholders can protect their interest and participate responsibly to the corporate control mechanisms. “One share – One vote” is a fundamental cornerstone of shareholders trust and good market valuation.

ECGS has realised a short overview and present here its results. Sure enough, ECGS found out that the multiple voting rights are more often used to reinforce the voting power of dominant shareholders. This tool allows keeping control of the company while reducing the rights of the minority shareholders.

All 16 Italian issuers approved double voting rights have a controlling shareholder with more than 50% of shares. In France, we saw that the French state did not hesitate to  raise its stake in car maker Renault in order to ensure the adoption of double voting rights, so did the strongest minority shareholder in Vivendi, French tycoon Vincent Bolloré.

Multiple voting rights used to reinforced voting power of dominant shareholders


Source: Expert Corporate Governance Service, Stoxx®Europe 600 Universe



7 November 2015


Would the Horsemen of the Apocalypse come and knock on Europe’s door?

byJean-Aymon MASSIE

Let us imagine an observer free from any interest and from any external pressure who would return to Europe after a long journey and period of isolation from the rest of the world. He would sit at a Parisian street café with a stack of newspapers under his arm. He would start reading voraciously the European press. With a fresh pair of eyes, away from the influence of social networks and institutional misinformation, he would make a connection between all the relevant pieces of information. This would immediately spark a range of reactions, in particular Stupor, Anger and Despair!

Would the Horsemen of Apocalypse already be at the gates of the enlarged European Union? The EU is a body of 28 member states representing 503 million inhabitants. European citizens have been living in peace for the past seventy years. They now enjoy one of the highest standards of living in the world. They seem to rest quietly in a self-indulging comfort while confidently looking forward to the imminent creation of a European political union. Could all the achievements and sacrifices of two generations be jeopardized?

Stupor, of course, this is simply not possible! But let us face it: the destructive process is currently under way. It is looming ahead on the eve of the building of the rocket’s third stage: the political union would have completed the economic and monetary union and then the banking union, followed by financial regulation, revamping of corporate law and governance principles, harmonization of various tax systems and social gains.

Anger, after bewilderment comes anger. It is our fault. In other words, it is the fault of industrialized countries and nuclear powers who patrol the world. This destructive power expresses itself in two ways:

- On the first hand, social imbalances, especially unemployment of young graduates combined with household and State over indebtedness, could provoke a full scale social upheaval -thanks to social networks - and a risk of disintegration of the EU. Despite progress made in the field of corporate governance and ethics, lofty CSR principles, emergence of the SROI ratio, primacy of human capital, the taking into account of the interest of future generations, businesses do not create jobs. The euro zone economy doesn’t return to growth. Defense industrials’ voices have become prevailing.

- On the other hand, vast military spendings were voted by Parliaments of democracies feeling threatened. They will set the conditions to make war in the framework of NATO, or outside in various parts of the world such as Africa, the Near & Middle East, Ukraine. These spendings have been justified by the necessity to fight the mythical enemy that is international terrorism. In order to combat these evil spirits, methods from the past, such as inquisition (Patriot Act, French Law on Intelligence) and burning alive (by long-range missile and bombings), are being used.

Generating conflicts and civil wars brings about chaos in developing or emerging countries weakened by a difficult economic and industrial transition. It also results in moving populations outside conflict zones and creating migratory flows that are difficult to control. Let us take an example. The war, that unleashed NATO forces in Libya provoked chaos and the displacement of 2 million Libyans to Tunisia - 20% of the population of this country. This happened a few kilometers from the European Union.

How many migrants from Libya, Mali, Nigeria, Somalia, Yemen will reach in the next few months Europe from Tunisia and Libya?

They will be encouraged by the current example of the inflow of Syrian refugees, that are carefully organized fleeing from combat zones and liberating the territory from future decisive confrontation. As a child in 1940, I experienced the arrival of refugees in French free zone from Netherlands, Belgium, North of France, fleeing the invasion of the German armed forces and the Allied bombing campaign.

Despair finally comes. These two aspects could interact and cause a chain reaction that destroys the equilibrium of civil society and European cohesion. This would inevitably trigger the disintegration of the European Union in a short timeframe.

It is still time to react with daring, courage and determination. Tomorrow it will be too late as the Horsemen of the Apocalypse already are at the different gates of Europe.


Jean-Aymon MASSIE, President of AFGE

French Corporate Governance Association (AFGE)





2 November 2015

Non compliant companies: a come-back of the former Eiffage tycoon Jean-François Roverato

Pierre Henri Leroy

The unexpected disappearance of Eiffage CEO, Peter Berger, is certainly a test for this group of construction and public works. Its board has awarded former President founder, the imperious Jean-François Roverato, 71, the interim.

The lack of succession plan at Eiffage accused here again, as we observed last year at Total, another common non-compliance of french companies with the AFEP-MEDEF Code which states (1) “The selection or nomination committee (or an ad-hoc committee) should establish a succession plan for executive directors to be in a position to propose succession solutions particularly in the event of an unforeseen vacancy. This is one of the main tasks of this committee, although it can be, if any, entrusted by the Council to an ad hoc committee. ”

Note that the Eiffage “lead director” , another recommendation said Code, was  the former CEO Jean-François Roverato, Honorary Chairman of Eiffage, and obviously not independent … In these cases of unitary Boards the only presence of a true successor appointed   would nevertheless a useful protection against bad surprises or any abuse of power.

Eiffage shareholders have long been victims of authoritarian governance and the stock price here suffered another time : remember the succession of quasi-founder, the charismatic Jean-François Roverato, had, in his time,   successively approached and discouraged two or three candidates  until the very happy discovery of an outside young entrepreneur, the late Pierre Berger.

Proxinvest maintains here its criticism of the governance of Eiffage, which protectionism was increased again with the introduction this year of  a double voting right, approved by the Caisse des Dépôts, the  second largest shareholder behind employees with 20% and soon 27%  of voting rights via Bpifrance Participations

Let’s add not independent Board of Directors where the presence of the founder remained essential and which tabled in 2015 the increase of the term of office of Directors from three to four years.

Recall that the company shareholding is locked by the employees SICAVAS fund  by the group management through mysterious statutes… The case in which SACYR Proxinvest was the first to criticize at the time the Eiffage CEO to make a coup against its Spanish shareholders by depriving them of the right to vote in the assembly, with the complacency of the AMF, will have been partially tried to date:  the company was found guilty but the Spanish shareholders were victims.

Like last year, the presentation of the remuneration of Pierre Berger communicated by the company or the target bonus, neither the weightings of the quantitative criteria of the bonus or the objectives … Although the amounts involved and the compensation structure were acceptable, Proxinvest could not recommend approval.

Wait and see.


25 September 2015

Seventeenth report on the remuneration of the SBF 120 index executives

Proxinvest, the French proxy adviser, publishes his seventeenth report on the remuneration of the SBF 120 index executives.

After two years of decline, the average total compensation of the Chief Executive Officers of the CAC 40 index reaches € 4.21 million in 2014 (+ 6%). In contrast, the average total remuneration of the SBF 80 index (next 80 companies after the CAC 40) falls by 3% down to €2.36 million after two consecutive years of increases.

The remuneration structure stays faulty as 40% of the Chief Executive Officers have no long-term remuneration of any sort. Indeed, the remuneration structure is focused on short-term: the average fixed remuneration (€ 1.042 million) and bonus (€ 1.308 million) remain stable in the CAC 40 index. The 6% increase in total remuneration is mainly due to exceptional elements (severance payments) and the increased use of performance shares, which now account for 29.1% of the remuneration of the CAC 40 index CEOs. Stock options have almost disappeared in France as they now account for only 4.1% of total remuneration. In the coming years, changes in legislation (“Loi Macron”) aiming to promote free share plans will further fuel the performance shares boom and the stock-options decline.

The report details the different components of executive remuneration in the SBF 120 index. With € 15.2 million, Carlos Ghosn, CEO of Renault-Nissan, is the best paid CEO in 2014. His massive increase in remuneration (+ 56%) clashes with the context of efforts required from Renault employees through a competitiveness agreement. For years, Carlos Ghosn has been paid from Renault as well as from Nissan (of which Renault holds 43%). For the first time, his Nissan pay tops one billion yen, the equivalent of € 8 million. In addition, Nissan does not disclose the nature of the remuneration and the amount appears disconnected from Japanese practices (Ex: Akio Toyoda (Toyota) € 2.7 million, Takanobu Ito (Honda) € 1.16 million).

His Renault pay package was challenged by the French state, with only 58% of the votes FOR. The Say On Pay would have been rejected if the majority of foreign investors had not voted FOR the resolution according to Proxy Insight (including Alliance Bernstein, CPA, Blackrock, Calpers, CalSTRS, Capital, Deutsche Asset Management, Fidelity, Henderson, Legal & General, MN, Norges Bank, Ontario Teachers, TIAA-CREF, Vanguard). Proxinvest will conduct a survey among these shareholders to determine if the lack of information regarding the remuneration paid by Nissan in the meeting documentation has misled them.

Christopher Viehbacher, former CEO of Sanofi is the second best paid executive with € 12.5 million of total remuneration. While the performance conditions of his severance pay previously approved by the general meeting were not met, administrators granted him a new settlement payment of € 4.2 million. In addition, the presence requirement on the performance shares and stock options was lifted.

With € 11.1 million, Bernard Charles reaches the third place of our ranking. For years, the massive performance shares plans have placed the CEO of Dassault Systèmes among France most paid executives. In 2014, Bernard Charles has received an amount of €8,718,000 of performance shares according to Proxinvest (€5,620,500 according to the company). The valuation gap is explained by the weakness of the performance conditions according to Proxinvest.

Ten years ago, Proxinvest fixed a maximum socially acceptable remuneration of 240 times the minimum wage (“SMIC”) aiming to encourage investors, directors and executives to focus not just on transparency and performance but also the amounts allocated. While thirty one CEOs of the SBF 120 index exceeded the limit of 240 SMIC ten years ago, they are now sixteen and Proxinvest ceiling seems to have had a deflationary effect. To go further in the analysis of the necessary social cohesion, Proxinvest backs the transposition of the CEO Pay-Ratio in the French law.

The directors fees increased by 1.3% while for the first time in six years, the remuneration of non-executive Chairmen increased (+ 10%), Philippe Camus (Alcatel-Lucent) being the highest paid (€1,36M, with the allocation of performance units) and Franck Riboud (Danone) aspiring to take the first place with a fixed remuneration of € 2 million as of 2016.

The second season of “Say On Pay” in France saw no rejected remuneration, but issuers were challenged with increased intensity (approval rate of 87.87% in 2015 against 91.69 % in 2014 in the SBF 120 index). The votes have focused the meetings on remuneration and transparency increased. Only 29.2% of companies met our recommendations. However, Proxinvest is delighted to see his opposition rate decrease as more companies adopt good practices. Many improvements are still expected to ensure reasonable and transparent remuneration policies, aligned with long-term performance. Directors, including members of remuneration committees, will be expected to dialogue with shareholders on these issues.

The 2015 proxy season was agitated by controversies related to severance agreements: Michel Combes at Alcatel-Lucent, Chris Viehbacher at Sanofi, and Patrick Kron at Alstom. These controversies have highlighted the current lack of regulation and the inadequacy of the ex-post advisory votes on remuneration. Against excess, shareholders rights must be strengthened, and an ex-ante vote on the remuneration policy, as it exists in the UK, appears as a necessary reform.


22 July 2015

We mourn André Baladi, private financier, the European founder of the ICGN

I met André Baladi, a citizen of Geneva, in Paris in 1994, thanks to Stephen Davis then at IRRC.  André was passionately inhabited by its active shareholder role with the major European listed companies. He had thought before everyone here many corporate governance problems and considered essential that the major professional investors be engaged to improve corporate behavior. A former Nestlé executive, he wanted to help for the creation of Proxinvest proxy advisory services and always supported our European consortium ECGS.

As a correspondent member of the US Council of Institutional Investors and as an individual investor, not as an employee,  he invited me in 1995 to join  in Washington D.C. the group which created under his vision and that of Bill Crist, the International Corporate Governance Network (ICGN),  a wonderful organization that has just celebrated its twentieth anniversary in London.

With Lebanese nationality, he was raised by Jesuits in Alexandria (Egypt). His passion was the European Mediterranean culture, he told me often that that he was probably of Jewish ancestry, had kept in Geneva a Christian faith and a French heart.

I called him on the phone before the London conference, and he seemed very tired. Actually, soon eigthy years, he was suffering from a bad cancer  and Sylvia, his dear wife, told me that he did happily not have time to suffer. She said that his ashes will be scattered on the Geneva lake and thereby will return through France to his beloved Mediterranean Sea.

To Madame Baladi, to Alex his son, to his daughters Viviane and Sybille, all of us who loved André bring here our deep sympathy.


25 June 2015

Alstom : Proxinvest suggests Kron to drop its parachute in four questions to the company and AMF

Tuesday, June 30 will be held the Annual Meeting of Alstom. Proxinvest poses here to the company and to the AMF four questions as to the company’s compliance with legal requirements regarding shareholders information and the treatment of the CEO special remuneration.

Alstom announced in 2014 a major asset sale to the US General Electric. Hereby Proxinvest asks four questions on the regularity of the Extraordinary Shareholders General Meeting of December 2014, on the legality of the information given on the nature of the misconduct which resulted in fines by the US DoJ, on the legality of the information provided on the proposed special remuneration for the CEO and about a possible withdrawal of this remuneration in view of its legal risks and in view of the company performance.

I Our first question concerns the legality of the shareholders EGM of December 2014 asked to rule on the sale of the Alstom Power (electricity generation) and Grid (Networks)), and renewable energy businesses to General Electric.

According to the notice of the Extraordinary General Meeting and under the Purchase Agreement, “the completion of the Transaction is subject to approval by the general meeting of shareholders of the Company by a majority of two thirds of the votes cast (the “Majority”). However, Alstom informed only the day before the General Meeting about a substantial change in the selling price: the US announced fines for acts of corruption, which was, to be borne by the purchaser, was not as the Plea agreement prepared with the US DOJ had just stipulated that no part of the fine could not be transferred to General Electric as part of the planned disposal: In the words of CEO at Assembly, the $ 772 million dollar (720 M. €), representing the bulk of the loss recorded for the group in fiscal year 2014/2015 would be offset by commercial arrangements… Moreover, reading the joint ventures organized conditions with General Electric and the odd arrangement between Bouygues and the State it appeared in 2015 that what was presented as a 50-50 joint venture an alliance or an association between equal partners was inevitably shifted into a differed sale of Alstom’s assets to GE at preset prices.

Therefore, Proxinvest, which despite reservations had recommended a positive vote, regretted publicly for the first time in its history to have issued this positive recommendation, calling it unacceptable given the unexpected change in the transfer price and the inaccurate conditions of this agreement.

In view of a substantial change on the eve of an extraordinary general meeting in the conditions of the operation as reported by the Board and the breach of French legal rules on the agenda setting including Article R225- 83 (*) is the vote recorded to be considered as void and should it not require, the project being modified and maintained, a new shareholders consultation, this ime in line with the latest recommendation of the AMF ?

II Our second question is on the quality of the information given on the nature of the misconducts that resulted in substantial fines.

In 2010, the US Department of Justice (DoJ) had begun investigating the Group’s subsidiaries on the facts of corruption and prosecutions have resulted in fines imposed to the Group for approximately $ 772 million, the exclusion of subsidiaries of tender procedures and may lead to further costly civil actions for the group and its shareholders.

A subsidiary of Alstom, Alstom Network Schweiz AG (formerly Alstom Prom AG) agreed to plead guilty to violation of US anti-bribery rules and Alstom SA pleaded guilty to failure to comply with the FCPA provisions on bookkeeping accounting and internal control (« The Defendant did knowingly falsify its books, records, or accounts such that its books, records, or accounts did not fairly reflect the transactions and dispositions of the assets of the Defendant »). The “Plea agreement” (Case 3: 14-cr-00246-JBA Document Filed 12/22/14 Page 5 2 and 3) says that [1] « The Defendant did knowingly fail to implement a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions were executed in accordance with management’s general or specific authorization; (ii) transactions were recorded as necessary (l) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (ll) to maintain accountability for assets; (iii) access to assets was permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets was compared with the existing assets at reasonable intervals and appropriate action was taken with respect to any differences.”  ” The Defendant is pleading guilty because it is guilty of the charges contained in the Information.”, ” The Defendant admits, agrees, and stipulates that the factual allegations set forth in the Information are true and correct, that it is responsible for the acts of its officers, directors, employees, and agents described in the Information…”The Defendant failed to voluntarily disclose the conduct even though it was aware of related misconduct at Alstom Power, Inc…”

However, the only explanation in French that we find on the fines for the shareholders in the Annual Report is included in the risk factors chapter “Thus, the violations covered in the agreement with the DOJ are essentially the use of external consultants Alstom paid these according to the success of the projects in support for the internal sales teams. ”

We also observe that if the Chairman’s report on internal control procedures and risk management has grown considerably in recent years to almost ten pages, it does not refer to the admitted control breaches, nor the Report of the external Auditors prepared pursuant to Article 225-235 of the Code appears to us to have been the same and unchanged for ten years. But we have seen above, that the parent company, which does not seem to have it, directly employed external consultants, has fully admitted his guilt on various breaches of control and diligence.

Can we therefore consider as accurate, sincere and exhaustive that the breaches admitted by the company came from only “essentially the use of external consultants” and can it be said as do the reports of the President and commissioners accounts that there has been no breach of the group’s control procedures?

III Our third question concerns the legality of the information on the proposed exceptional remuneration for the CEO Patrick Kron:

The valuation of the outstanding contingent remuneration for Patrick Kron, approved by the Board of Directors (the counter-value of 150 000 shares as on the date of completion of the transaction with General Electric), is a variable compensation according to the Code, but its amount does not appear for the year 2014-2015 in the Summary of compensation table. The absence of this remuneration decided in 2014 payable in 2015 as part of the 2014-2015 pay is not in line with the Article L 225-102-1 and it reduces from € 6.5 million to an official amount of € 2.5 million the pay of Patrick Kron for 2014. The accounting provision, which we must be found in a footnote on page 143 of the consolidated accounts only amounts to € 2,771,000 whereas the current price stands at € 4,026,000.

There is a failure to comply with the Article L 225-102-1 as well with the completeness required by the Code in its recommendation 23.1 renewed by recommendation 24: “A comprehensive information must be given to shareholders so that they have a clear understanding not only of the individual compensation paid to executive officers, but also the policy of determining compensation is applied. ” While Code Recommendation 25 asks the company to provide an explanation when a recommendation is not applied, the omission of the compensation paid by Alstom is nowhere justified in the document. Recommendation 24.3 on the Consultation of the shareholders on the individual remuneration of executive directors requires that it covers the elements of compensation due or awarded for the year ended on each executive director including “advantages any kind ‘. This special remuneration for Patrick Kron is mentioned but is amount is not included in the Board’s report for the Say on Pay vote : on the Exceptional compensation line is indicated oddly “No amount payable in respect of the year”.

Our question therefore is: does such deliberate concealment or spreading of a major compensation item proposed for the CEO for the financial year 2014-2015 in violation of the law, constitute or not an inaccurate and misleading information on the CEO remuneration?

IV Our last question is about the appropriateness of a withdrawal of this exceptional remuneration both in view of its legal risks and its lack of alignment with the performance of the company.

The elements of irregularity and non-compliance mentioned above are associated with a diversion from the legal rule applicable to severance payments.

Recall that the company originally had decided for a severance payment for the CEO   subject to the “recognition of the beneficiary’s performance conditions assessed in relation to those of the Company.” The Board took note on 4 May 2009 of the resignation of the CEO Patrick Kron to such indemnification. Then Patrick Kron at the end of 2014, announced his departure at the closing of the strategic transaction announced and confirmed this decision in the Reference Document. It is clear that this voluntary departure could have been associated either to with an exceptional additional variable remuneration regularly declared or to the grant of a conditional severance payment within the legal framework of Article L225-42- 1 But in the latter case, the compensation should be both subject to performance conditions and to a prior approval of the general meeting with a specific resolution under Article L. 225-40. As recalled by the AFEP MEDEF code “The law gives a major role to shareholders submitting such predefined allowances paid to the cessation of executive Directors functions. It requires full transparency and submits severance to performance conditions. These performance conditions should be assessed on at least two years. ”

Nothing thus prevented the Board to choose this route in 2014, but Patrick Kron is also Director of Bouygues, and the leading shareholder of Alstom would not have validly participated in the vote of such severance pay.

The Board decided for the easier formula of an exceptional bonus within the meaning of Article 23.2.3 of the AFEP-MEDEF Code, which was not reported as we have seen above, in line with legal rules. This exceptional compensation was capped at twice the total remuneration in 2014/15, Patrick Kron, or € 4,936,000: this reminded the AFEP-MEDEF ceiling of severance pay when subject to performance conditions and to special vote.
The procedure finally chosen and looks like a diversion from the legal proceedings under Article L225-42-1, but it also appears that the amount create concerns. This amount does not seem to fully satisfy the recommendation 23.2.3.du reference code, since its magnitude does not seem “balanced”. Capped at € 4.9 million, it is at he current stock price a percentage of 400% of the fixed remuneration part, and in Alstom shares, representing it represents almost ten times the personal investment of Patrick Kron (16,011 shares). This amounts appears not aligned to the changes investment value as perceived by shareholders as the Alstom stock price after a happy surge following the 2003 State support and the and the arrival of Patrick Kron declined steadily for eight years since 2008 and is now less than half of its 2008 level.

Our final question is: In view of the irregularity of the remuneration adopted procedure, which puts in risk the company and the unjustified amount in the current context, should the CEO of Alstom, upon the example of his predecessor, renews its 2009 waiver to any severance pay?


29 May 2015

JPMorgan CEO Jamie Dimon calls shareholders ‘lazy’ and ‘irresponsible’

JPMorgan CEO Jamie Dimon has criticised on May 28 shareholders who use proxy advisers as ‘lazy’ and ‘irresponsible’.  The chief executive of JPMorgan Chase told investors that shareholders should make up their own minds rather than use the recommendations of ISS or Glass Lewis, the main US proxy advisers. “God knows how any of you can place your vote based on ISS or Glass Lewis,” Mr Dimon said at the Sanford Bernstein conference. “If you do that, you are just irresponsible, I’m sorry. And you probably aren’t a very good investor, either. And you do. Believe me. I know some of you here do it because you’re lazy.”

Mr Dimon was clearly unpleased with the turnout of the Say on Pay vote on his 27 million 2014 pay. Only 61% of shareholders supported the bank’s 2014 compensation packages, which included a $7.4 million cash bonus for CEO Jamie Dimon for a total which some one total to 20 up to 27 million according to the Fortune magazine.

Many active and engaged shareholders might feel extremely insulted by Mr Dimon’s suggestions at lack of professionalism; indeed his accusation, offered without evidence base is itself professionally questionable.

Jamie Dimon raises however  good question widely discussed  as it rare to see an issuer calling so abrubtly his sharehodlers, and it opens an opportunity for dialogue about the state of stewardship. It is true that there are some investors who are more interested in voting as a compliance issue and who have become, to all intents and purposes, zombie voters. That is not a model we support at ECGS.

Rather we see that governance and voting should be integral to the core fund management process and our research is one tool amongst many which helps inform fund managers points of view.

Two years ago JP Morgan interfered in the vote counting process on the contentious vote regarding his separation of chair and CEO in such a way that the Council of Institutional Investors was forced to write to the SEC to demand a review:



Remuneration is not solely an issue of quantum, it’s an issue of performance and accountability; it’s the “window on the corporate soul”.

We are always a bit confused when fund managers say that reading annual reports is “too complicated”. Stock selection research is complicated, it’s what fund managers are paid to do. Where governance isn’t integrated into the investment process then there can, it’s true, be resourcing issues, it’s not reasonable to ask 1 or 2 people to read 200 annual reports a week without some form of assistance. No fund manager I know would make investment decisions without the kind of research and tools available from Thomson Reuters, Bloomberg, FactSet et al, not to mention the billions that are spent on sell side research.

ECGS members, Proxinvest as Manifest in the UK  are only paid by investor clients to research the issues which matter to them and present findings in an easy to digest, robust and comparable format.   In some cases the simple facts and figures are sufficient to inspire the vote as we can observe from the Say on Pay votes :

ISS and GlassLewis are competitors of us but they have a right to do their job. The fact is also  that there are many shareholders who do not want to see egregious pay for under-performance and they do want performance to be sustainable. Many also see the joint chair/CEO appointments as a red-line issue going back a quarter of a century at least.

The final question on JP Morgna is stated by Sarah Wilson of Mnaifest: is Jamie really in touch with his shareholders? Does he understand what they do or is he just listening to what his advisors are paid to tell him?

It’s much easier for an advisor to blame someone else than it is to have that tough conversation about what they don’t like. Most importantly, what does his outburst say about his views on accountability? I think he’s done everyone a great favour by opening up a really important debate.

But on one thing we agree with Jamie : the right thing for investors is not to rely on any one source to make key decisions about the companies they own. A cheap services on proxy voting can turn out to be very expensive for their users while reputations are priceless.


28 May 2015

Orange, a truly contested AGM with an outstanding score for Phitrust and five vetoes

With eight other institutional shareholders, representing more than 1% of the capital of Orange, the PhiTrust Active Investors governance activism fund had included on the agenda of the General Meeting on 27 May 2015 a resolution calling Orange maintaining a simple voting right in the articles of association.

This remarkable investor mobilization  got the unseen score of 43.3% as opposed to the double voting rights at theOrange AGM.

An insufficient score but certainly historically exceptional and quite honorable: the power of the French State allied with  too well handled employee shareholders ensured control of 30% of the shares and of 44% of votes at the meeting.

Moreover, no less than five special résolutions of financial authorization were rejected: these resolutions may deprive the shareholders of their subscription rights have not reached the necessary two-thirds score, not only averaging 61% : a negligence of Orange teams that should have taken note of the concerns expressed in the 2014 autumn and early 2015 by most of the voting advisory firms.

Let no one say that these pure comfort permissions were needed to finance the group. Let us remind Orange directors as other subservient to  irresponsible rulers that Air Liquide, one of the great companies who have refused in 2015 the unhealthy facilities of dthe ouble voting right, has never wished to approve funding authorizations without shareholder subscrition right…

Note also that Anne Lange a director representative for the State received only 78.61% of the votes of shareholders.

So there is  at Orange some way to go to reconcile investors interests and a Board complacent to short term politics…


4 May 2015

PhiTrust do it again at Orange : restore the “one share one vote” principle

With eight other institutional shareholders, representing more than 1% of the capital of Orange, the French activist fund PhiTrust Active Investors, advised by Proxinvest, has just tabled  on the agenda of the 27 May 2015 General Meeting of Orange a new resolution calling for the retention of the single voting right in the articles the company.

This is another new external resolution Phitrust in the debate  resulting from the “Florange law” of 29 March 2014 which generalizes the double voting rights for registered shares as a default regime for French listed companies. The legislator has allowed the opportunity for companies to deviate from these provisions by the vote of a specific resolution in general meeting in 2015 to maintain the provisions relating to simple voting law, restoring the “one share – one vote”.

The double voting rights does not meet the proportionality between the capital invested by a shareholder and his voting rights at the AGM.

As aresult in 2014  out of 6 252 resolutions  analyzed by Proxinvest at 369 companies there were only 56 resolutions rejected (less than 1%) and some  32 other resolutions at 12 French listed companies  should not have to be adopted without the game of double voting rights to controlling shareholder. In short, in France,the number of rejected resolutions should be 50% higher than that observed!

Moreover, this creates a distortion between shareholders since obtaining it requires the registration of registered shares, cumbersome and expensive, a deterrent to foreign investors, pension fund or UCITS, which does not allow them to benefit from these double voting rights.

Contrary to the intention of the law – that PhiTrust Active Investors shares with many shareholders and co-depositor of this resolution – which would encourage long-term investment, we can only see that the device does not facilitate long holding securities. Other more suitable methods exist to retain shareholders.

The adoption of double voting rights only encourages investors wishing to exercise control of a listed company without paying a control premium. This is shown by the recent history of several companies in the CAC40.

PhiTrust Active Investors demand to Orange shareholders vote FOR the resolution calling for maintaining simple voting which ill be published in the company register on May 6, 2015


13 April 2015

Will Renault CEO Carlos Ghosn be the highest paid French CEO for 2014 ?

The Paris financial press is not very factual when it merely explains, such as Les Echos, that the Renault CEO’s full  2014 “package” amounted to € 7.2 million for 2014. But the real figure exceeds the twofold.

This newspaper still quotes the President of Proxinvest Chairman , Pierre-Henri Leroy: “Carlos Ghosn will become the highest paid French CEO here, with pharaonic amounts only obeying fuzzy criteria.” Proxinvest ECGS  French member completed its ECGS research report soon available on the on line ECGS Shop.

On reading page 142 of the reference document the posted elements for 2014 actually  exceeds € 15 million, unless the Echos considers that the CEO works part time only for Renault since he also chairs and manages the Japanese group Nissan. Indeed, Renault indicates a total compensation due for 2014 as approved by the Board of € 7.2 million against € 2.67 million in 2013. Then, a paragraph indicates that he has receiveda much higher fixed remuneration for Nissan: 995 million yen 2013, i.e.  7.6 million …

The excellent Carlos Ghosn has fetched nearly 15 million euros or 850 SMIC for a employed manager, and even perhaps more, since its 2014 stake of performance free shares is valued € 4.1 million by Renault is now 8 million worth excluding the possible impact of performance conditions, which conditions remain unverifiable …

Renault information on the Japanese compensation paid to Ghosn the previous year is only released in  yen a practice which is neither clear nor consistent with French law that requires to “communicate the detailed and otal compensation and benefits in kind paid during the year to Managing Directors  and,   ./ ..  received during the year from companies controlled within the meaning of Article. 233-16. ” Nor is this consistent with the  AFEP MEDEF Code for which Completeness is the first principle for determining the remuneration of executive directors…Nor with its application guide (“If the remuneration of executive directors is paid by a third party, whether or not the parent or a shareholder and whether or not invoiced in whole or in part to the listed company, information about it must nevertheless be comprehensive. “)

Clearly the remuneration paid by Nissan in 2013 or 2014 is not approved or considered by the Renault Directors, which have yet this statutory task, nor by its Compensation Committee, which officially refuses to assess all remuneration and perceived  benefits eventually paid by other Group companies to the CEO. The committee is therefore lacking in his mission as defined by Article 18.3 of the AFEP MEDEF Code: ”  to place the Board in the best conditions to determine the set of compensation and benefits of Executive dDrectors.”

It will seem acceptable to many, amid improved group performance in  net earnings, “free cash flow” and operating margin, that the variable pay portion due to the CEO for 2014 grew by 31% to 147.5% of the fixed pay:  quantitative criteria were, they say,  fully satisfied and qualitative criteria fulfilled at 96% of expectations…

However it is in February 2014, well ahead of the improved results, that the Renault Board granted it 100,000 free shares valued 4.1 million today … And for 2015 it has already promised him again 100 000-called performance shares, indexed allocation for third on the free cash flow (not otherwise specified), one third of the change in the automobile operating margin percentage points from a panel (PSA car, Fiat Auto EMEA, VW and Skoda Brand Brand), and one third of the total share return (TSR).

It is true that Renault on the basis of the strategy adopted by the remarkable predecessor of Carlos Ghosn, is  on a nice course, but the engine of the current CEO  is clearly not a model of sobriety!


4 April 2015

Vivendi, which concentrates shareholders activism in France, practices bullying.

Vivendi’s Management Board and its largest shareholder Chairman of the Supervisory Board, Vincent Bolloré, received the inscription of three external draft resolutions for the meeting of April 17, 2015. Some of the group ‘s answers turned to intimidation if not to misleading information …

The first resolution proposed A, for the maintenance of simple voting rights, following the campaign of Phitrust, advised by Proxinvest. A group of top  investors came to support the draft resolution A. These include the pension fund of the British railway, Railpen, the giant of the British insurance Aviva Investors, of the largest Dutch pension fund PGGM, the US giant CalPERS, famous retirement funds of  the Californian State employees, the  giant collective management in France, Amundi with his little sister CPR AM, a subsidiary of Crédit Agricole, Natixis group’s asset management subsidiary  DNCA Finance, the Edmond Rothschild asset management subsidiary and the big French mutual insurance group OFI-Macif.

They all decided to participate to the tabling of this resolution calling for the maintenance of simple voting rights in the articles of association on the agenda of the April 17, 2015 General Meeting of Vivendi.

In line also with the Proxinvest Voting Policy for 2015 we warmly support this resolution.

Two other resolutions B and C on the dividend distribution were presented by P. Schoenfeld Asset Mgt.(PSAM) a New York money manager, and Proxinvest has had the opportunity to discuss with the Management Board of Vivendi and with Peter Schoenfeld on these. 

PSAM considers that the proposed payment of 1.3 billion dividend to shareholders is in no way related to the 17 billion seen following the group recent  divestments. It proposes a first dividend increase (resolution B) to be paid for the year 2014 to 2,900,000,000 € instead of 1,3 billion € planned, then other massive  distribution of cash to September 2015 (resolution C).

Proxinvest ECGS  French member completed its ECGS research report soon available on the on line ECGS Shop.

Besides French investors were highly surprised by the content of a letter of March 27 by the Vivendi’s Management Board to its US shareholder P. Schoenfeld Asset Mgt.(PSAM) as published on the company’s website.

Vivendi, which did not earlier mention in  the shareholding section of its annual report any statutary or legal ownership limitation for non EC investors,  reminds PSAM of this 1986 legal limitation  for non-EU shareholders of French television companies : it suggests that in case the investor  would exceed 20% of the company this “would very deeply harm the company ” and would obligeVivendi to court assignments leading to potential fines of  5 up to 9 billions euros. In Proxinvest opinion such public baseless astronomical amounts  turns to misleading information.

Besides , as in earlier similar cases here, the issuer is threatening shareholders having no takeover intentions of a concerted action with unknown other shareholders only on the grounds that he convinced some investors to vote in favor of his external resolution. This clear is an opportunity for the French AMF to remember that the dialogue among investors and  their common intent to vote in the same way , whatever it is, should never in itself only constitutes a take-over concert situation.

Shareholders should not be unduly discouraged to cast freely their vote at the General Meeting of 17 April.


24 February 2015

SANOFI : a generous EUR six million “Golden Hello” for Olivier Brandicourt, a great pharmaceutical mercato

SANOFI has just released the conditions of employment of its new CEO, Olivier Brandicourt, and Proxinvest was invited by the press to comment the news.

A welcome gift, or ‘Golden Hello’, partly conditional and paid over three years  and estimated by Proxinvest € 6 million was made to the signing of the contract that binds the former Executive Board member  and boss of the pharmaceutical division of German group Bayer to the French top pharma player Sanofi. The company also communicated the generous remuneration terms agreed with its new CEO : a fixed EUR 1.2 million, a variable salary of up to 250% of the fixed plus the annual grant of 220,000 stock options and of 45,000 performance shares: an expectation, according Proxinvest for about EUR 6 million per year as estimated under  the generous performance conditions generally used by Sanofi (1).

Olivier Brandicourt is the ideal boss to Sanofi:  a physician and biologist by training, Olivier Brandicourt, a specialist in infectious and tropical diseases, spend as intern eight years at the Pitié-Salpêtrière Hospital in Paris, in 1988 he joined the US laboratory Parke Davis, later bought by Pfizer and then joinded Bayer in 2013 for which he bought a division of Merck and oncology laboratory Algeta … In short, a unique experience, the post was only waiting for this man.

What is however not clear in the  Sanofi icommuniqué is that the ‘Golden Hello’ offered, we are told, to Olivier Brandicourt, is actually offered to Bayer as a compensation for the non-compete clause breached by Olivier Brandicourt . Because fact is that the contract of this “great man” forbade him to quit Bayer and join a competitor, and so he had , likely with the help of Sanofi, compromise on an indemnity paid probably by Sanofi to Bayer … why not  between four to six million euros?

Proxinvest, who spoke with the Chairman Serge Weinberg , interim CEO   since the dismissal of Chris Viehbacherby the Board at the end of October 2014 , thinks it would be wise to explain the mechanics of such mercato dealings rather than to suggest that Olivier Brandicourt received  millions without having worked a day for Sanofi.

This case is, for Proxinvest,  remarkably illustrative  of the current ” économie concentrationnaire”, according to Pierre-Henri Leroy words. Big pharmaceutical companies around the world pay huge salaries and practice an executive mercato perfectly comparable to the trade of football or basketball star players. The industry is very complex, it negociate prices with Medicare authorities and is known for its generous margins : accordingly it pays very high salaries to its top managing directors and employees. The real cause behind these indecent salaries at the top is for Proxinvest in the selection of directors and the convenience of the financial system as a whole for these eprotected employees, tehse excutives  adored by our universal banks which are  abnormally present in the investment industry. actually the influence of investment bankingh is felt over the selection and remuneration of top exécutives at listed companies. A complication that points to a difficult but possible reform of the financial system in Europe …

Pending such a big reform, Proxinvest is left to recommend investors to oppose the up-coming non-binding vote on the compensation of Olivier Brandicourt, which is simply excessive, particularly in terms of the wage ceiling of 240 minimum wage ( or 4, 8 million euros a year) as retained by Proxinvest for the best employed CEOs.

(1)  Sanofi applies the following performance criteria: (i) the net income for each year, then the net income Medium, (ii) the ROA, (iii) leTSR or “value creation” and (iv) the average weighted Performance of Net Income Average Rate, ROA Performance Rate and TSR Performance Rate for the period, but the 2014 CEO package was also at large based on non financial criteria …


12 January 2015

Mr. Macron, there are better things to do!

by Pierre-Henri Leroy

Finance Minister Emmanuel Macron, asked about the CEO pensions cap, states: My belief is that any additional pension system is legitimate provided it is based on a contribution of the employee. Some of these pension schemes are not: they are simply a perpetual annuity,  a deferred income for the person who has never contributed to the plan. This will not be possible. I prefer a system that better rewards performance and risk to a system that promotes an annuity. »

The Minister’s opinion is respectable and we respect it all the better that we share it.

end of One share - one vote

But is the question of the CEO pension not the responsibility of the Directors and ultimately the shareholders of  companies?

What a failure of the directors and what a lack of engagement on the part of investors when a minister is obliged to intervene on such a secundary subject. One of the many reasons for these weakness il also in this government distaste for clear management responsibility and fair shareholders democracy:  as underlined by Les Echos, the 2014 Florange law generalizes the double voting right and puts an end to the Board’s neutrality in case of public offer.

Directors fail accordingly to their duty, too torn by conflicts of interest, managerial proximity, and the influence of a  universal banking regime, big banks of which  this minister is the protector.

Incidentally, this Finance Minister  is still expected on the Hollande candidate promise of truly reforming finance.

When will the real reform of efficiency occur, the split of these universal banks? 

It is vital that  the taxpayer guarantee be limited to only banking deposits and that these groups no longer  compete under the guarantee of the State umbrella against independent  private companies of many non-banking sectors.


27 December 2014

Three questions to the Alstom CEO and Board on corruption, profit warning and the special spin-off bonus

After BNP PARIBAS  fined  for nearly $ 9 billion imposed for violations of US embargoes, it has been the turn of Alstom to settle for a fine of 700 million dollars (560 million euros) in the US after prosecution for corruption in Indonesia. Corruption is as old practice at Alstom according to experts, and Chairman & CEO Patrick Kron who was in control since 2003  does not appear innocent of these criminal operations started  in 2004  and pursued until 2009.

French shareholders in both cases are often outraged the ambiguous behavior of the world’s US policeman, who has obviously found its industrial interest in the strict enforcement  in the Lex Americana for non-US firms, a milder treatement here is that General Electric will finally pay the bill.  But this corruption case  has certainly weakened Alstom  by the threat of substantial sanctions and the company was possibly obliged  to transfer to General Electric  its Steam France division (turbines including nuclear), its grid  division (power distribution)  and and its renewable energy division. Our first question to the Board is therefore was it any early arrangement with the US Dept. of Justice escaping top Alstom executives from their personal liablity under the US Foreign Corrupt Practice Act ?

Looking at the deal Financial conditions now, Proxinvestdespite of limited appreciation data for the valuation of these assets to be sold, finally supported the deal on the basis of alleged sincere information provided by the company : the French proxy advisor recommend to vote FOR on the sole and advisory resolution proposed at the 19 December 2014 general meeting. The results of the divested activities have continued to deteriorate since its announcement of their transfer,  but everyone knows how easy can be the drive of reported results on long contracts in such activities, while General Eleectric can drown this decline including the impact the final DOJ fine in consolidated accounts of a much larger magnitude.

As French says “When you want to kill your cat you tell it has rabies …”

An Alstom profit warning of January 21, 2014 announced the operating margin to drop in 2014/2015 and its cash flow to be negative in the second half in late March 2014 instead of being positive.  Why was this not confirmed by the annual results, a positive free cash flow (cash flow) finally was of  € 340 million in the second half against a negative figure of 511M in the first half ? According to Marie-Jeanne Pasquette,a  seasoned Financial journalist of DeontoFi  Billed as” balanced “, the Alstom deal with General Electric might happen one day to be one of the great forgeries of the stock market history.

In both earlier mentioned victim cases of the Lex Americana, BNP Paribas and Alstom, on should notice that the highest level of senior management deliberately opted for further breaching with the US rules.  But the as in the BNP Paribas case Managing Directors who at least tolerated these illegal behavior and decided to brave the public interest are not now under any personal indictment…

How can  then the Board  justify the considerable compensation recently granted to the executive team as the company reduced its size to a third and as its shareholders appears to have lost in the last years under  Kron ? The stock price price was 12 euros there ten years then plummet ted at 80 euros to drop for now at 28 euros. But Patrick Kron who has seen  annual compensation of 3 million euros reduced by 10%  in the last five years and while piling a 13 million provision for retirement will be granted  an “exceptional bonus” of an amount equivalent to the value of 150,000 shares of the company nearly 4.1 million. How can the Board dare paying so much  for having ensured a sustainable future for Alstom Energy  division”  while the Alstom group gives up three divisions to be confined to the single rail transportation business?
The new Proxinvest 2015 voting policy will scan seriously this “exceptional conditional remuneration” for this now possibly departing CEO . It now requires the inclusion of a clawback” provision for this type situations in the long-term incentives for senior exécutives, as it is true that the very generous compensations paid in the past to Patrick Kron covered questionable behaviour.


4 December 2014

16th Proxinvest report on Executive Compensation in France

As shareholders of major French groups experienced their first year of Say on Pay, Proxinvest published for the sixteenth consecutive year its report on executive compensation. Its uniqueness lies in the valuation all the various forms of executive compensation (fixed, annual bonuses, fees, benefits in kind, stock options, free shares, cash incentive plans and other indirect forms of compensation).

The analysis of annual reports published in 2014 on compensation due for fiscal 2013 reveals a paradox: the limit of the socially acceptable pay set by Proxinvest (240 “SMIC”, the minimum annual pay, equivalent to € 4.76 million) is now exceeded by 18 executive chairs against only 13 in 2012. Despite this trend, the average total remuneration of executive chairmen of the 120 largest listed French companies slightly increased by 1.2% in 2013 and reached € 2,909,000.

Some virtuous companies and the pressure of the French State, a major shareholder of public companies, therefore had a moderating impact, offsetting the excessive compensation practices of some companies and the average executive compensation in the CAC 40 index was down 2.5% to € 3.968 million, the equivalent of 200 SMIC.

Arnaud Lagardère, General Partner of Lagardère SCA, with € 16.6 million (+296% YOY), is the most paid French CEO in 2013. This unusually important sum for a French CEO is explained by the statutory dividend of 1% of the net income Mr. Lagardère perceived from his company. This statutory dividend amounted to € 13,1M because of the large capital gain made by the disposal of EADS share by Lagardère SCA. The issue of executive compensation in Partnerships limited by shares is raised as the 1% levy of the result can be likened to a form of rent which excludes other shareholders. In addition, the company did not put the regulated agreements report to a vote, which is an infringement of the French law.

Bernard Arnault (LVMH) is in second place of the top, with € 11 million despite results that were not exceptionally bright in fiscal 2013 (+ 2% in current operating income, stable net income). Mr Arnault benefited from an annual bonus of € 2.2M, a sum unchanged from 2008 to 2013. He was awarded a performance share plan whose conditions are particularly undemanding. His family holding company, Groupe Arnault SAS, benefit from business relationship with LVMH (net balance of € 3m) and again the law seems poorly respected since Groupe Arnault SAS seems to vote on the special report on regulated agreements at the AGM.

The former CEO of Havas, David Jones, is in third place after the payment of a severance payment of € 5.4 million, although this does not seem to comply with the AFEP-MEDEF code of governance as the departure was not officially constrained. Here again, the payment of a severance pay unapproved by the General meeting also raises the issue of a non-compliance with the voting procedure on regulated agreements stated in the French Law.

Carlos Ghosn, CEO of Renault-Nissan, is fourth with € 9.7 million. He perceived a fixed remuneration of € 1,230,000, higher than the average of the CAC 40 index, and a compensation equivalent to € 7 million paid by Nissan. The nature of the compensation paid by Nissan and the criteria for calculating it, are still undisclosed despite the requirements of Article L225-102-1 of the French Commercial Code. Taking into account Nissan’s operating margin (4.7%), far below that of its Japanese competitors (Toyota 9% Honda 6.6%) and far from the 8% target announced for the end of 2016 in the Nissan Power 88 plan, the level of compensation seems particularly high.

Chris Viehbacher, former CEO of Sanofi, is fifth with a total compensation of € 8.6 million. It is, however, composed of a € 5 million grant of stock options and performance shares he should not vest because of the attendance condition associated (however the financial terms of his departure are not yet specified by Sanofi). The annual bonus of Chris Viehbacher (€ 1.7 million), illustrates the undisclosed nature of some compensation practices: French boards too often hide behind the excuse of “reasons of confidentiality”, in order not to provide the information about the underlying objectives of the variable compensation.

Beyond the strictly quantum issues also arises the question of the compensation’s alignment with the company’s performance. Proxinvest observed than half CEOs received a long-term compensation in 2013, a cause of concern for investors.

While stock options have almost disappeared in France, certain compensation arrangements are still highly controversial, as pensions cap. Because of the lack of transparency on the subject, the annual cost of pensions cap is not taken into account by Proxinvest (although Arnaud Lagardère, Bernard Arnault and Carlos Ghosn are beneficiaries of such schemes). However, as only 6 CEOs of the CAC 40 index do not have such plans, this matter is not to disregard. The AFEP-MEDEF code of corporate governance is excessively permissive on the subject of pensions cap and Proxinvest encourages companies to replace the generous defined benefit plans by defined contribution plans, more transparent and less costly for shareholders (for example, Veolia Environnement approved amendment by 99.67% of the votes of the AGA).

In 2014, because of a large amount of problems, Proxinvest opposed 70% of Say on Pays.

As of 2015, Proxinvest will recommend extending the performance measurement period of long-term plans to 5 years; Proxinvest will also verify the implementation of shares ownership policy and the introduction of clawback mechanisms.

Proxinvest expects the French regulator to enforce the Law, including section L225-100-2 of the Commercial Code, which requires compensation details and the respect of regulated agreements procedure. Without full compliance with the Law, shareholders are deprived of their responsibility to control the compensation of corporate executives.


2 November 2014

Total : the sudden death of the Chairman & CEO shows the weakness of the regime for succession planning

Shareholders and employees of the Total group have learned with grief the death of Christophe de Margerie, Chairman and CEO, along with three other victims. The sudden death of a charismatic leader of great influence and shocked the markets. It is a more serious as the company is without a CEO and Chairman faces a double problem.

The outstanding qualities of the deceased could not hide the risks associated to this usual confusion in France of the two separate conflicting functions in the hands of one man: on the one hand the role of CEO, the real driver of the group in charge of daily operations and management, representing the company vis-à-vis third parties, missions for which the natural qualities of Christophe de Margerie received unanimous praise and secondly, the role of the Chairman to monitor the proper functioning of the company,  organizing an directing the work of the Board,   including the control the action of the general direction.

Statutory age limits are supposed to provide a schedule for anticipating the succession process. In practice, the temptation to extend the statutory age limits exists and can not post regret that the extension to 67 years was requested by Total (19 of resolution 2014 adopted at 87%) instead of considering a split of the functions offering bettre visibility. It is hoped that the Board of Directors of Total, top Paris market capitalization  had planned at its  Governance and Ethics Committee the conditions of rapid succession this type of sadly predictable accident, since one is irreplaceable.  . It is hoped that the Board of Directors of Total take the opportunity to improve its governance to appoint a Chairman an independent of the Management Committee.

Christophe de Margerie  beautifully set on the path to modernity for Total, notably by investing in solar energy (SunPower). But it remained to be done to modernize Total governance and a larger shareholder pool : it is regrettable that he could not have his last years at the head of the group to implement these necessary reforms.


8 October 2014

The French government misleading information on Air France-KLM

As the main but minority shareholder of the Air France-KLM  airline, with 16% of capital and voting rights,  the French State is also Director and as such an insider.

But in announcing on September 24 on the radio at 7:40 am, “the Transavia Europe project is abandoned by management,”  adding that “the project is not suspended for three months, it is removed,” the French  State secretary for transports Alain Vidalies committed an offense of false information:  his statement was quickly contradicted a spokesman for the company quoted by the AFP Agency: ” We see no change in the negotiations, there is no evidence that this project is removed.

Under Article L 465-2 two years imprisonment and a fine of EUR 1 500 000 will punish “the fact for any person, to spread or attempt to foster publicly  any false or misleading information about the prospects or condition of an publicly listed company.While it is excluded that the State prosecutor ever prosecutes and as the Management of the Company ultimately had to bow to the Vals Government change, the other shareholders of Air France-KLM, victims of this criminal attempt to influence the fate of the group, could legitimately claim for the damages that will be suffered as a result of this move.

The recent  bill  adopted to modernize the management of State participations, in which the role of the Directors appointed or nominated by the State shareholder will be distinguished from its other functions, such as customer or regulator , is certainly welcome: and the representatives of the State at the Boards of companies may be now selected in “a broader pool, in ordre to benefit from their experience.”

Thanks God  for our professional politicians ministers clearly know nothing about industry and securities  market constraints. As wrote in the Figaro Eric Verhaeghe, the former CEO of Apec: It’s pretty amazing to see a minority shareholder speaking in the press about internal  business affairs / .. The first issue of the. State is to stop transfering his decadent management style – which explains the uncontrollable drift of public spending -. to companies that are his or for very little


18 September 2014

Phitrust Active Investors has adopted its shareholder engagement programme for the 2014-2015 season.

The Board of Directors of open-ended investment fund Proxy Active Investors, a  SICAV, has adopted its new shareholder engagement programme for the 2014-2015 season. Its initiatives will focus in particular on three themes: a defense of  the “One share, one vote” principle in France, the reintroduction of the neutrality duty of the Board in period of public offer and the introduction of “claw-back” provision for executive directors of the banks.

As stated recently by the Novethic  RI agency , “Phitrust Active Investors,one of the rare European funds focusing in shareholders engagement for better governance , is proposing the introduction of claw-back provisions in all the Bankers contracts. Because of the accumulated fines  against bankers these banks last years including  a $ 8,9 billion fine for BNP Paribas following the 2013 euro 446 million against   Société Générale then the expected fining of Crédit Agricole accused of Eurolibor rate or derivatives manipulation and whom despite  July 2013 denials has created a  € 1.2 billion provision for these risks.

1. For a long time, the community of French and international investors has applied the principle of proportionalitybetween capital and voting rights (“one share – one vote” principle) and the principle of Board neutrality for listedcompanies during takeover bid periods.

The French law of 29 March 2014 “aimed at recapturing the real economy” (known as the “Florange” law), reverses these principles by allocating double voting rights by default for holders of registered shares only, and authorising the Board to make any decisions to block a takeover in the event of a bid. The law thus undermines the rights of minority shareholders.

At the same time however, the “Florange” law includes provisions whereby the shareholders of listed companies can re-introduce the principles of “one share – one vote” and board neutrality during takeover bids through amendments to the by-laws.

Proxy Active Investors will introduce a number of initiatives aimed at re-establishing these principles which it considers vital to ensure equal treatment for shareholders and freedom for takeover bids to progress.

2. The increase in fines and legal proceedings under way against banks in many countries (see the recent $8.9 billion fine imposed on BNP Paribas) actually punishes their shareholders.

Proxy Active Investors will engage with the Boards of Directors of listed French banks to ensure that shareholders’ annual meetings can resolve to introduce director compensation systems that include claw-back clauses compelling directors to return bonuses for past years, to improve accountability and control of long-term risk.


28 July 2014

The ECGS since years keeps concerns on the Banco Espirito Santo (BES) governance.

The setbacks of the 2nd largest listed Portuguese bank Banco Espirito Santo (BES) shook the markets :in this listed bank with Crédit Agricole as second shareholder with 15% of capital and three Director seats we discover Madoff style bank management. They are, after the BNP Paribas US fines, perfectly revealing of the perversions which leads the universal banking model, so praised the banking lobby and French Treasury.

The BES stock dropped in eight years from Euro 15 to 50 cents d'ECGS and clients have been warned several times.

For several years our ECGS analyst criticized the incredible protectionist family governance of BES group and its intricate family companies refinancing. Like other Iberian banking groups BES maintained a Board dominated by the family interests as family Espirito Santo owned 25% of BES, now 20% due to an emergency sale, via Espirito Santo Financial Group (ESFG) itself 49% owned by Espirito Santo International (ESI).

In order to maintain control the family overloaded its holding companies with BES group debt and shares plus billions of Angola's debt : then the allowed addition of the asset management for third parties and the usual listed commercial bank business suggested to litteraly "stuff" the BES clients managed accounts up to a billion euros of junk investments in the family interests. It is indeed a crime when the interests and protection of customers are left behind confused interest defined by generously paid managers of State protected multi-business banking groups.

This year as last year ECGS recommended its clients vote against the BES Management report, but the complacency of many international shareholders and banking regulators have allowed the BES Group to sink into the deadly trap of self-possession and outright fraud of its managed clients.

Remind that Portugal Telecom in June bought € 897 million bonds issued by the Spirito Santo Luxembourg unit Rioforte as Portugal Telecom is 10% held by BES, of which PT holds in turn 2%. Brazil’s Oi was not informed of the investment from PT and the terms of the Oi-PT merger will likely be re-discussed. A typical case of national disasters caused by the “relationship capitalism”, similar to so many cases supported by univesal banking in Southern Europe….

This case is a useful warning shot for shareholders on the abuse of shares repurchase whose consequences can often ruin companies.


VIPsight Archives Europe - France

2011 2012 2013


8 June 2014

BNP Paribas shareholders heavily penalized by the US....

BNP Paribas shareholders heavily penalized by the US because of the arrogant Management race for multi-business banking concentration.

A BNP Paribas shareholder write Proxinvest: "I think the bank's Board and Managing Directors:

  • Were negligent in respect of internal control as the Board never ceased to say "we are in compliance with the laws of all countries where we operate"
  • Were poorly negotiated with the U.S. authorities continuing to conceal the scale of operations in breach. "

Why BNP Paribas, a French bank active since 1970 in the USA, exposed itself to violate the US embargo against Cuba and Iran in oil trading transactions of its Swiss subsidiary with these countries ?

While France did not share the U.S. desire to ban these countries, the French BNP Paribas acted as poor U.S. citizens (they are not), certainly as good French citizens but, in the long term, as poor responsible bank managers .

This case confirms the inevitable and normal dependency of banks vis-à-vis their state guardianship as if BNP PARIBAS could not pay the final fine, the French taxpayer would be obliged to take the bill and pay. But no worry, only naive bank shareholders will have to loose as the final fine will be precisely calculated.

The banking group knew its problem with the U.S. authorities and acted "in accordance with the laws of each country in which it operated." His defense is casuistic: "I was as a French banking entity operating in the United States, but the operations of my Swiss subsidiaries with the Iranians or Cubans were perfectly legal under Swiss or French rules and did not have to comply with U.S. law. "

The U.S. authorities, who had long known this breach and the disclaimer of parent companies vis-à-vis their 100% subsidiaries, will easily charge the bank. This American imperialism is certainly irritating, but it has its own logic, while the position of BNP Paribas is just confused.

Once again, the case demonstrates the confusion of the universal banking model : " To do, here and everywhere, everything and its opposite with the guarantee of the taxpayer." Remind here that the Glass Steagall Act of 1933, which spun off the banks, also had an important component of geographic limitation of the activity of each bank in only one U.S. state...

The internationalization of trade has led our universal banks to seek dollar deposits to finance the global trade of our major firms: a healthy ambition which exposed the bank to the U.S. diktat, it should have played another card instead of the simplistic primary race for size, that of the European integration and Euro. Over time, the cost of hedging dollar Iranian or other contracts would have lead customers to prefer contracts and deposits in Euro.

Our "big banks" have preferred to play with the larger American interests and, as always, to hide under the carpet the many conflict of interest ...

And, finally, they lead the defense and illustration of this perverse model, and as JP Morgan, Barclays, Deutsche Bank all our universal banks subsidized by the ECB, far frome being exemplary, have foolishly took their fingers in the regulatory gear ...

It belongs to the shareholders to question the "sustainability" of our banks model !

Pierre-Henri LEROY


3 May 2014

Loyalty Shares , a serious innovation encouraging shareholers stability and discouraging shares lending

Proxinvest discovered recently at a conference of the French SIF (FIR) and thanks to the CEO of the French cilvil servants pension fund ERAFP Philippe Desfossés a quite challenging and refreshing innovation, in clear contrast with the recent decision of the French Parliament to generalize the double voting right as default regime in France.

This financial innovation has been designed by Patrick Bolton, Columbia University, and Frédéric Samama, SWF Research Initiative and Amundi and described in the included article of the Journal of Applied Finance.

In two words a serious weapon for encouraging investment stability without harming the “one share one vote” principle, a fair instrument (unlike double voting rights and increased dividend based on company share registers) for this basic over-water warrant for all shareholders is to be called after three or four years based on the ISIN code and on no other register, a superb and efficient deterrent against shares lending by funds.

At an invitation of Proxinvest fourthy investors gathered to hear Philippe Desfossés and one of the two inventors , and Amundi senior officr, Frédéric Samama.

The French specialized press offered a large echo to this very promissing idea


21 February 2014

Peugeot shareholdesr still unclear about the Dongfeng Peugeot deal

The announced entry of Dongfeng and of the French State as shareholdesr or Peugeot should be based on a capital increase stock price of EUR 7.50 euro, while the share is currently priced above Euro 12. .

The conditions released on February 18 th. are not perfectly clear and they where only available on the Dongfend site.

Bothe Dongfeng and the Chinese Government would sunscribe at this pice of EUR 7,50 EUR, nt 140 000 shares and committing for another r 25 000 share at market price. This would bring 1.8 billion in cash. Then each current shareholder would receive a Wwrrant at EUR 7.5 for 30% of his shares which should bring another EUR 800 Million more the addition Billion is expected from the public capital increase at market price...

Investors will be well advised to balance the strategic benefits to be expected from such a venture and, if not convinced, they should clearly resist and oppose to a deal in which the State and investment bankers once again would make their meal with the minority shareholders owned good.


20 February 2014


PhiTrust Active Investors, the activist French Goverannce engagement fund will attempt to file external resolutions to the 2014 General Meetings of these four companies, each being led by a Chairman/CEO.

Subsequent to their contacts with the Chairmen of the Board of Directors of these listed companies, and after discussing the issue with several institutional investors, the Board of the Phitrust fund decided that the separation of powers was the most important topic to tackle at the four following companies :

  • ACCOR: the newly appointed Chairman/CEO (as of 2014) was already an influential shareholder for several years, and the strategy he helped implement has not borne fruit.
  • RENAULT: after the departures of the "second in command" of both Renault and Nissan, the issue of power centralisation has become increasingly important to shareholders.
  • SAFRAN: the refusal of the Board of Directors to take into account the shareholders' vote on items related to the Chairman/CEO's compensation is among the issues which lead to the encouragement of the company to return to the organisational management structure that prevailed prior to 2011.
  • SOCIETE GENERALE: the recent position taken by French banking regulator ACPR (independent authority linked to the Bank of France) asking French banks to apply European rules regarding the separation of powers, calls attention to Société Générale's current governance structure.

Phitrust maintains that such the confusion of powers implies a risk for the shareholders and invite investors to file on its sitethe resolutions and if needed to request the necessary elements allowing to participate in these initiatives.


15 December 2013

French banks prefer conflicts of interests and shame than reforms

While the Governor of the Bank of France boasted in July 2012 that no French bank was involved in the interest rates manipulation scandal, Société Générale has just been fined for 446 million euros by the E.C. Competition Authorities. In the same inquiry a procedure has been initiated against Crédit Agricole.

Yet the dispute chapter page 259-261 of the Annual Report of Société Générale ! for the 2012 General provisionnait € 300 million in other cases , said not a word of this investigation by the competition services of the European Commission ( nor folders educated by the AMF and since then has given conviction) ...

Note that the more transparent Crédit Agricole who has not been convicted to date, recognized him having " received requests for information from various authorities in the context of investigations concerning both the determining of intereste rates on several currencies and an certain other market indices, and other operations related to these rates and indices. "

To our knowledge the Financial Markets Authority (AMF) instrcuted no inuqiry in this area and the French government is so addicted to debt that he is quite far to meet its legal obligations as a supervisor of French banks.

But there is not always bad news , the appointment by the Chairman of the National Assembly, Claude Bartolone (PS ) of Thierry Philipponnat, CEO of the Finance Watch NGO , to serve on the panel of the AMF, is clearly good news for investors and shareholders.

This former manager of Amnesty International, also a former banker of BFCE, Exane Paris, UBS and BNP Paribas is General Secretary of Finance Watch, a non -governmental organization specializing in "financial regulation for the service of companies and the real economy, not speculation."

The AMF College is the main decision-making body of the french markets authority AMF . It comprises 16 members (including the chairman , Gérard Rameix, a former member of Proxinvest Consulative Committte. The members of the College term of office is of five years, renewable once . The AMF College is renewed by half every thirty months.


4 December 2013

Bernard Charlès, Proxinvest Top 2012 CEO pay, is quite right...

Bernard Charlès, the CEO of software champion Dassault Systèmes and the champion of our French 2012 CEO pay survey is quite right to alarm in an interview in Le Monde about the mad French taxation on equity investments.

"If I can not distribute plots of land, that is to say, a share capital of the company, I will leave. " Without specifying if he speaks of him or his firm ...

It belongs not only to the CEO but mosttly to the shareholders who distribute these "plots" if the form of bonus shares or options. But Bernard Charles rightly points " the extremely high French taxes on capital, stock options and free shares ." For a free share of the capital remitted to en employee, inn addditionto the purchase cost or the dilution, " the company and the employee will have to pay in taxes and taxes up to 80 % of its value , it is not bearable ."

Not only our socialists Ministers have done this, the Sarkozy era contributed as well. " Cease fire ! " already cried Jean-Claude Sobel in an excellent in Les Echos of November 2012 .

For the remittance of such share related advantages the employer's contribution tripled in two years to 30% against 10% and the employee contribution was quadrupled from 2.5% to 10 % ( a "social" contribution without any social compensation for the contributors ) .

At the end of 2014 , the collection of the State's =taxation on share related plans has become such that these could be considered by Proxinvest as abnormal management act .

Bernard Charles is possibly overpaid with his € 15 million package, but he is clearly right to emphasize the danger to overtax the French digital secgment. Our entire economy is in danger when government and officials ignore the risk attached to any equity investment, the engagement of its shareholders and wehn they sabotage the fair involvement of employees in the companies capital.


5 November 2013

Proxinvest last report on french CEO compensations

Shareholders of the largest French listed companies will now vote in 2014 on executive compensation following the amendment to the AFEP-MEDEF corporate governance code. Proxinvest the French proxy advisor just published itse fifteenth consecutive report on executive compensation.

The analysis of the remunerations granted for the fiscal 2012 year indicates that the average total compensation of executive chairmen of the 120 top listed French companies rose by 2.4 % in 2012 and reached € 2,839,000. Adjusted for special items such as severance pay they rose by 6.3 %.

Among them, the CAC 40 CEOs, however, exercised due restraint in the context of the presidential election adding tax or regulatory pressure. Their average compensation passed under the € four million line to € 3,968,000 (-6.3%). The top executives of the 80 following companies (SBF 120 companies not included in the CAC 40 index) have however received very significant pay raises (+9.3 %).

Thirteen CEOs in 2012 and 2011 exceeded the remuneration ceiling of 240 official French minimum wage, currently € 4.7 million, retained by Proxinvest as socially acceptable maximum.

Bernard Charlès, the CEO of Dassault Systèmes, is this year's top earner with a total € 14.9 million (+36%) remuneration. Carlos Ghosn, the CEO of Renault-Nissan, is second to € 13.4 million. The CEO and owner of Christian Dior group, LVMH, Bernard Arnault, is at the third place with € 9.5 million at LVMH only.

Beyond these quantums also appears the question of the relationship with the performance. Proxinvest observes that the relationship between performance in the medium to long term business and compensation provided to executives is clearly insufficient. Only 9% of the total compensation of executive chairmen of the SBF 120 is based on performance conditions measured over a minimum of three full years (12% in 2011). This lack of link between pay and long-term performance is a concern for investors who seem to suggest to the directors and compensation committees to reduce the fixed annual compensation and bonuses paid in cash in favor of a truly long-term performance lined compensation using economic, financial and ESG criteria.

On fixed remuneration too many Boards of directors fail to explain to shareholders the reasons for increases in fixed remuneration while the average fixed remuneration of the SBF 120 CEOs has increased significantly faster than inflation since 2006.

In a favorable stock market environment (CAC 40:+15 % in 2012) but disappointing results showing cumulative net income down by 27 % (as computed by Investir), the annual variable compensation does not drop in the CAC 40 index and even increases by 5 % for the SBF 80 companies.

These annual bonuses remain at a high level (120% fixed in the CAC 40) and appear hardly justified as the rate of achievement for the criteria underlying these variable remunerations are only in rare exemplary cases fully disclosed (e.g. Essilor International, Teleperformance).

Finally, the share related remuneration (options, shares or instruments indexed to shares) increased by 7% in the SBF 120. This form of compensation based on value creation over the long term is the best alternative to disputed short-term compensations. Proxinvest’s and ECGS voting policies continues to require an exemplary level of transparency and the use of demanding verifiable performance criteria measured on a minimum of three years.

Proxinvest observed the development of multiple new innovative compensation forms (deferred bonus, deferred bonus shares, synthetic multi variables remuneration ) for which full transparency is needed, as it is for the disputed indirect remuneration practices using special holding companies or related party transactions.

The report also examines compensation for chairmen and non-executive directors. In some cases the Chairman or Vice-Chairman is given additional responsibilities specific to their normal duties. These payments therefore clearly deserve to be approved by the general meeting, according to Articles L225- 38 and L225 -46 of the Commercial Code.

The top French Chairmen are paid the equivalent of 8.6 times the pay of their fellow directors. These will have received a token increase of 4% for a total of € 65 million for the year


16 October 2013

Christian Dior: a reference in French code compliance!

Christian Dior, the luxury company which gathers each fall as shareholders at the prestigious Carousel of le Louvre, tends to take it easy with its compliance to the French reference code.

Proxinvest considers the eleven members of its Board as not free of potential conflicts of interest, while the company considers six of these as independent.

This is for instance the case of Ségolène Gallienne, the daughter of Albert Frère, called independent director "despite having served on the Board of Directors of Château Cheval Blanc, part of the LVMH group ", while she is also a Communication Director for Dior Fine Jewelry, and the Annual Report of the company does not specify any existing ownership links between Groupe Arnault and the Frère family Belholding Belgium a holding of the Albert Frère family, reported to hold 18.08 % in the Groupe Arnault. In addition, Delphine Arnault, the daugther of Bernard, sits on the Board of M6 chaired by Albert Frère...

We smiled reading that " Mr. Eric Guerlain should be considered, taking into account personal circumstances, as an independent member notwithstanding his membership on the Board of Directors of the Company for more than twelve years and his tenure on the Board of Guerlain, a unit of LVMH ..."

Besides Christian Dior still does not give any details on the consulting contract of € 505,716 signed between the group and its former CF0, Denis Dalibot, representative of Arnault SAS for Belgium and director of a dozen of the Arnault Group subsidiaries.

In recent years this related party agreement for consulting services was not even mentioned in the special report of related party transactions signed by reputable firms Ernst & Young and Mazars, a clear breach with the article L 225-38 of the French Code of Commerce...

We therefore can congratulate here Eric Guerlain Chairman of the Nomination and Remuneration and Audit Committee for his excellent compliance job! Also in accordance with the AFEP / MEDEF code which the company explicitly refers to, the compensations due and allocated for the year ended April 30, 2013 to the Chairman and to the CEO is proposed for a non-binding vote.

To make its recommendation, Proxinvest reviewed 52 control items in four areas: Transparency, Quantum & Structure, Alignment with Performance and Dynamics.

This first experience of "Say on Pay" should have prompted the company to a better disclosure about the remunerations paid to holding companies of the Bernard Arnault Group... The main factor for a “NO” vote is that the total amount received by Bernard Arnault taking into account its € 8 million compensation through holding companies reached a remuneration of € 11,414,039 ... far beyond the socially acceptable maximum defined by Proxinvest 240 SMIC, while the amount of the commitment made by LVMH for his complementary pension on April 30, 2013 was of € 15.7 million!

The young CEO Sydney Toledano € 1.8 million total annual compensation is much lower, but the quantitative criteria of the bonuses are not verifiable and account for only one third while another third is based on the achievement of untraceable qualitative objectives. Finally, Sidney Toledano has a non-compete clause of 24 months of gross salary in case of termination and, in the case of grants of shares, his final allocation is based on a positive trend to be observed at only one of the four criteria of your choice (current operating income, net cash from operating activities and operating investments, current operating margin Group)...

An fine luxury life…


12 October 2013

New release of the Proxinvest Governance Metrics CAC 40 rating

Based on forty-two risk factors organized into three categories (Shareholder Democracy, Board Composition , Executive Pay ) and developed from the Proxinvest principles of governance, the new Proxinvest Governance Metrics© rating published by Proxinvest provides a fresh rating of the governance in the CAC 40 index.

This rating is based on Proxinvest Corporate Governance guidelines and enables homogeneity, transparency and integrity and allows putting forward the best companies in terms of governance, in order to help responsible investors in their stock selection and the definition of their investment universe when it has been now unanimously recognized that risks associated to a poor governance can affect the companies’ financial performance.

The Proxinvest Governance Metrics ©’s methodology provides investors with a tool facilitating the integration of the risks associated to a poor governance. This tool, complementary with proxy reports and voting recommendations already delivered by Proxinvest and ECGS, can also facilitate the engagement process of investors towards investees companies identifying burning issues to be further discussed. During the conference where investors, issuers and journalists were gathered, Proxinvest disclosed a brief summary of its 2013 rating report with the best in class reaching an average Total Shareholder Return (TSR) of 3.23 % over the period 2008-2012 while the companies marked with a grade lower than the average show an average TSR of -1.03 % over the same period.

On top of this ranking, Unibail-Rodamco (Real Estate) occupies the first place with a grade of A+ (256/300), rewarding its important efforts to implement and maintain good corporate governance standards for many years now.

According to Proxinvest, seven companies show a favorable coupling of positive returns over the 2008-2012 period and good governance (Air Liquide, Essilor International, Gemalto, Kering, Legrand, Technip and Unibail- Rodamco ) while twelve companies combine poor governance and negative 2008-2012 total returns for shareholder (Accor, AXA, Bouygues , Carrefour, Credit Agricole, Danone, EDF, Lafarge, Renault,STMicroelectronics and Total).(see erratum on Schneider Electric)

This Proxinvest Governance Metrics© methodology reward companies providing a healthy shareholder democracy, respecting the " one share, one vote" principle, with an open capital stock, encouraging employee share ownership independent of management, promoting the separation of powers and independent oversight within the corporate bodies, ensuring transparency, moderation and the long-term performance alignment of the remuneration policy.

Proxinvest Governance Metrics ©’s finds its originality in its approach exclusively focused on investors’ side as unfortunately, the existing codes of governance and especially the French AFEP-MEDEF code mostly set up by the companies’ managements do not address certain issues and investors’ expectations in terms of corporate governance and/or shareholder rights can sensibly differ from those of management.

For instance, Proxinvest reported three major concerns:

• First, 32.5% of the CAC 40 components opted for a dissociation of the roles of chairman and CEO.

• Second, 32.5% only of those companies have a Board made of a majority of independent members.

• Third, the managements of 5 companies out of the 40 constituting the Index are protected by anti-takeover devices (“Bons Breton”, Dutch Stichting, special French legal status of “Société en Commandite par Actions” corresponding to a partnership limited by shares), raising in the meantime the issue of registered headquarters in the Netherlands or Luxembourg as anti-takeover devices where lower shareholder rights are then observed.


16.September 2013

Lessons from formally fair governance : will Bolloré, the 5% shareholder, now rule the Board ?

The Vivendi crisis launched py the public dissent of a 5% shareholder Vincent Bolloré, confims the limits of conglomerates and emphasizes the great interest of demergers. It also emphasizes that the split of functions between chaiman an CEO ought also to be real and not only cosmetic...as it finally weakens the Board at Vivendi.

The challenge from the start resulted from the 2000 "logical" proposal by Jean-Marie Messier to associate in one group the two businesses of communication channels or containers on the one hand (networks with SFR and Canal + , and films or CDs of Universal Mussic ... ) and content on the other(television production , film and music) ... Everyone agreed that a strong understanding of both the container and contents was essential for the proper management of each other. But should these be merged ?

Passed the JMM cash shortage of 2001-2002, the history of Vivendi has shown that the professional excellence of CEO Jean- Bernard Levy did not ensured a successful unique lead to this group, each division was left to leading experts ultimately constrained by a central managementy himself under the demanding supervision of Jean -René Fourtou the former CEO of Aventis... Two floors of supervision were not helpful to unite the energies.

Jean-François Dubos, former Secretary, assured therefore acting for over a year ... at the request of Jean -René Fourtou after Levy's departure, while Vivendi share is now is at its lowest for 13 years. And while pieces were officially for sale, possibly for saving considerations or because of the opposition of Bolloré the dissociation of the companies were apparently not seriously considered...

Vincent Bolloré, who had appropriately merged its thematic channels in exchange for a position of 5% shareholder, publicly and succesfully opposed the appointment of a new German CEO leader approached by Fourtou , Thomas Rabe, the former Bertelsmann's CEO. According to the press Bolloré wants to replace as soon Jean-René Fourtou in his boots of Almighty monitoring Chairman ...and succesfully obtained teh vice-chairmanship.

For Proxinvest there where three lessons :

First, the separation of functions at the top must be real and not apparent, the strategy should be proposed by the Board and not by the Board or its Chairman.

Second, the differing business models should not be unnecessarily merged and the spin-off of assets, as the recent Accor-Edenred and Carrefour-Dia demonstrated is inexpensive and efficient for shareholders, when the split of business is real.

Third Bolloré takes today credit for a demerger he still opposed on Monday this week. he is clearly attempting to fully control Vivendi and abuse the company as it abuses Havas with uncontrolled remated party transcations. Shareholdesr of Vivendi should beware

Renault : tycoon Carlos Ghosn fires for the second time its COO

The departure of Carlos Tavares, who was deputy CEO at Renault under Chairman & CEO Carlos Ghosn, the Tsar of Renault, confirms our numerous previous warnings to shareholders of Renault against the disturbing trend to over-concentration of powers at Renault since now five years.

As highlighted by the French press there is a clear inability of this Chairman & CEO to share decisions and at least to appoint a number two able to replace him in case of failure.

"The problem of governance at Renault is getting worse. Carlos Ghosn is already CEO of Nissan, AvtoVAZ, the JV purchase RNPO, he did not have time to cumulate these tasks. Renault here must have a real pilot who better defend its interests in the Alliance with Nissan. This new reorganization clearly is not the way, " says Jean-François Nanda, Deputy Steward central CFDT Renault quioted by daily Les Echos.

This is, for Proxinvest a lasting significant risk to the market value of Renault as for the future and integrity of the international industrial group

LVMH will not appeal against its conviction by the AMF : a good point for the French regulator.

LVMH renouncing to appeal against the very complex and courageous decision of the Disciplinary Commission of the AMF is a very positive news: it consolidates the case law on compliance with shareholding disclosure thresholds and information on significant economic positions held on listed companies.

This is excellent for Proxinvest who from the 2010 announcement of its hidden 14% stake in 2010 had suggested that remedy against the methods of this rider and secret shareholder of Hermès International .

According to Le Monde, LVMH Bernard Arnault group finally decided to abandon his appeal against conviction to a fine of € 8 million in its dispute with Hermes International of which it now holds 23.1 % .

Recall that the AMF decision blamed LVMH, on the one hand , for "having issued to the public a false, inaccurate or insincere information on Hermes shares it already held , and on the other hand, not having informed the market preparation of the financial transaction to acquire a stake of more than 10% of the voting rights and 15% of the capital of Hermès. "

The AMF has established that thanks to the use of subsidiaries Hannibal (Luxembourg), Altair Holding located (Delaware), Harmony (Hong-Kong) subsidiaries , LVMH had been secretly accumulating a significant capital stake in Hermès International " Bypassing all rules to ensure the necessary transparency to the functioning of the market ".

All this , with the active complicity of three French banking groups banks : Nexgen Capital Limited ( Natixis ") , Société Générale and Crédit Agricole CA-CIB (formerly Calyon ), the latter having, however, shown to LVMH in 2010 his opposition for lack of transparencyto the final unwinding in equity.


01 July 2013

Less accountability : French CEOs go for a not binding Say on Pay vote, while French bank censor indepenent analysts

The new 2013 version of the AFEP-MEDEF Code recommends as of this week companies to table an annual advisory vote on the individual remuneration paid to individual corporate officers. This is probably enough, but it is progress. If, on the question of the independence of directors, the Code does not progress, it retains a limit of two terms for the leaders of a large group, which is another improvement. And this code requires more rigor in explaining differences outside its recommendations ...

So we will slowly, too slowly in the right direction. But as time lost, as procrastination, to limit the liability of directors and officers facing their shareholders to waive any exemplary on wages, while it is precisely the exemplary multiple leaders and entrepreneurs such as Louis Gallois, EADS, which explains the success exemplary that allows them to survive in Europe despite the social and administrative costs exorbitant.

Meanwhile, six years after the start of the crisis, more than € 1 trillion of questionable or illiquid assets are stored in 'bad banks', we say Les Echos June 18 will require 63 years to liquidate the 266 billion euros of distressed assets grouped in Dexia, which has already cost ten billion to our tax also encumbered five billion Natixis early 2009.

It is understandable that the installed bankers do not intend to question the model that protect the taxpayers' expense. Too human.

But the shareholders of BNP Paribas and Credit Agricole be warned: these two listed companies today censor financial analysts who criticize the model and exclude their analyst conferences.

The irresponsibility of employers on their remuneration is reflected in the irresponsibility of the banks on their own accounts face to analysts and shareholders.

Unappealing well for the future of our economy and our markets.


23 June 2013

MEDICA when small companies and medium audit firm imitate poor practices

Proxinvest often blames major firm for not facing their esponsibilities, alas their example is often followed by small business. It is sadly the same for auditors: we will see here that the Big Four are not the only ones not to respect the law.

Medica, the SBF 120 company specializing in comprehensive care for dependent persons, refers to the MiddleNext less demanding governance code, but it also maintains illegally in our eyes, a severance and a non-competition indemnification for its CEO J. Bailet, in direct breach of Article L225-42 of the French Commercial Code.

Proxinvest has therefore recommended voting against the special RPT report but also against the renewal of the firm's auditor Constantin Associés signing jointly with Mazars, an incomplete special report on these commitments.

J. Bailet, CEO, benefits following the suspension of his employment contract of a severance payment of 18 months of full salary of reference for the 24 months prior to any termination of employment), i.e. € 495,000. But, contrary to the provisions of Article L.225-42-1, this compensation is not linked to performance conditions.

In addition a non-competition provision offers him plus 30% of the last monthly fixed salary for the 12 months from the effective date of termination of the contract is € 66,000 based on final salary, so in total € 561 000, or 20 months of his final salary.

Proxinvest, which for its part considers that severance pay shall not exceed an amount equivalent to one year's full salary compensation, draws attention to the following three breaches of legal provisions mentioned below:

  • These benefits are not included in the special report.
  • the severance pay is not subject to a performance condition ulike required by the Commercial Code (Article L.225-42-1).
  • these benefits have not been not subject to a vote of shareholders.

The two audit firms Constantin Associés and Mazars have however certified the accuracy of information on the remuneration as some Big Four representative would have done it: these totally neglect their duties vis-à-vis shareholders

BNP Paribas : the failure of a modest change in the articles tells us about the lack of commitment of the bank's Directors

The May 15 AGM of BNP Paribas rejected the resolution to amend the articles 13 of the by-laws, yet presented as a "simplification" of the company articles.

Proxinvest, after conducting a comparative analysis of the of the bylaws versions w , recommended to oppose. The resolution covered no significant changes except the removal of the minimum number of shares to be held by each member of the Board.

While a significant increase of the minimum investment of Directors in BNP Paribas shares to address the problem of insufficient comitment of the Directors, the Board proposed to remove this requirement. For Proxinvest it is important to require Directors to invest in shares to develop and demonstrate to all shareholders their loyal commitment, their "affectio societatis". Contrary to what the company stated the removal of such rule was in no way an "ajustment to new regulation," such change was only an option refused by shareholders.

In rejecting the resolution the shareholders of BNP Paribas remind all Directors to keep representing shareholders interests despite the natural old boy netwok game and and the so human complacency.

According to the les Echos article on the AGM, Baudouin Prot, the Chairman of BNP Paribas, reportedly told the shareholders' meeting that "all directors must hold the equivalent of one year of attendance fee in share of the company ", which corresponds the historical recommendation of Proxinvest. The company even gave this argument to professional asset management to support the resolution.

But no less than six Directors of BNP Paribas do not even hold that a year's worth of fees in shares: two directors representing the Belgian State (Emil van Broekhoven and Michel Tilmant), two employee directors (Nicole and Thierry Misson Informer ) Fields Wiecker-Miurin and ... Laurence Parisot, a so revealing ommisison by the MEDEF president.

It would be therefore appropriate for the Board to ensure enforcement of its ownn rules the rules and proposes to the General Meeting to introduce this full year requirement in the article next year

Essilor AGM : ECGS and Proxinvest call for a rotation of the audit firms

Most of the investors do not really look carefully at proposals requiring to renew auditors : during the 2012 proxy season in France, this type of proposal was approved by 98.8% of the voting rights.

However some responsible investors starts to do their best efforts to address the problem of auditors' independence and a coalition of investors led by USS was launched with the support of ECGS and Proxinvest.

In line with the recommendations of this coalition and with the ECGS voting policy, Proxinvest recommends Essilor shareholders oppose PricewaterhouseCoopers which has certified the accounts of the company for 30 years.

Proxinvest, the French partner of ECGS, also recommends opposition to the re-election of the audit firm Mazars since the non-audit fees paid to Mazars amounted to 53.7% of the audit fees on a three-year basis

In addition, the auditors failed to mention the supplementary pension granted to Hubert Sagnières in their special report on regulated related-party agreements.


10 May 2013

Sanofi : Union Activism against generous dividends but not against the generous CEO pay

The CFDT union at Sanofi has launched a creative campaign to oppose the 4.5% increasing dividend per share (third resolution) proposed by the company "while net profit was down 7% and that thousands jobs are destroyed."

According to their recent press release :"The short-term gain for shareholders at the expense of employment, investment, and research." Asset managers, for the French additional Superannuation Public service pension fund (ERAFP) and the http://www.ci-es.org/Inter-Union Committee of employee savings (CIES) also asked to vote against this resolution. It is true, however, that Sanofi, which has already cut 4,000 jobs between 2009 and 2011 continued to cut jobss in France and Europe in 2012. Similar actions, even dividend cut proposals, are witnessed at EDF, GDF Suez or France Telecom.

Proxinvest as proxy advisor did not find recognized a major concern with this generous increase, the company being extremely profitable should return any excess cash available to its shareholders without restricting future development.

These unions have not been troubled by the generous remuneration of the CEO Christoph Viehbacher whose "fixed" pay has been increased to 2012 to 127% of the median of the CAC 40 companies, and whose total compensation, up 4.8% at € 7.5 million corresponds to 380 times the minimum wage, which exceeds by far the Proxinvest ceiling of socially acceptable CEO pay (240 times the minimum wage).

Unions that do not scream when it is the wages are increased, wages can not be reduced them, they are well advised to oppose here the interests of employment in the interests of shareholders?

Shareholders are always paid the last "if else left ", and some of them say that Sanofi treated too well for a long time its management and even its employees and this is also why the group must now cut jobs in Europe.

Europe needs shareholders to create new jobs, to finance start-up companies and global corporations can help nd later even purchase these to give them the needed scope of a global development. To buy companies one must havea strong stock sustained bay the dividend expectation of world shareholders.

The social awareness and activisme of the players mentioned above deserves to be respected: they are right to question the generosity of the Board of Sanofi, and they would do even better to consider, as do many large and small investors, all the rent situations at our largest multinational groups.

Paris, 1 May 2013


17 March 2013

EADS : special capital reduction for Lagardère and  share acquisition limit

EADS has been long governed by usual Dutch company statutes and a shareholders Participation Agreement freezing 50.5% of the capital and 50.7% of the voting rights between Sogeade (Lagardère SCA and the French State), Daimler, the German and Spanish States using a common holding company EADS Participations BV exercising jointly the voting rights of the State shareholders.

This Participation Agreement amended in October 2007 provided that the Board would includes 11 members, including a chairman and an executive president, respectively of French or German nationality and jointly appointed Directors with two directors designated by Daimler, two by Sogeade, one by SEPI and four independents.

Following the drop of the participation of the controlling shareholders to 45% of the capital by the cession end of December 2012 by Daimler Benz , 15 bundled resolutions of this extraordinary general meeting provide a clause limiting the acquisition of 15% of the capital or voting rights ("Mandatory Threshold Disposal"), a repurchase of shares for cancellation up to 15% of the capital and the bundled individual election of 12 directors,

It is indeed expected that EADS buys this occasion the greater part of Lagardère shares.

Following discussions with the company, Proxinvest , the French ECGS proxy analyst, decided to recommend to oppose to these bundled resolutions for the following strategic, financial an governance grounds.

Strategic considerations:

It should be recalled here that the French private member of the Participation Agreement Lagardère demanded in the last few years to sell its shares, and that no such special conditions has been granted to his German counterpart Daimler when it sold 5% of the shares last December.

No reason, other than some window dressing of the Lagardère special redemption arrangement seems to justify to proceed in two almost equal redemption tranches which will be arbitrarily engaged or not by the Board. In other words, the ECGS Board keeps the initiative of inequitable treatment of shareholders, while nothing prevents the State shareholders to buy directly ther Lagardère shares and to resell them later.

The understandable willingness of both States to keep a direct control on the EADS management is no longer of prime strategic interest to the group engaged in a fierce international competition as both French and German States have, regardless of their position in the capital, already a significant leverage over the EADS strategy and management. They control substantial key defense orders as well as the related State supported research programs while they benefit from the national regulations concerning the vital sectors of the States and they from the projected ring-fencing of the EADS defense activities in two subsidiaries with a special governance : these facts sufficiently meets this legitimate requirement for national controls.

The introduction of the nationality clauses in the statutes on this point seemed acceptable, with regard to national interests deemed vital, even a common golden share or even two golden shares for each State the type of the GDG Suez in France. The refusal to align voting rights and control over the financial shareholders commitment appears however as a strategic weakness and a threat to other sizeable shareholders.

The reduction of capital of EADS seems indeed justified by the need for a strong capital base, as tends to demonstrate the historical moderate distribution of dividend sometimes criticized by Proxinvest with average distribution of 30% a normal situation for a growing technology company.

Financial conditions:

It should be reminded that the projected buyback should be made at market price, the acquisition of 15% of the shares at the highest historical market price creates a considerable unneeded risk. In with the previous resolution, the Board seeks shareholder authorization to reduce the company’s capital by cancellation of the purchased share up to 15% of the capital. At the current stock price of €39.90 the flat equity fund impact from cancellation of the share amounts to €27.30. the expected income per share from a repurchase of € 2.72 does not cover the yearly total funding cost of the transaction € 2.43 based of an industry P/E of 16 and of a borrowing rate of 6% , plus the equity replacement cost estimated at € 1,00 (spread over three years).

Governance conditions:

The presented legal solution of the introduction of a clause limiting acquisition of 15% not applying to the current controlling shareholders on a grandfathering ground is plainly unacceptable in the name of equality of shareholders.

The interests of European defense could make such limitation acceptable to all shareholders but the shareholder equity principle but does not, in our opinion, justify such “grandfathering”.

Electing all the directors almost all not independent in our judgment , and only one woman in bundled decisions was not necessary : it appears as an additional disgrace to the shareholders freedom.

We recall here the constant disregard shown by the chairman Arnaud Lagardère, and the six directors who did not attend the last shareholders meeting of the company. We finally recall the insider trading at EADS case finally classified by the French courts, for which case the company has supported various officers and directors who had exercises their options and tendered their shares in the context of negative warnings.

Putting the company at risk in order to please a somewhat noncontributory shareholder cannot be supported. The presentation by EADS of a not so fair deemed strategic transaction in fifteen bundled resolutions including an uneven acquisition limitation clause accompanied by the bundled election of twelve directors including only on non-independent woman is a misunderstanding of the shareholders expectations and a serious setback for the company potential.


3 March 2013

ESMA Final Report on The Proxy Advisor Industry

Expert Corporate Governance Service Ltd. (ECGS), a joint-venture of European proxy advisors, welcomes the ESMA Final Report on The Proxy Advisor Industry published on February 19th. The report confirmed there is no “market failure” related to proxy advisors’ interaction with investors and issuers in the European Union (EU) that would require regulatory intervention.

ECGS takes note that ESMA recommends that the proxy advising industry should develop an EU Code of Conduct (Code) that focuses on “identifying, disclosing and managing conflicts of interest,” and “fostering transparency to ensure the accuracy and reliability of the advice”.

ECGS as a global service is comprised of several local partners acting as experts in their local countries. ECGS welcomes the ESMA principles highlighting the importance of engagement with issuers and the consideration of local market practices.

ECGS considers that all services related to governance or voting recommendations (proxy analysis reports, proxy alerts, customized vote, responsible ownership service for institutional investors or asset managers who exercise voting rights and engagement actions), including proxy solicitation services, should be subject to similar rules of conduct.

The recommended Code should apply to all professional providers whatever their main business or capital structure (private firms, professional bodies or associations, asset managers, funds...).

Considering that all these services are targeted to end-investors, ECGS believes such a Code should make a clear distinction between the Buy Side service providers (paid by investors), and Sell Side providers (paid by issuers).

Such a Code should prevent this basic conflict of interest and prohibit any mix of income sources. The ECGS partnership has adopted this rule because ECGS believes that disclosure of conflicts of interests and conflict management are not sufficient to manage potential conflicts of interest.

Relying on proxy advisors selling governance advisory data or services to corporate clients could be damaging to Investors.

Finally, a major issue, not yet considered by ESMA, is the lack of efficiency and traceability of the voting process due to the long intermediary chain, particularly in the case of cross border voting.

ECGS will be represented in the working group and is glad to further contribute while adopting the highest standards.


3 Feburary 2013

Here's to you Guillaume Poitrinal !

Proxinvest is extremely proud to have interacted several years on governance issues with the remarquable young CEO of Europe's leading commercial real estate Unibail Rodamco, Guillaume Poitrinal, who will leave the group of he has runs for ten years quadrupling turnover, staff and the dividend.

This announcement comes on the day Unibail-Rodamco publishes a net profit of 1.45 billion euros in 2012, up 10% year on year, and net recurring profit per share up 6.7% to 9.60 euros, above expectations. Last year, while turnover increased only by 1.3%.

Poitrinal, who participated in the Strasbourg Proxinvest workshop last September, had recruited his successor Christophe Cuvillier two years ago, and he wishes to engage in a personal new business venture.

The move is exemplary, this is an entrepreneur !

Proxinvest pays also tribute without having personally known him the former CEO of the company Mr. Léon Bressler who has instilled this ethic of loyalty, exemplarity and performance for this beautiful listed group. He had likewise retired with elegance!

Congratulations, Gentlemen! We have some great CEOs in France, and those dont wait for some one else to hire them to launch their new projects !


1 February 2013

No reason to merge the chairman-CEO functions at Schneider Electric

Schneider Electric intends at the next extraordinary meeting of shareholders to merge for current CEO Pascal Tricoire the chief executive officer function with the Chairmanship of the Board currently performed by Henri Lachmann, who was obviously a defender so far of the separation of functions but sees the case as exceptional and still claims his preference for the separation of functions...

Pascal Tricoire, Chairman of the Management Board has certainly deserved, but shareholders have at least two good reasons to oppose to the confusion of functions:

  • The confusion of roles of executive management and of supervision is an unhealthy anomaly when any person truly responsible should accept to be controlled: only the weakness or complacent directors or dedicated servants can consent for bad reasons to this facility.
  • The representation of major international listed companies and their dialogue with shareholders involves a fair technical and geographical share between the two functions of supervision and direction: it belongs to the Chairman to represent, in a way as constitutional monarch, for the company investors and the general public, but it is the CEO who set the strategy for approved by the Board and conducts the needed decisions.

Now, Pascal Tricoire, possible future Chairman of Schneider Electric proposed, just exercises a part of his stock options and sold on 9 January 1st some € 22.6 million in shares of the company.

Not such a clever move when you know that the issue of personal investment commitment by CEOs is dear to investors.

The question of dissociation of powers comes at the time when Wansquare, little suspect of excessive criticism of top executives, questions about the CEO of Renault, " Can it Ghosn continue to run on gold? "

"While he mismanaged a fake espionage plot at the top in 2010, insisted to remain the specialist of the concealment of CEO pay information due to shareholders, Ghosn , with the costly outcome of the Renault electric car ventures, might have reached the limits of the excellent strategy of his predecessor.

Precisely the type of situation that, without any insult to Pascal Tricoire, we want to avoid in the future of Schneider Electric.

Jean-Yves Haberer, Jean-Marie Messier, Marcel Frydman Daniel Bouton as Arnaud Lagardère defended the confusion of functions: their shareholders have suffered the consequences.

Not for Schneider Electric, please!


30 December 2012

Proxinvest presents its annual CEO Pay survey , order now !

Proxinvest published on December 11 its annual CEO Pay survey. After a sharp 33% rise observed for 2010 the average total compensation of CEO of the French CAC 40 index presented another modest 4% increase at ¤ 4,246,000 for the fiscal 2011 year.

Excluding severance payments, the total average compensation of CAC 40 CEOs was down 3% for 2011 still better than the financial year marked by a country solvency crisis, a 17% decline of the CAC 40 Stock market index, and a decrease of 10% of net profits earned.

A European survey prepared by Proxinvest and its partners Expert Corporate Governance Service (ECGS) shows that the remuneration of the top executive director of 392 top listed European companies decreased slightly more (-5%) to stand at ¤ 3.7 million in 2011 ( based on a sample of 392 large European companies). The French CEOs rank in sixth place in the European comparison.

The ex-CEO of the following 80 other companies in the SBF 120 index who had seen their total compensation increased by 32% in 2010, received on average 2% less in 2011. On average a SBF 80 CEO is paid twice less than the CAC 40 CEO with 2.06 M ¤.

Fourteen CEOs exceeded the Proxinvest socially acceptable ceiling of 240 minimum wages, instead of eleven in 2010, currently ¤ 4.6 million :

Maurice Lévy of Publicis Group was exceptionally ahead with the advance payment of his Deferred Bonus resulting in ¤ 19.6 million the total compensation for 2011 after ¤ 6.2 million in 2010

He was followed by Carlos Ghosn of Renault, whose Nissan remuneration remains poorly disclosed, with ¤ 13.3 million after ¤ 9.7 million.

Then come Bernard Charles (Dassault Systèmes - with ¤ 10.9 million after ¤ 9.5 million, +15%), Bernard Arnault (LVMH ¤ -10.8 million after ¤ 9.7 million, +11%), followed by Jean -Paul Agon (L'Oréal) - ¤ 7.7 million after ¤ 10.7 million, -28%), Christopher Viehbacher (Sanofi-Aventis - ¤ 7.1 million after ¤ 6.1 million, +17%), Frank Riboud ( Danone - ¤ 6.1 million after ¤ 5.9 million, 3%), Daniel Julien (Teleperformance - ¤ 5.6 million after ¤ 3.2 million, +76%), Denis Kessler (SCOR ¤ 5.5 million after 4 , ¤ 2 million, +20%), Olivier Piou (Gemalto - ¤ 5.5 million, +103%) Gerard Mestrallet (GDF Suez ¤ 4.8 million, +44%), Tricoire (Schneider Electric- ¤ 4.7 million, +12%), Pilenko (Technip - ¤ 4.6 million, +7%), Henri de Castries (AXA - ¤ 4.6 million, -7%). The figures do not include Proxinvest not yet complement supplementary pension enjoyed by some leaders, for the most part without communicating the annual cost.

Proxinvest observes the continuing growth of fixed remuneration which having a multiplier effect on other long-term compensation items: CEOs of the CAC 40 index exceeded in 2011 the million euro averae fixed pay , and it confirms that their fixed average pay has been growing faster than inflation with + 9.4% in the CAC 40 since 2006, and + 18.6% for the average next 80 companies.

The annual average bonus for 2011 fell 8.6% in the CAC 40 and 10.2% in the SBF 80. . Since 2006 this average variable cash pay rose 7% for the CAC 40 and 23% for the 80 other companies of the SBF 120 index. Despite this recent decrease annual bonuses remained at a high level of 124% of the fixed pay, even exceeding the target bonus of an average 116% of the fixed pay as determined by the compensation committee at the beginning of the year. Some bonuses such as those paid by Carrefour, GDF Suez, SCOR, Peugeot, Dexia, although the latter two have finally not been accepted by their beneficiary, show that the variable is not always in line with the performance perceived by the shareholder.

Proxinvest observes a further extinction of the use of options or restricted shares dropped from 51.5% of total compensation in 2006 to 11.5% to ¤ 487,000 on average for the CAC 40 companies in 2011. Compensation in restricted shares in the CAC 40 rose from 3.7% of the total in 2006 to 15.9% at ¤ 873,000 in 2011. All these elements of share related compensation representing 55% of the average earnings in 2006 dropped significantly to a low point in 2009 and remains relatively low at 28% of the total.

Proxinvest observes a tendency for increased use of deferred cash payments paid partly in share indexed cash items, which are out of control of the general meeting of shareholders.

Proxinvest will consider as short-term item any pay element not requiring at least three years conditionality for remittance. Currently only 16% of the total remuneration of the CAC40 CEOs is based on long term performance conditions.

This lack of link between pay and long-term performance is a major concern for investors : there is an urgency for directors and compensation committees put an end to the uncontrolled rising of fixed pay or annual bonuses, and to favor of a true long-term compensation tied to performance.

As in previous years the remuneration of the mission of French non-executive chairmen is out of control of the shareholders, in defiance of the legal requirement submitting any fees and special remuneration for any director of the General Shareholders Meeting.

The authorized attendance fee in the CAC40 went from 71,000 to 70,000 ¤ while the final average amount paid was ¤ 53,844, while the average authorized amount at the 80 other companies was of ¤ 38,752 per director and the amount finally paid of ¤ 28,751.

Empower to revitalize :

Proxinvest notes that companies have much to gain from a remuneration policy better understood by their shareholders and by the general public, this is the merit of an annual AGM " Say on Pay" vote on the issue, as established now in all other European countries and the United States.

This will be the opportunity to :

• Restore the sovereignty of the shareholders meeting

• Insure a better accountability of Directors

• Tighten the investors voting policies

After consultation with its investor clients, its European partners ECGS and its Steering Committee, Proxinvest has decided for 2013 significant changes to its voting policy , in particular substantially narrowing its assessment of severance indemnification now capped at one year's compensation (instead of two years according to the AFEP-MEDEF) and limited to the only cases of a change of control of the company.

Proxinvest now requires disclosure of individual annual cost of the special pension plans. Out of respect for the CEOs of mid-cap companies, the maximum allowable rent is increased to 30% of final salary compensation instead of 20%, but the additional annual pension will now be capped for all beneficiaries at ¤ 300 000 (¤ 450 000 ¤ including maximum mandatory pension regimes).

Proxinvest will now request the application of performance criteria on share related remuneration for all members of the Executive Committee, which vesting conditions shall be measured on a minimum of three full years. Finally, to ensure a better balance in favor of long-term incentive plans (stock options, free shares), Proxinvest and its ECGS partners invite to cap these variable items at 300% of fixed remuneration :

A maximum of 150% bonus fixed for short-term;

A minimum of 150% of fixed for variable long-term.


3 November 2012

Golden parachutes are associated with under-performance

In an empirical study of golden parachutes by Lucian A. Bebchuk, Alma Cohen, and Charles Wang confirm that golden parachutes do indeed have a beneficial effect on acquisitions. They find that companies that offer such packages have a higher likelihood of both receiving an acquisition offer and being acquired, but are also associated with lower premiums in the event of an acquisition. *

GET RICH QUICK On average, they say, shareholders in companies with golden parachutes pocket larger benefits from acquisition premiums and companies that have adopted golden parachutes tend to see their valuations (relative to their industry peers) erode over time. Over 15 years these companies have lower valuation already before adopting a golden parachute, but their value declines further in the subsequent several years. "By ensuring executives of a cushy landing in the event of an acquisition, golden parachutes weaken the disciplinary force exerted by the market for corporate control."

Quite a useful case for thinking while French corporate governance practices are very tolerant for generous golden parachutes of two years of full pay, or € 4 million for each CAC 40 CEO, as defended originally by the AFEP-MEDEF Code.

The British practice is less generous, (one year of full fixed and premium pay) and the Dutch even less (one year of fixed pay only) or even recently the French public ERAFP (Etablissement de Retraite Additionnelle de la Fonction Publique) fund decided to oppose to any golden parachutes for any CEO with a full pay exceeding 100 times teh French minimum wage (€ 1 678 000€)...

See the article of Lucian A. Bebchuk or their full research paper.


8 October 2012

Xstrata-Glencore : beware of mega-mergers !

Our ECGS analysis of the two extraordinary meetings of shareholders convened successively by Xstrata expressed strong reservations about the proposed conditions of the merger with the non-least Anglo-Swiss trading house Glencore.

The important suggested synergies failed to hide that the bulk of the expected profitability was coming from Xstrata and that the exceptional financial conditions offered to the executives, including the CEO Mick Davis, betrayed some likely deception.

A first extraordinary meeting was adjourned in July to add more serious performance conditions on the pay package while reviewing the synergies announced. Facing a risk to miss the deal, Glencore, the giant commodities trading, postponed once again on September 7th. the merger approval meeting and raised its offer for Xstrata, which now reaches $ 37 billion (€ 29.15 billion). Glencore also finally increased the proposed exchange ratio to 3.05 shares. All in 10% more for the Xstrata shareholders.

This teaches us at least two things:

Against the forces of a transaction biased by financial markets with little concern for shareholders, employees or consumers interests. The voice of investors at general meeting with the help of independent analysts like those of ECGS can pay big dividends to these clients: we have seen in recent years in cases as diverse as Portugal Telecom or Capital Shopping Centers.

Moreover, the excessive executive compensation of mercenaries generally set in the name of the alignment of interests leads often to a betrayal of the interests of shareholders. The attitude of CEOs vis a vis their own remuneration is extremely revealing of the true motives of their actions. Cave Canem, wolverines rarely respect their shareholders.


24 July 2012


Proxinvest received a letter from the current Vivendi CEO about our recent comment on the departure’s conditions of Jean Bernard Lévy and which we publish as requested.

We had called as "coquette", or "cozy", in a news of July 5, 2012 the departure benefits offered to former CEO of Vivendi and of its subsidiary SFR, Jean Bernard Levy, 57, recently dismissed.

The new CEO, Jean-Francois Dubos, wrote courteously to Proxinvest July 13, supporting that our July 5 articlecontained "errors and inaccurate statements". We have wanted to review them very precisely hereunder.

Our calculation of the full "departing gifts" adding to a total amount of € 10 million for Jean Bernard Levy was not disputed:

• six months of base compensation plus one month per year of seniority in the Group beginning in 2002, i.e. 16 months of the last fixed and variable compensation or € 3,888,000.

• the benefit of all its stock options and performance shares, subject to the achievement of performance conditions relating to them. This benefit is estimated by Proxinvest to € 3.4 million.

• the maintenance of the additive pension scheme: the annuity to be paid by additive Vivendi in addition to other complementary systems was estimated by Proxinvest at € 218 232 a year. The cost of this item to Vivendi is estimated by Proxinvest by more than € 3.5 million.

Vivendi blames us for seeing some inconsistencies between these payments and the AFEP MEDEF code, as it is a "forced departure". In fact, the AFEP MEDEF Code , in Recommendation 20.2.4. "Severance payments", recalls that "it is unacceptable for Managing Directors whose businesses are in a situation of failure or who themselves are failing to leave with compensation. "

And this Code further states" These performance conditions set by the Board must be demanding and not permit the recovery of an officer in the event of a forced departure due to a change of control or strategy. "

We did, in Proxinvest, not see neither very demanding performance conditions nor very clear change of strategy, and above all, in clear disagreement with President Jean-Francois Dubos, reminding the that the 2011 recovery in earnings, we maintain the subjective opinion, that there was "state of failure" since Vivendi shareholders have lost 30% of value since early 2007.

On the maintained pension plan, however, we acknowledge to President Jean-Francois Dubos a minor inaccuracy of Proxinvest who wrote that Jean-Bernard Levy will also benefits "of a hat-retirement pension fully paid by Vivendi while it has not reached the retirement age, and with the number of stock options and restricted stock in violation of AFEP-MEDEF code" .

"Forgive us, dear Mr. President, JBL will certainly benefit "in all cases" of his additive pension plan if he is crazy enough to take an employee job until his employee date of formal retirement, instead of getting paid by advisory fees... Only in case of such new salaried job, Vivendi actually would save the cost of hat pension payment!

Did finally Vivendi as states President Dubos, "scrupulously respected" the Code which states clearly: "The payment supplementary pension benefits is subject to the condition that the beneficiary be a Director or employee of the company when he asserts his pension rights under the rules in force. "

So please tell us, dear Mr. President Dubos, where hide our other errors or inaccurate information?


10 June 2012

A mile stone: the French State limits CEO pay and vote against special parachute for the Air France-KLM CEO

Proxinvest had recommended to its investor to oppose the resolution 4 of the General Assembly of Air France-KLM May 31, 2012 and this AGM was a mile staone as the State at last acted in line with its public stances andn assumed its role on the sensitive issue of CEO compensation.

An anecdote in passing: as a registered shareholder Proxinvest, entering the meeting, was informed that it had given "blank power to the Chairman"! This being totally excluded by Proxinvest principels and policies, who was not the only one in that situation, led us to investigate. By dint of insistence and after verification, it was confirmed after 40min that Proxinvest had properly filled its ballot and had in no way gave a blank power to the Chairman. The registrar manager then explained that if the ballot was not perfectly black ticked or that the forma had any imperfection its votes were automatically remitted to the company Chairman ! Proxinvest will write to the AMF on this a worrysome methods of registrars (here Société Générale Global Services) to giving to the company Chairman the voting rights of any proxy qualified as illegible.

The AGM of Air France-KLM, held on Thursday, May 31, 2012 at the Carrousel du Louvre, has enjoyed strong media interest with over 800 attendees, but the main item was certainly that the State, the main shareholder with 16.1% voting rights, had indicated its opposition to the approval of the compensation remitted to thye dismissed CEO Pierre-Henri Gourgeon of around € 1,525,000.

Chairman Jean-Cyril Spinetta, facing 31 written questions, announced that the board had decided to halve the half of Directors fees and committed his personal not to exceed € 200 000 despite his new responsibilities and changes in its status as CEO of Air France-KLM. This attitude was warmly applauded by the public. But on the issue of the special non-competition of 400 000 € paid to Pierre-Henri Gourgeon, Jean-Cyril Spinetta defended that the council had acted fairly and reasonably, that it was common practice for managers at this level.

A shareholder opposed the example of Louis Gallois former CEO of EADS who just had forsaken any special pensionand non-competition indemnification.

This intervention was followed by that of a retired employee of group: "Why should we pay Mr. Gourgeon to act as an honest man to the group he has served for over three years and not as a thug? "

For Proxinvest, the amount of this clause had little justification as the payment of € 1,125,000 made by the Board under an "additional special remuneration given the unpredictability and the anticipated termination of Pierre-Henri Gourgeon. " This allowance did not meet the AFEP / MEDEF as was also observed by an employee of the company at the AGM. The response of Jean-Cyril Spinetta was that this amount was below the amount of two years of fixed salary and variable which "should have been paid for premature departure." This response was greeted by a noisy opposition of the public and the resolution was rejected by 78.8% of voters.

The Board renewal resolutions as a result came under criticism from shareholders. The reappointment of Jean-Francois Dehecq presenetd the worst score with only 74.1% of votes, closely followed by the appointment of teh new CEO, Alexandre De Juniac, with only 79.62% in favor. Proxinvest had advised his clients to oppose both resolutions under the absence of a majority of independent members at the Board, and even the renewal of Leo Van Wijk obtained only 80.57% of votes in favor.

1 June 2012


In addition to the compensation of non-competition € 400 000, the board of directors of Air France-KLM had granted an "additional remuneration" exceptional € 1,125,000 "given the unpredictability and anticipated the termination of Mr. Gourgeon "(source: reference Air France-KLM - page 26). The company said the agreement does not correspond to deferred compensation, it was not subject to approval by the general meeting of shareholders as provided by the TEPA Act ...

Neither the spirit of the TEPA Act nor the erecommendations of the AFEP-MEDEF code were respected and Proxinvest invited the French State to establish a clear legislative framework and specific guidance to requiring prior approval of the general meeting of shareholders on all elements of compensation offered to executives.

In the eyes of Proxinvest this compensation was not acceptable to shareholders, ruined by the division by 4 of the value of their investment in ten years, nor for employees sharehodlers forced to endure the efforts of the conservation plan required.

Proxinvest recommends that Boards of directors :

• include a non competition commitment from the start of any contract and for a moderate amount of compensation;

• Refuse any supplementary payment for MD taking its pension and receiving a supplementary pension plan (the case of Pierre-Henri Gourgeon);

• not to offer any double severance payments to MD's in case of dismissal without criminal cause: once based of the company normal contractual provisions and another one time as supplementary mechanism of severance.


26 May 2012

JP Morgan trading losses reminds the needed split of banking activities

All non-credit activities of universal banks( equity tradinga and investing, asset mgt, insurance real estate;..) should be split from regulated normal banking activities (deposit, credit and interest rate instruments of payment)!

JP Morgan quarterly loss of 2 billion dollars announced May 10 by Jamie Dimon, CEO of the most conservative and well-respected U.S. bank, following the annoucment of further expected losses at Dexia this year following the 11.5 billion shareholders blood bath for 2011, reopens the question of the urgent necessity to split banking.

Dexia announced on MAy 9th. a net loss of 431 million euros for the first three months of the year, shareholders hold now Dexia shares worth 0.18 euros which represents a market capitalization of 350 million euros, less a thousandth of its balance sheet, which is weighting currently around 400 billion euros. At Dexia, whose board of directors unanimously threw money away by paying Pierre Mariani, the friend of President Sarkozy and BNP Paribas, more than € 1.2 million euros for 2011, " function premium" included there no more than managing a bankruptcy. Bankers remain all fooolish about pay and the appointment of Karel De Boeck, former Belgian CEO of Fortis, as Dexia Director and perhaps CEO in place of Pierre Mariani is just miserable national politics on a well paid job.

The JP Morgan brokerage losses "could still cost one billion dollars or more" and "the risk will remain for several quarters." It is especially astounding that JP Morgan boss admitted that he discovered these risks following a Wall Street Journal in early April, from rumors at the London City on massive positions taken by a French trader of the bank, Bruno Michel Iksil, dubbed the "whale of London."

After the Crédit Lyonnais, Kerviel' Société Générale, Madoff' UBS, Natixis, bankrupcies in Germany and the UK waiting for further Spanish and othe bankruptcies to come, the inability of the best universal bank executives to see the whale that lurks in their own accounts should lead every honest man to end this dangerous model which we blame since fifteen years.


6 May 2012

Citicorp, UBS, Barclays, UniCredit... bank shareholders give stronger voice on pay!

It is hardly surprising that shareholders refuse to approve the egregious pay offered by complacent Boards to CEOs, be they recognized as excellent managers, such as here Denis Kessler of Scor, Franck Riboud of Danone and Jean-Pascal Tricoire of Schneider Electric or be they clearly questionable for their industrial and stock performance, such as here the CEOs of Renault, Vivendi, Carrefour or Dexia...

It is most revealing that CEO remuneration paid at universal banks be in the crosshairs, since, according to our analysis, it is the very model of universal banking that have generated not only the economic crisis but also these chronic abuses which provoke hatred of the general public.

Proxinvest and its ECGS partners have invited shareholders to vote against excessive executive compensation at Banco Santander, Unicredit, UBS, Barclays or Citigroup. In France the long awaited reform of the Chairman & CEO regime at Société Générale is actively proposed by Proxinvest engagement partner Phitrust with its famous open fund PROXY ACTIVE INVESTORS.

ECGS also advocates for a mobilisation in Italy against the Board of UNICREDIT to obtain a refund of some € 18 excess overpaid to former CEO Alessandro Profumo, an initiative launched by our partner Frontis Governance in Rome and registered on the UNPRI, the UN official responsible investment engagement site.

ECGS Swiss partner, Ethos, just launched a new offensive against the approval of the bonuses at UBS and the grant of a four million Swiss Francs bonus to the CEO .

In the UK the Barclays AGM was expected to be so tense that the Board added a new condition to the deferred part of the variable remuneration of its CEO Bob Diamond and CFO Chris Lucas. One half of the £ 2,7 million three years deferred bonus ans will only be paid if the ROE exceeds the cost of capital 11,5% threshold.

For the first time a compensation plan at a large bank has also just been rejected United States : The Citigroup Board had recommended approval of a fee of $ 15 million in total for Vikram Pandit this year, against $ 1 in 2010 and 128,751 dollar in 2009 while three other officers for 2011 were to receive between 11 and 13 million dollar each. But 55% of the shareholders of Citigroup voted on April 17 against the pay plan or abstained, possibly on recommendations of the voting advisory firms including the partner of ECGS in Montreal GIR (see hereunder the GRI voting recommendation on the item 4 of the Citigroup general meeting).

Executive compensation is clearly no longer a taboo for large institutional investors, as demonstrated this year the big pension fund officials ERAFP. This is a good news that we have expected for too long.


9 April 2012

Hot picks for the 2012 season?

The highlights of shareholders meetings this year in Europe?

It's a safe bet that the 2012 season, an election year if any, will provide opportunities for milestones at shareholders meetings, often simply the consequences of careless disregard of certain top management for the" nation of shareholders " as for the nations of employees and consumers.

Our major international groups seem to appreciate the quality of infrastructures, training and public aid,in short the art of living in Europe but as they dont feel yet the pressure to beg for their savings they still tend to neglect of shareholders. Some of them therefore reminded SWORD, searching tax exile in Luxembourg, that keeping with this lifestyle requires the respect of all shareholders, French or foreign, individual or institutional.

The insufficient dividend coexists often with inadequate communicationc, as in the case of Altamir Amboise listed equity fund, where another management company, Moneta, claimed with the ADAM sharehodlers association for more dividend : the stock of Altamir Amboise remains disappointingly low in half of the net asset value and shareholders have a legitimate right for a reasonnable dividend: Moneta unsuccesfully requested a dividend of € 1 , that is 30% of EPS instead of the 6% dividend proposed by Altamir Amboise.

Shareholders initiatives at Total and at Société Generale are expected to suggest to theirs Chairmen & CEO long needed governance improvements...$*

The Inter-Union Committee of Employee Savings CIES advanced two areas of focus for 2012 in his letter: "First the oil sector (Total, Shell, BP, Eon ...) for its weal environmental practices and governance ..." and the banking sector, for its uncertainties, its governance, tax havens and the social consequences of the crisis ...

The strategic waeknesses of some groups is worrying, thinks CIES: "Carrefour, whose spin-off strategy appears confused while social policy deteriorates, Unilever (governance, tax havens, Lipton Tea ...), or Deutsche Telekom (weak social practices at foreign subsidiaries notably in the United States). "

As supported by the CIES diversity is welcome at the Boards, but not at the cost of a weaker independence or governance, such as cross-directorship: it will be the problem of the proposed to cross- directorship proposed by Danone Chairman and CEO, Franck Riboud, director of Renault for Mrs. Mouna Sepehri, a member of the Executive Committee and Director of Renault Delegate at the Presidency of Renault SAS (sic). The renewals Anne Lauvergeon at Total and of MM. Patrick Artus Bertrand Collomb, and Pébereau will also be problematic.

Publicis must have made Sarkozy mad for the issue of excessive CEO came loudly in the press when the differed bonus of 16 M€ for the CEO of Publicis was made public.

This differed bonus was hidden from 2003 until 2008, and its amounts shocks. The same issue of CEO pay will hit at Sanofi, Renault, Carrefour and Havas. The chairman and CEO of L'Oreal, who relinquished half of his stock options grant for 2010 with intrinsic value was already of one million euros and much higher time value, should have won a deserved peace, unless his new restricted shares grants create a shock.

It remains that the Europeans shareholders are demanding a real long term duration of the performance conditions applicable to the now very fashionable bonus shares and a better disclosure of complimentary pensions.


4 January 2012

Proxinvest report on French 2011 general meetings

Proxinvest is publishing its 15th survey on French 2011 AGMs « Les Assemblées Générales des Sociétés Cotées Françaises – saison 2011 » and Presenting the 2012 voting policy

Proxinvest’s annual study on general meetings finds a decrease of the number of shareholders participating with a lower average protest on resolutions. Nevertheless, French shareholders are still some of the most critical compared with their European counterparts with a level of opposition averaging 5.9% at companies within the main index, CAC 40 (6.3% in 2010). The level of opposition is of 4.79% at companies of the SBF 250, the index for smaller capitalisations, compared with 5% in 2010, 4.6% in 2009 and 4.1% in 2008. The number of resolutions rejected despite the support of the Board which had reached a record of 64 in 2010, falls to 44 rejected proposals in 2011, less than in 2007. Shareholders primarily criticised anti-takeover measures with a level of opposition on average reaching 35.3%. During the year, there were 2 notable rejections at Essilor International and Publicis Groupe. Shareholders also managed to reject resolution where they are deprived from pre-emptive rights at 21 companies including Air France-KLM, GFI Informatique, Publicis Groupe, Rubis, Saft Groupe, and SOI TEC. Shareholders now hesitate less for voting against Directors which resulted in 7 rejected elections in 2011, notably at Altran Technologies or Gascogne. We also noted a more serious control over incentive schemes including share or option plans with 7 rejected resolutions including Saft Groupe, Seb, Rubis and Ubisoft Entertainment. Shareholders have also reflected their concerns within regulated related-party agreements reported in the special auditors report especially when they comprised a differed element of remuneration for Executives (Alten, César, Delachaux, Groupe Gorgé, Risc Group, Theolia).

The number of shareholders proposals such as the external resolutions proposed at GDF Suez, Safran or Total, which already fell from 62 to 24 in 2010, decreases further in 2011 to 12 initiatives only. The level of external proposals in France is going back towards the shy year of 2005 that saw 11 filed resolutions only. The very first environmental resolution in France was not inserted on the meeting agenda by the Board of Total. The proposal led by Phitrust Active Investors required more information on the exploitation of oil sands in Alberta, Canada. Proxinvest regrets the need for legal procedures in order to force the filing of external resolutions at general meetings as seen at Total, Lagardère or Société Générale over the last two years.

Voting advisory services are more and more crucial to serve a responsible ownership. Proxinvest, Managing Partner of Expert Corporate Governance Service (ECGS), is welcoming Frontis Governance, the reference point for institutional investors in Italy, among partnership of local independent experts focusing the biggest European capitalisations. Following the recommendations from the financial authority (AMF) on proxy voting agencies, Proxinvest has created a Steering Committee comprising fourteen members with extensive experience headed by Dominique Biedermann, Executive Director of Ethos Services. Proxinvest has submitted its 2012 voting policy to the committee for consultation. The new policy will particularly be stringent on the separation of the roles of Chairman and CEO, the control over regulated related-party agreements as well as executive remuneration.

A working group on general meetings has been created at l’AMF and is chaired by Mr Olivier Poupart-Lafarge. The group is examining related-party agreements, electronic voting and the conduct of general meetings. Shareholders should ensure that their rights are respected as a source of value for issuers.

Most issuers are better prepared to listen to their stakeholders today and show a better communication facing shareholders’ eyes that are becoming sharper and sharper and Proxinvest notes some substantial improvements in governance. It should not be forgotten that the local governance code (AFEP-MEDEF code) is written by employers’ bodies only. Therefore, improvements in French governance might be linked to auto-regulation. Views still diverge, for example regarding the combination of the Chairman and CEO which management favours. In addition, French management are opposed to a ‘Say on Pay’ contrary to what is now a norm in Europe and the U.S.. Executive remuneration in French banks is published late and extremely difficult to assess due to the lack of transparency as seen in Société Générale report as well as with BNP Paribas.


18 November 2011

ECGS responses to the Consob’s public consultation on Directors’ remuneration transparency

The Italian market Authority, Consob, recently launched a new public consultation on proposed changes to market regulation to enhance Directors’ remuneration transparency. The Proxinvest joint subsidiary ECGS Ltd.answers:

"ECGS congratulates Consob as all proposed changes move into the right direction, encouraging issuers to a greater and more detailed disclosure of all remuneration components."

Together with its new local partner in Roma Frontis Governance, ECGS approves the adoption of Say on Pay vote in Italy and suggests further changes needed to imsure a fair treatment of all shareholders at every investee company. In particular, ECGS provided comments on: disclosure procedures, detailed information on maximum amount variable remuneration might reach, independence of Remuneration Committees’ advisors, bundled resolutions including Directors’ appointment and remuneration, binding shareholders vote on remuneration policies.

Actually France lags far behind : the "Say On pay" vote has spread now all-over the world while French companies still escape any control of the shareholders on CEO bonuses. Say on Pay started in the UK(2002), then Australia (2004), Nederlands (2004), Sweden (2006), Norway (2007), Spain (2008) United States, Belgium and Germany (2011) while Swiss and Canadian companies have voluntarily introduced the vote.

With Proxinvest and the ECGS, French investors, suchs as membesr of the Association de la Gestion Française (AFG) in its corporrate governance recommendations or members of the Forum of Responsible Investment (FIR) within its Cordial 2010 working groupon corporate governance, call for the introdcution of a Say and Pay vote in France.


22 October 2011

Eurofins Scientific: is moving to a tax heaven a

Eurofins Scientific SE, a brilliant and profitable bio-tech analytical services with a large share of its sales in Europe - its turnover in both Germany and Scandinavia is already higher than its French sales - moved several years ago to the legal status of European company. Its top management staff have already moved the headquarters from Nantes to Brussels.

The justification offered this year by the company to transfer its nationality in Luxembourg sounds like a tautology: EUROFINS "has already reorganized the corporate structure of the Group around a holding company by industry, each of which is located at Luxembourg, it appears entirely consistent with the structure of the Group today to locate the parent company, Eurofins Scientific SE, in the same country. In addition, over 80% of sales of Eurofins Scientific SE is generated outside France. Faced with these findings, the Board considered it in the interest of the Eurofins Scientific Group to transfer the registered office in Luxembourg"...

Shareholders will regret that the company does not dare to make clear the real reasons of this transfer to Luxembourg. In a similar case last year the British materials group Wolseley plc. at least offered to its shareholders the precise estimated positive fiscal impact of its transfer in Jersey and Switzerland.

The Eurofins Scientific decision appears to be opportunistic and authoritarian: its announces a clear renunciation to the scientific roots of the company in Nantes. Worst it seem to ignores civil society and if each successful company had to move its future abroad no one would ever pay for the academic training in sciences to which Eurofins Scientific's owes its success of today. Besides Luxembourg is not only a tax heaven, it shows also weak corporate governance requirements, the company intends to replace its double voting rights by special similar unequal rights certificates...

At this stage, as the company only presents its usual "go multinational", " business is business" attitude, we believe that shareholders should oppose to this destructive decision for the long term value creation.


8 September 2011

The stock exchange is the sick lung of our economy

- Editorial by Pierre-Henri Leroy -

As thermometer as well as barometer the equity market has maintained its reliability: in contrast, its primary function of lung of the economy is in bad shape. Indispensable distributive source of equity, the Western stock market seems anemic and brings slowly but surely our bodies to economic asphyxiation. One should not wait to treat the lung to insure re-breathing.

Number of companies and all banks who are now valued below their net worth per share of the end of 2010 and their 2001market value. Yet non-financial listed companies have little to fear directly from a solvency crisis for sovereign borrowers.

Shareholders apparently leave the stock market even as prices are more attractive than ever: from seven million individual shareholders in France fifteen years ago down to four or even three million individual shareholders.

General Eviction of individual shareholders

The eviction of individual shareholders was the consequence of the widespread pro-banking liberalism in the last three decades. On the Anglo-Saxon side came the repeal of the Glass Steagall Act and the promotion of measures inspired by banks such as the MIFID Directive favoring the wholesale equity market, discouraging the direct access of individual players. In France, "the German bank, "capitalism without real capitalists", allowed and still allows some to get rapidly rich while two million cheated shareholders were not indemnified.

An economic recovery requires trust and the key essential reconstruction item will be the return of savings into equities. It is urgent to reform as clearly expressed shareholder representatives at the Consultation of the European Commission Governance in July 2011 a banking system which has since long closed the access to the stock market of individuals living in savings.

How to recover?

First each country should put tax payers protected universal banks before their responsibilities. Without waiting the unfair competition of banks in many competitive sectors such as real estate, management of savings, insurance should be stopped. They must, through the simple splits, focus the banks on the business of savings and credit only to revitalize these and each sector polluted by the presence of uncreative large banks.

As positive counterpart of this new discipline for the banks, opposite of that advocated by the IMF, their capital requirements should not be increased, and even recently increased requirements for the insurance industry in this area should be reconsidered. Such reserve requirements have increased credit spreads since 2008 while the withdrawal of insurers from the stock market has had a catastrophic effect on investment.

It is also urgent to upgrade more directly the indispensable role of individual shareholders, encouraging their participation and loyalty.

Some adjustments were suggested to EU rules requiring intermediaries and exchange platforms insuring the restoration of free services to depositors, such as information on prices and transactions, registration of securities for voting, confirmation of order processing and votes of shareholders, etc. ...

This also means reforming the governance of listed companies, restoring the authority of shareholders in general meeting, tighten control of regulated agreements, greater transparency and a systematic vote on CEO pay, encouraging the scrip dividend, etc.

Finally, we should make sure that shareholders be protected against abuses. We must stop protecting big business and bosses against the public of consumers or investors. The come-back of the shareholders requires the establishment of a fair process of collective court redress, a European class-action, as without criminal and civil penalties the rules of the contracts are violated, the small investors turns away.

International investors gathering in Paris for the ICGN and UNPRI conferences the week of Sept. 12 will repeat their request for better market integrity. The World Council of Churches, recently quoted by former Crédit Agricole CFO Bertrand Badré in Le Figaro, stated: "By contrast with growth development is the strategy of the embryo, it must put things in their proper place and time and ensuring respect their relations ". Our great occidental economic body lacks oxygen; better governance and the come-back of individual shareholders are the conditions of investment and employment.


15 August 2011

Renault finally discloses the 2010 Japanese compensation of Carlos Ghosn

In a late corrigendum issued on June 30 to its reference document for 2010 Renault, likely under pressure from the AMF following several Proxinvest remarks, informs that Carlos Ghosn received in Japan a 2010 pay of 982 million yen from Nissan Motors, i.e. € 9.03 million or 982 / 108.65 at the January 1, 2011 exchange rate, to be added to his Renault pay. Needless to say, under this new concern for tranparency, Renault suggests a lower yen June 30 2011 exchange rate and does not even provide the resulting amount to the reader.

Such total CEO pay of 10.27 million € for 2010 compares with the € 1.2 million figure posted earlier by Renault, an outsanding and unsanctioned make-up of factor 8 !

Thank you to the AMF. Congratulations to Carlos Ghosn for his exceptional earnings / performance ratio, and to the honourable auditors and directors of Renault for their courage and sense of responsibility.


21 June 2011

Carrefour thanks its chairman following a strong opposition vote

Following the strategic hesitation and shaking at the Board of Carrefour, Proxinvest had recommended to oppose to the reappointment of the Chairman of the Board of Directors, Amaury de Sèze.

Since joining Carrefour, Amaury de Sèze, former BNP Paribas banker, Chairman of the Board and of the Strategy Committee, totaling more than six mandates at the Board of large companies, left the company under the short term pressure from two big names known for their dynamism (Groupe Arnault and Colony associated within Blue Capital and hoding jointly 11% of the shares): this included the ouster of CEO, Jose-Luis Duran, its replacement by Lars Oloffson, then announcement of two contested spin-offs, followed by the resignation of a prestigious Director, Jean-Martin Folz, fomer CEO of Peugeot, and the firing of two top managers... The non-executive Chairman had received a fixed remuneration of € 700,000, plus fees of € 88 776, 42 times the French minimum gross annual salary (SMIC), a compensation which should but was not subject to the vote of the shareholders.

Amaury de Sèze having suffered the worst vote score among elected Directors of Carrefour, with 78.15% stightly better than the Dia special dividend and lower than the 78.4% of the efficient but unpopular Bernard Arnault, proposed that the current CEO, Lars Olofsson, become Chairman and CEO.

The proposed demerger of the discount chain Dia, whose management is located in Spain and was never integrated into the CARREFOUR purchase and logistics, was appouved in line with the Proxinvest advice. Dia's concentration in discount stores was no longer comatible with the "hypermarket re-enchantment" strategy launched by Lars Olofsson. If the consolidation of the executive and supervision functions is certainly not of good governance, the elimination of a disappointing and overpaid position of Non-Executive Chairman at least offers a saving in this critical reconstruction period for Carrefour.


1 May 2011

From Lagardère to Allianz, most inefficient cross-border voting

Inefficiencies of cross-border voting demonstrate the lack of care of the banking community for shareholders. After the Wyser-Pratte v. Lagardère case of 2010, the General Meeting of Siemens called for early May 2011 provides us with a demonstration of the inefficiency of the cross-border bankers chain used for the vote of shareholders.

Guy Wyser-Pratte, a shareholder of Lagardère had presented at the 2010 AGM of the French media and aerospace group two resolutions, one challenging the scheme of the Lagardère SCA partnership regime and another one running as candidate for election to the supervisory board. His proposal, quite justified in our eyes but rather undiplomatic, had obtained for the two resolutions the high scores of 22% and 24%. Somewhat disappointed with this honorable result, the New York arbitrageur complained to the company, then to the AMF to verify the votes outcomes of the meeting. After investigating, Wyser-Pratte, his lawyer, Eric Bernard, and the company observed that a number of votes had been either lost on the way or treated inverted by a chain of agents including the U.S. proxy firms ISS and Broadridge and the banks UBS and BNP Paribas… According to the counsel the actual score of the resolutions was 443 and 44%, and Eric Bernard demonstrates the failure of the UBS US bank to properly process the votes. In short interbank plumbing is not working properly for the cross-border vote, as all the operators perfectly know.

Voting investors such as ECGS clients must see the research report far too early before the dates of annual meetings. This is typically the case for German shareholders meetings such as Allianz. The ISS Votex and the Broadridge ProxyEdge platforms are requesting their vote at meeting date minus 21, some times 25 days before the meeting.

We believe that this is the result of a mis-interpretation from the custodians and sub-custodians using these platform, confusing the Record date (the cut-off date to register the number of shares entitled to vote) and the deadline to send the vote instruction.

Looking a the proxy card for Allianz, it is well stated that the proxy card may be received as late as the 27th of April by the issuer. There was clearly no reason for the platforms or for the chain of intermediaries to request to receive these instructions 21 days before the general meeting.

The same thing can be said for the vote at French firms wher actually the paper proxy form can be provided as late as three days before the meeting but platform and banks request twenty days. We believe that platforms and bank intermediaries make major mis-interpretations of the voting rules in Germany, France and many other countries, possibly because they are not technically able to dissociate the message regarding the voting instructions from the voting entitlement (Proxinvest had warned on this issue for many years and provided the DirectVote solution as clear solution for these big players to imitate while respecting intellectual property of the patented dissociation concept).

This at last is the basic efficient solution to the current thrombosis of the cross-border voting chain of the shareholders.

Investors and proxy firms keep worrying about this situation because it suggests also that when proxy reports are produced and delivered in a timely manner yit implies that very little time has been given to a serious analysis of the agenda items and governance issues and no time left for exchanging with the issuer and debating with investors.


1 April 2011

François Pérol, the CEO of Natixis is a conflicted figure

François Pérol BPCE and Natixis Chairman & CEO, CEO of Caisse Nationale des Caisses d'Epargne, and of the Federal Bank of Banques Populaires, also Chairman President of the French Banking Federation (FBF), the powerful bankers lobby, gives a striking example of authenticity and social responsibility.

The supervisory board of the bank just decided that his remuneration (fixed and variable) would reach 1.65 million euros for 2010. A decision that might launch again in France the fichier supprimé : www.proxinvest.fr/web/divers/Tchoutourian_RRJ_2010-3.pdf as properly anlysed by Prof. Tchoutourian of the Nantes university!

ENA graduate, former " Inspecteur des Finances, a former department head of the Treasury, and clsoe aide of Nicolas Sarkozy, François Pérol has always been a defendant universal banking. A master of finances, he led France to the banking crisis of 2008, then, to say the truth out of the crisis, and he allowed our big banks to recover.

The authenticity of the FBF chairman imptressed already when he stated over the BFM radio in January 2011 that French banks had never invested in U.S. sub-primes nor never received assistance from the tax payers...

It should be remembered that French banks, including Societe Generale and BNP Paribas had at least an exposure of € 3 billion euros in these sub-primes vehicles, a busines that earned us the most appalling mismanagement of public money in our history with a deficit doubled to 8% of GDP and a public debt reaching 82% of GDP against 55% in 1995.

It is worth recalling that in exchange for 3 billion paid by the State through the CDC into Dexia bank, BNP Paribas was able to purchase Fortis cheaply and ordrerly. It is worth recalling that when creating the BPCE group with Perol in August 2009, the State has made three billion euros by underwriting of preferred shares for BPCE allin a total of € 7.1 billion of State aid for Perol's endehavour and the refund the balance of state contributions was finally made possible in March 2011 following the expecetd recovery of the net income for 2010 to 3.6 M euros.

Accordingly François Pérol is also an example of responsibility for compensation: last year he already had tripled his salary for the more than 550 000 € in fixed part (without bonus!). This year, for 2010, he triples again ! Another demonstration of the unavoidable leap-frogging as explained in the Rapport Moral sur l'Argent dans le monde !

Everyone knows that, following the United States decision, certain countries and the European Parliament had seriously considered a € 500 000 cap on CEO compensation at banks supported by taxpayers. France Inter radio just revealed that a Brussels lobbying firm hired by Pérol did prevent the further adoption of this cap by the European parliament. Business Bridge Europe as quoted by journalist Philippe Lefébure was hired to fight against an amendment limiting to 500 000 € total euros maximum pay for teh CEO of a bank having received state support. The lobbying firm worked well no cap was longer voted, only will managing directors of these financial institutions no longer receive variable pay "without valid justification."

No worries therefore for the $ 1.1 million bonus of François Pérol BPCE CEO, will not be questioned by the French prudential supervisor ... At least the shareholders of Natixis, never compensated for the ineptitude and lies of the past, may be now concerned about the proper use of the bank's funds and the accute sense of conflict of interests of their president.


20 March 2011

14th Proxinvest report on AGMs

The Proxinvest’s annual survey on companies meetings points out the increasing criticism of shareholders.. The annual survey records for France an average refusal rate on resolutions submitted by boards among the highests in Europe: 6.3% for the CAC40 in 2010 against 5.9% in 2009 and 4.8% in 2008. For SBF250 companies it reaches 5% in 2010 against 4.6% in 2009 and 4.1% in 2008.

Rejected resolutions in France, against the Board’s recommendation, reaches the number of 64, when it was 50 in 2009 and 48 in 2008. The most controversial topics were Chairmans’ and combined Chairmen-CEOs’ elections and their salary supplements, more precisely termination payments, retirement benefits, stock-options free allocations. However, in 2010, the number of external resolutions presented by shareholders have decreased from 62 to 24. Environmental and social resolutions are still unexistant in France, rare in Europe, while well spread in the U.S.

Despite a better communication among a few issuers, those figures shows a more accurate analysis from French companies’ shareholders, who are better prepared to an active surveillance of the companies they invest in.

The increased participation during shareholder meetings slowed down: for the SBF 250 it keept increasing from 68.8% and 68.3% for the two previous years to 69.4%. However, it falls from 62.2% to 61.7% for the CAC 40. Without a real reform of online proxy voting in France, voting seems to be reaching its limits . Regarding the number of shareholders, participation rate keept being low: only 5% of CAC 40 shareholders attendedgeneral meetings in 2010.

The high contestation rate during shareholders’ meetings points out the limits of the French way of self-regulation where the code of good corporate governance is exclusively written by employers’ federations, AFEP and MEDEF, withe their favour for the Chairman unlimited powers among his Board. Holding simultaneously management and chairmanship responsabilities is being more and more criticised by investors, as only one person at the head does not seem to be the best option for shareholders and companies’ interests, while an independent non-executive chairman may be a good protection of the CEO against short-term pressures. Past cases like Vivendi, Vinci, Thomson or Alcatel and current cases like Total, Renault or Société générale show that a CEO having all powers and responsabilities often causes a weak governance or excessive compensations.

2010, like 2009, has witnessed a few cases where shareholders rights have been violated, in France where in total contrast with other countries the law has rather weaken their rights.

While most European countries adopted annual vote to fix the level of executives compensation in 2010, French shareholders have only a say on differed pay items and 2010 confirmed that large companies still refuse to put the non-executive chairmans’ compensation under the control of shareholders’ meetings these chairmen showing the highest remunerations in Europe: € 928 048 per year for the CAC 40 in 2010, against € 864 225 in 2008 and € 1 267 390 in 2007.

Some French Boards have taken the bad habit to assume a legality control of external shareholders resolution that behove normally to Justice opposing a veto on external resolution regularly submitted by shareholders ( as done bySociété Générale in 2010 about a possible separation of the chairman and CEO functions and in 2009 by Total and Sanofi Aventis on the approval of their chairman’s remuneration). However, judicial decisions against Lagardère or Total in 2010 confirmed the right of initiative for shareholders at general meetings.

While the Dodd-Frank bill in the United State was engaging a modest but real reform of its financial system and governance system, the European Union just cobbled the unbalanced financial system and has not earned back shareholders’ trust, yet necessary for investment and employment.

The French regulatory step back is particularly noticeable: when other countries are inviting shareholders to a better control of companies, France, on the contrary, has limited their rights by translating the Shareholder Rights Directive in a restrictive way. Despite the marked opposition of investors, four new articles were adopted on the 9 December to regulate strictly proxy vote and sollicitation and allow companies to contest these votes.


28 January 2011

Shares lending is still an issue : at last practical solutions

Following the demand from Proxinvest for a specialized committee on the issue of share lending the ICGN released in 2007 a report of this commitee chaired by Andrew Clearfield including a several recommendations.

In view of recent abuses observed in Europe with teh Porsche-VW and LVMH-Hermès International scandals, and taking this useful but not sufficient ICGN piece of work as a starting point Proxinvest herebyattempts to suggest a set of new solutions to the issue.


A definition of “share lending”

“Share lending” can be defined here as any practice that passes temporarily the nominal ownership or holding of a company share form one party transferring its securities to another party and promising to take them back at a later date from this other party, thereby keeping the long term economic risk of the shares.

If the general meeting of the company takes place during this lending period and unless unlikely the transaction if disclosed to the issuing company, generally the voting right will be left to this other party and no one else than the to parties might here form the transaction .


A general view on “share lending”

Share lending offer a practical solution to many market situation when investors temporarily needs to have shares of a company, the most common being the outright sale of shares or “short selling” allowing any investor to bet on a drop in the price of a security that he does not hold. Proxinvest considers that short selling while being pro-cyclical is not a misleading action toward the rest of the market community and is therefore acceptable. On the other hand, we know that share lending can be used to mislead the market or shareholders.


The concerns relating to “share lending” practices

All analysts of the governance of listed companies have observed situations of abuses related to the use of “borrowed shares” before or during the general meeting of shareholders. The use of borrowed shares by financial intermediaries before the meeting has allowed and still allows these to offer a hidden shareholding position to “creeping investors” at the capital of listed companies. As evidenced by the ICGN committee, the use of “borrowed shares” will legally allow any investor to increase its voting power by paying a fee or offering any kind of payment for the lender who forsake its voting participation to the annual meeting of shareholders. Even cases of change of control thanks to share borrowing without activating any guarantee for minority shareholders have been observed such as in the Havas 2006 situation.

As an independent voting advisor to institutional investors, we witnessed since many years the resulting conflict of interests created by the share lending income opportunity at the time of the AGM proxy voting record date. Some major institutional have admitted not to exercise the voting right in order to maximize portfolio income, a practice which appears to maximize short term gains at the expense of corporate control.

The tax arbitrage opportunities offered by the borrowing of shares allows investors positioned in tax heaven countries to avoid dividend withholding taxes by temporarily relocating in countries of lower income tax but not subject to this tougher tax withholding tax such as Luxembourg. Because of the proximity of the AGM record date and of the dividend payment date or of the dividend record date if any, such tax arbitrage penalize not only the tax income country of the issuing company; it also reduces the AGM participation as usually the bank intermediary holding the shares do not vote at the AGM any more than the tax heaven located investor.

Generally tax authorities of the issuing company would oppose to evidenced tax arbitrage : however tax heaven authorities favour the tax arbitrage while the tax authorities of the country of share borrowing intermediary see it a source of fee income for its community. Long term investors including ECGS members would consider international dividend tax arbitrage as an harmful non sustainable practice for the national community of the investor’s country.

Finally, last but not least, issuing companies themselves have been invited by intermediaries to lend shares that are held for the benefit of employees : some of these previously held in treasury stock had no voting rights and can be passed for free to a voting party voting in favor of the board officially without the company admitting any voting orientation. Some other might be sold for a fee credited to the company. In some cases the shares of employee funds might have been passed to an intermediary for a fee thereby avoiding that the employees fund be voting shares in line with public voting policy and against resolutions supported by the Board and the management.


The ICGN code has both merits and shortcomings

The ICGN Securities Lending Code of Best Practice presents one clear and substantial point in its Item 7 which states that “It is bad practice to borrow shares for the purpose of voting. Lenders and their agents, therefore, should make best endeavors to discourage such practice.”

However the ICGN code, short of strong investors support facing a community of intermediaries active in the field of share lending, did nothing more to stop this well explained “bad practice”.

The code requested in an item 3 that that lending institutional investor to “have a clear policy with respect to lending, especially insofar as it involves voting”, in its item 4 that lending policy should be mandated by the ultimate beneficial owners of an institution’s shares (which is quite impossible or theoretical in the case of open funds asset management). Finally, short of any direct measure to discourage the bad practice , the code uses the usual disclosure route in items 5 and 6 requesting investors to report the extent by which the lending activity may alter the risk characteristics of a portfolio, and separately from other investment returns, the income returns from lending .


Proxinvest recommends to stop the “bad practice”

Proxinvest believe that disclosure requirement imposed on institutional investors fell short of stopping the abuse and the temptation for preferring short term lending fee to long term corporate control benefits. Instead of making here investors and companies the victims of rogue behavior of a minority of operators, Proxinvest considers that the borrowing party and its intermediaries should be exposed to the burden of any diligence requirements and thereby making the borrowing more expensive for them. A minor side effect which many would consider as positive would be to discourage some-how short lending and dividend tax arbitrage. Because of the private “over the counter nature of these lending transactions it appears needed that market authorities or State regulators consider ruling in line with the following four recommendations :

I First Proxinvest recommendation: similar to insider trading abuses the vote of borrowed shares being strictly private only the qualification of this unfair behavior as a criminal offense associated with heavy fines could refrain from the temptation to legally cheat the market. Clearly share lending should not be penalized but a general prosecution of the voting of shorted shares would avoid the current perfectly legal abuses.


II First alternative Proxinvest recommendation: any intermediary holding share during the record date of the general meeting of a publicly listed company should be made liable to exercise voting rights in line with a «publicly released voting policy established in the long term interest of all shareholders and managed by a special third party proxy execution agent”

III Second alternative Proxinvest recommendation: any company or investors lending shares carrying a voting right should insure that the borrowing party either duly commits to vote the shares in line with the legitimate voting policy or instructions of the lender or be liable to exercise voting rights in line with a «publicly released voting policy established in the long term interest of all shareholders and managed by a special third party proxy execution agent”. IV Third alternative Proxinvest recommendation: any company or investors lending shares carrying no voting right should insure that the borrowing party be liable to exercise voting rights in line with a «publicly released voting policy established in the long term interest of all shareholders and managed by a special third party proxy execution agent”.

We believe that investors, companies and the general public could only benefit from such clear piece of regulation.


28. January 2011


The French open fund Proxy Active Investors opens a busy season with notably there very visible engagement on Total, Société Générale and Renault.

On Total the fund could have chosen either the firm’s environmental policy or the managers compensation or the governance of the firm : its current target is the involvement of the French oil company with the climate-changing tar sands in Alberta backing The Green peace moto "Total invests in sustainable destruction." Total S.A. has already invested more than 8 billion Euros in Alberta, and is planning to invest 10 billion more in the next decade, in Alberta and Madagascar, in order to step up its oil production from tar sands to 10 per cent of its global production.

The fund will launch on Januray 21st its fist environmental resolution for the next TOTAL AGM in May.

Concerning Société Générale , the only bank in town with a unitary board and extreme defender of the classical all casino universal business banking model , Phtrust Active Investors proposes in a new external resolution to change the compay’s statutes and introduce the spit”Cahriman6CEO” governance: Finally the most popular “Shame on You” resolution from Proxy Active investors will concern car maker Renault and will target its Chairman and CEO Carlos Ghosn, for incomplete disclosure and the cover-up of some € 8 million hidden pay for the 2009 fiscal year. According to the fund’s Board The total remuneration paid to the CEO under the Renault-Nissan Alliance should have been clearly stated to the shareholders of these two companies. _ A resolution will request the Board of Directors to :

  • Disclose the amount of the remuneration granted by NISSAN MOTOR to the CEO of Renault, Mr Carlos Ghosn, for the financial year ended 31 December 2009.
  • Disclose information relating to the remuneration of RENAULT directors by NISSAN MOTOR in the group management report on the consolidation of the “Renault-Nissan Alliance” accounts, as from the 2011 financial year.


28 January 2011

The creeping venue of LVMH for 17% of Hermès International illustrates differences between the two groups

It has been revealed on October 22 that LVMH had rolled over equity swaps on Hermès International stock price and at the final settlement decided to ask for shares up to 14% and then 17% of the French most prestigious fashion and leather goods house.

LVMH had thereby a wise tactic to hide its buying position using tax heaven countries subsidiaries with the excuse of a an efficient treasury management at work, in whats pretends to be a perfectly legal process! Hermès International sees this as an unfriendly venue and request LVMH withdrawal. The AMF (Autorité des Marchés Financiers) undertakes an enquiry on the case while it is likely that little threshold declarations have been made by the banking intermediaries on their holding...

The late LVMH dislosure benefited from the application on November 1st of a long awaited new rule on derivatives and equity swaps as well as from the effect on the bankers of another very recent change in the French regulation on borrowed shares. Its Article 49 requires that any holder of shares promised for resale and exceeding 0.5% of the capital or voting rights should declare to the company and the AMF( ), the latest three trading days before the general meeting of shareholders at 0 hour the total number of shares held, the name of the seller, the date of the contact and its maturity and the attached vote convention if any, the company to publicise then the declaration according to AMF rules. Failure to proceed can deprive these shares of their voting right for the up-coming meeting and further, can allow eventually to cancel decisions made by the AGM and finally would entitle the court of Commerce, on request from the company, any sharehodler or the AMF, to deprive the failing shareholder of all its voting rights for no more than 5 years.

It is now more than ever vital for the shares-lending community to monitor carefully all existing legal and conventional disclosure thresholds at listed companies. Proxinvest and our ECGS Ltd. European joint venture has proposed since 2001 this service in order to facilitate information processing and to minimise the risk of faulty thresholds’ disclosure by asset managers. The service will help investors and intermediaries to comply with the local legal rules in terms of thresholds’ disclosure and thereby to maintain their voting rights.(For further information please call Charles Pinel at 00331 45 51 50 43) A failure to notify thresholds’ crossing can result in the loss of voting rights.

For years, Proxinvest had advocated for tougher diclosure rules and the AMF will have to test if LVMH information to the market has been faultless.

Whatever be the result of the AMF investigation we have here the demonstration of two different business cultures: the clever and agressive methods of Bernard Arnault at LVMH versus the the deeply rootted craftsman culture of Hermès International.

As can bee seen in the above pages, the corporate governance of both companies is far from being satisfactory, but there is something pleasant in the current defence of Bertrand Puech, the Chairman of the Emile Hermès family holding, concluding "We are not in the luxury business, we are in the quality business".