Several French and foreign
shareholders have joined forces with the Proxy Active Investors mutual fund in
tabling a resolution to amend the bank’s articles of association by creating a management
and supervisory board. This is the latest in a series of attempts made over the
past few years to challenge Mr. Oudéa’s combined status as Chairman and CEO of
Société Générale.
Given the size of the bank and
the issues currently facing the banking sector, it is high time SG finally made
the move to separate these functions:
- in view of the risks inherent
to banking and finance activities, how can SG justify having one man responsible
for determining, implementing and controlling strategy?
- in view of the volume of
work required of the Board of Directors, the job of organising the Board,
preparing its meetings and managing its discussions must be done by someone who
has time and is not embroiled in the daily grind of managing the company: how
can SG justify entrusting this task to a Vice-Chairman, a position with no role
or responsibilities recognised by French law?
- in view of the need for openness
and freedom of opinion in board discussions, how can SG ignore directors’
affirmations that the quality and tenor of discussions is quite different when
presided over by a non-executive chairman?
Société Générale is a major
bank, and the challenges it faces in the present banking crisis require the
services of a full-time executive responsible for putting strategy into action.
It is the only French bank and one of the few European banks to combine the
functions of chairman and chief executive (this is forbidden in Switzerland,
for example), and recent events have confirmed the fact that centralised power
is a potential cause of management error.
Some critics of our stance will
claim that the supervisory and management board arrangement is not the best
option and that it would be better to separate the titles of board chairman and
managing director. We requested this separation two years ago and reached the required
0.5% threshold, but the Board refused to include our resolution on the agenda,
on the grounds that it would deprive the Board of its choice, as provided for
in the articles of association, of deciding whether to combine or separate
these functions. However, according to Article L.225-51-1 of the French
Commercial Code, as confirmed by the comments of several law academics, it is
the EGM that decides on the conditions relating to the exercise of governance. The
Société Générale Board decided to hold only one ordinary General Meeting last
year in order to prevent us from tabling an extraordinary resolution!
In view of the challenges
faced by the banking sector today regarding the possible separation of bank
business lines, an issue that will surely be tackled by the winner of France’s upcoming
presidential elections, Société Générale’s shareholders need to mobilise in
force in order to push for a new and more confidence-inspiring model of
governance, consisting of a management board in charge of operational
management and a supervisory board charged with systematically controlling the management
board’s work and with granting it the relevant authorisations required by law
or the bank’s articles of association. This is the new framework within which Société
Générale should be formulating its aims and objectives.
Olivier de Guerre
PhiTrust Active Investors
