The issue of segregation of powers in non-controlled companies
is again under the spotlight at a time when Schneider Electric proposes to
merge directorship functions, with a CEO who will be based in Hong Kong. If
shareholders vote for unification of powers, a question, which will arise more
and more frequently for global enterprises, will inevitably ensue: which type
of governance is suited to multinational enterprises?
In the case of Schneider Electric, if the CEO is in Hong Kong, it is likely
that more and more board meetings will be held outside France (a natural trend
given the
internationalisation of Board members and of the business). Given that there are few French shareholders (<16) and as the vast majority of employees are outside France, the company will no longer be anchored in France and will truly become a “multinational” (Georges Orwell’s Firm…). And we will soon reach the stage where General Meetings are held online, allowing all shareholders to attend… which will foster the emergence of a “virtual” enterprise.
internationalisation of Board members and of the business). Given that there are few French shareholders (<16) and as the vast majority of employees are outside France, the company will no longer be anchored in France and will truly become a “multinational” (Georges Orwell’s Firm…). And we will soon reach the stage where General Meetings are held online, allowing all shareholders to attend… which will foster the emergence of a “virtual” enterprise.
This trend "with the flow of history" gives rise to numerous
questions (let us not forget Pechiney, Arcelor, etc.) in relation to the future
of an industry in Europe and, particularly, as regards the risks incurred by
these companies that will be virtual, without any shareholding or national
roots, of facing a hostile takeover bid, in which case very few investors will
be there to support them as the company “will be both global and virtual”…
This offshore relocation trend in respect of directorships in major French
companies is currently accelerating (several companies will opt for this
solution in 2013…). This poses governance issues for any shareholder of a French
company. The aim is not to hinder a process but to review our governance
criteria. Our Belgian neighbours have gone through this 10 years ago with Générale
de Banque, Fina, Dexia, etc. and consider this trend to be irreversible, whereas
other countries have been able to implement a framework to limit the effects of
this trend:
- In Germany, segregation
of powers in major groups and voting rules within the Monitoring Committee with
a very significant weightage of employee’s representatives that de facto reduce the risk of having
decision-making bodies outside Germany,
- In Switzerland, half
of the Board meetings must be held domestically, thus requiring the onshoring of
decision-making bodies,
- In the UK or in the
Netherlands for instance, pension funds play a major part in supporting domestic
enterprises, whereas in France, the weightage of employee shareholders is non-significant
in several international French groups (lack of legislation on pension funds) thereby
impeding balanced governance.
Once again the risk is to see politics hijack the issue and propose
“nationalist” solutions which would only accelerate the offshore relocation process
in the context, in particular, of the European company legislation (ease of transfer
of registered office in Europe for any company having opted for European
company status). What is then left for the shareholders to do?
Segregation of powers now constitutes an answer to this very topical decision-making
issue and it is vital that Schneider Electric’s shareholders object and vote
against the proposal to amend the articles of association in view of unifying
the CEO’s powers.
Olivier de Guerre, Chairman of PhiTrust Active Investors
