The "Florange" law voted in this year implemented double voting rights at Paris-listed French companies for all shareholders who have held stock for more than two years.
The action was taken without any real consultation with investors and for the sole purpose of protecting French companies by strengthening the control of reference shareholders and employees. It is a reaction to the low level of capital currently invested in French stocks by French investors.
The policy is once again intended to remedy a shortcoming in our system (lack of pension funds, very high shareholder taxation, etc.) and the fear that companies will be taken over by foreigners...It's true that, against all expectations, the most recent creeping takeovers have been carried out by...French investors...remember Carrefour, Vivendi and others.
In practice, investors are only entitled to double voting rights if they are registered and, therefore, recognised as such by the company. While the benefit of the initiative is quite clear for companies, in reality, the net effect is that foreign institutional investors, as well as French UCITS, are locked out for administrative reasons tied to the complexity of registered ownership.
In fact, the measure dissuades many long-term investors who will not register and benefits those who want to retain control, thereby reinforcing inequality among shareholders.
In the long run, many international investors will stop investing in French companies because of the measure, making access to capital more difficult for our companies.
French law entitles us to request that General Meetings remove double voting rights from the by-laws. It's important that we be aware of this and that we ask companies to eliminate double voting rights from their by-laws (as some have already done) in order to rebuild a true shareholder democracy for the benefit of companies.
We must mobilise quickly and we must ask companies to move in this direction.
Olivier de Guerre
Chairman of PhiTrust Active Investors