"Bonapartist" French remain chary of Anglo-Saxon business trends

by Reuters
Tuesday, 8 April 2014 14:33 GMT

By Andrew Callus

PARIS, April 8 (Reuters) - Things are changing in France's business world. One in 10 top listed firms has a foreign boss, all report earnings in English, and a recent bid battle showed that state influence doesn't always trump the business interest.

But if you think that signals the end of the Gallic sneer at "Anglo-Saxon" ways - the free-market bent of the Americans and British - last week's promotion to economy minister for the interventionist Arnaud Montebourg is a reminder that laissez-faire government remains, in France, a linguistic irony.

Anglo-Saxon trends to get government out of business and implement shareholder-friendly governance reforms have largely passed it by.

Over a third of the companies that make up the CAC-40 index of top stocks has the government as a significant shareholder.

More than three-quarters of the men who run those same 40 blue chips have a combined chairman and chief executive role, in contrast to the U.S.-UK ideal, which separates the two jobs to ensure shareholder interests and profit come before personal power.

Marwan Lahoud, chief strategy and marketing officer at aerospace group Airbus Group, says the caricature of a French boss is "Bonapartist", after Napoleon Bonaparte, who made himself French emperor and conquered much of early 19th-century Europe, "(with) the boss at the top, forgetting he is not the owner of the business and that there are shareholders. He decides everything."

France's corporate culture has long felt different.

From the car-making Peugeots to the defence sector's Dassaults, families play a prominent part in many of its publicly listed companies.

At the same time, the "grandes écoles" - exclusive academies where France's elite are educated - have blurred the lines between business, civil service and politics.

All this is compounded by the fact that governments of right and left have used company legislation and tax policy to pursue social projects, often at odds with the pursuit of profit.

"France has an historic and cultural mistrust of enterprise," said Lazard France chief Matthieu Pigasse, adding that this dated back to the 19th-century view that the military and the clergy were the best routes to social advancement.

For an investment banker, Pigasse's own résumé - a former civil servant, who has been close to President Francois Hollande's Socialist Party throughout his career - would look unusual anywhere but in France.


France's penchant for state intervention has been in evidence as Montebourg took sides in the takeover battle for media group Vivendi's telecoms arm SFR, even though the government had no stake in any of the companies involved.

Citing job preservation, industrial logic and national interest, he backed an offer from French conglomerate Bouygues , even though Vivendi preferred a rival bid from cable group Numericable that raised fewer antitrust issues.

Underlining that he was not acting alone, the state CDC fund then joined forces with Montebourg and Bouygues, helping to bankroll the attempt to persuade Vivendi to change its mind.

Of course there is nothing uniquely French about government holdings or state-backed rescues like the one taking place at Peugeot PSA, formerly a family-controlled group. The financial sector and auto-industry bailouts worldwide in recent years worldwide are a testament to that.

But government-corporate links in France run far deeper than mere stock holdings, and cut across party politics.

It is hard to find a CAC-40 chief who was not educated at one of the elite institutions - the Ecole Polytechnique, Ecole Nationale d'Administration (ENA), Ecole des Hautes Etudes Commerciales (HEC), and the Ecole des Mines - where they will have rubbed shoulders with future political leaders.

Many of the CEOs - 15 of the 40 according to a Reuters trawl of Internet profiles - held civil service or political roles at some point in their careers.

Ecole Polytechnique graduate and Pernod Ricard CEO Pierre Pringuet was adviser to former Socialist prime minister Michel Rocard in the 1980s, and Societe Generale's chief Frederic Oudea counselled ex-president Nicolas Sarkozy while he was budget minister for a government of the right in the 1990s.

Some top bosses have found themselves on tricky legal ground as a result of the revolving career door between the state and big corporations. Stephane Richard, CEO at telecoms group Orange , is under formal investigation for his role in a large state-backed payout to businessman Bernard Tapie while he worked as a senior government aide in 2008.

Francois Perol played a key state role in the creation of bank BPCE from the wreckage of the country's banking industry after the financial crisis, and was then appointed to head the bank in 2009. He faces an investigation into whether that move was appropriate.

Both men deny any impropriety.


The SFR saga is also characteristic of the strategic and family holdings that pervade the French corporate world. Martin Bouygues and his family own over 45 percent of the eponymous company, while billionaire Patrick Drahi controls Numericable through a 40 percent holding.

Vincent Bollore, a powerful shipping and transport magnate, is one of Vivendi's top shareholders as well as a member of its supervisory board. The Bettencourts, who control L'Oreal , are another of France's top family dynasties.

Next to Vivendi alphabetically in the CAC-40 sits water and waste group Veolia, whose CEO Antoine Frerot is grappling with the competing interests and influences that drive French corporate life.

Insiders say Frerot has upset institutional shareholders by holding onto weak businesses, notably the lossmaking Corsican ferry operator SNCM. But to address those concerns, he will have to upset the government, also a shareholder, because ministers fear that will cost jobs.

Serge Dassault, head of another French business dynasty, a Sarkozy acolyte and the owner of Le Figaro national newspaper, is Veolia's second-largest shareholder after the state.

He led a failed attempt to oust Frerot earlier this year and replace him with David Azema - a top civil servant.


For all that, there are signs of change.

Montebourg's oar was, after all, firmly repelled by Numericable's Drahi, who won the battle for SFR at the weekend.

And Montebourg's government has promised to cut by some 30 billion euros ($41 billion) the labour cost burden on French companies, partly by bringing down corporate taxes.

Last week, a court knocked down a draft law aimed at forcing a company that wants to close a factory to seek a buyer first.

And some companies are taking their lead from beyond France's shores.

Last year, the biggest company in France, oil and gas group Total, moved its treasury and investor relations departments to London to reflect the importance of the non-French investors who hold almost half the stock in the CAC-40, according to 2012 Bank of France figures.

"It's evolving fast," said Airbus's Lahoud, with groups like Total and Airbus examples of "world players with a corporate culture where managers are given responsibilities and take the decisions".

"I know all the other CAC-40 bosses, and we've all become pretty international," said Chris Viehbacher, the German-Canadian chief executive of pharmaceuticals group Sanofi , the country's second-largest listed company, and its first ever non-French CEO.

The French corporate culture has become, he says, somewhat diluted, but concedes that "those of us who are not French have also gone some way to adapting".

"We wouldn't be here if we didn't like it." (Additional reporting by Jean-Michel Belot, Cyril Altmeyer and Tim Hepher; Editing by Mark John and Will Waterman)

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