Given the growing need for transparency by the management of listed companies and given the increasing weight of foreign minority shareholders, who hold approximately one third of the shares listed on the Paris Stock Exchange, France can not escape considering the increasingly important issue of Corporate Governance.

Originating in the United States, it was brought to the attention of the business world in the United Kingdom with the Code of Best Practice, fruit of the work of the Cadbury Committee.

Two employers' unions, the Conseil National du Patronat Francais (CNPF) and the Association Francaise des Entreprises Privees (l'AFEP) requested Mr Marc Vienot, Chairman of the Societe Generale, to preside over a committee composed of the chairmen of fourteen of the most prestigious French companies, and whose mission was to reflect upon the role of the boards of directors of French listed companies. A report, the result of the work of this committee (the "Committee"), was made public at the Paris Europlace congress on 10 July 1995.

This report does not pretend to be the French equivalent of the Cadbury Report; it merely comprises a list of recommendations which will permit a "soft" adaptation of the boards of directors of French listed companies to the principles of Corporate Governance.

As a preliminary statement, the Committee considers that the issue of corporate governance can be addressed under the French company law of 24 July 1966 which governs the board of existing companies without there being a need for major amendments.

The form of management of a societe anonyme with a board of directors (conseil d'administration) chaired by the Pdg (president-directeur general), which is used by a large majority of companies, is preferred to the dualist system which comprises a management committee (directoire) and a supervisory board (conseil de surveillance). This last form of company management is not the solution to the separation of powers which is generally recommended in matters of corporate governance.

Furthermore, the Vienot Report sets out a number of recommendations regarding the boards of directors of listed companies in respect of their composition, their role, and the exercise of their powers.


According to the Committee, the boards of directors of listed companies already include members chosen exclusively for their personal expertise and are independent (i.e., have no special interest in the company whether as a shareholder, a supplier, or a customer). This is due to existing provisions of French law which already imposes strict limits on the board membership of management, setting a ceiling on the number of directeurs generaux (executive directors) and the number of directors who may at the same time have service contracts with the company (no more than one-third of the board, art. 93 of the law of 24 July 1966). But, the Committee concludes that the boards of all listed companies should have at least two independent members, although it is up to each board to determine the most appropriate balance in its membership. As to the representation of minority shareholders, the favoured solution is to appoint several independent directors to the boards of companies controlled by a majority shareholder rather than to provide for special representation of minority shareholders.


In France, it is the chairman who calls the board meeting except when it has not met during the two previous months, in which case a meeting can be called by a third of the directors. The Committee recommends that boards should consider relaxing these rules through amendments to the articles of association, e.g., by allowing one or several directors to convene the board at any moment.

Furthermore, the Committee considers that the chairman should provide the directors with all significant information necessary to the fulfilment of their supervisory duties, and when directors believe they have not been put into a position to make an informed judgement, it is their duty to say so at the board meeting and to demand the information they need.


French law already provides that the board of directors may appoint some of their members to form committees to consider specific aspects of the company's organisation (art. 90, Decree of 23 March 1967). Accordingly, a number of companies have already set up committees with responsibilities in areas such as remuneration, auditing or strategy. These committees have been functioning satisfactorily. The Committee recommends that all boards should set up special committees for the selection of directors and corporate officers, for remuneration of corporate officers and for accounting. The boards should inform the Annual General Shareholders' Meeting of the existence of these committees and of the number of meetings they have held in the course of the year.


Under French law, both the board of directors and the Pdg (who combines the two functions of chairman of the board and chief executive officer) have similarly full powers to act on behalf of the company and to bind it in all circumstances. For some legal authors this could be a source of confusion. Contrary to this opinion, it is the Committee's point of view that the French legal framework offers clear advantages as a result of its flexibility. The Committee believes that the diversity of companies and their circumstances makes the freedom to organise powers within the board essential to the smooth operation and supervision of the management body. Thus, each board can adapt the organisation and its powers to the circumstances and the specific nature and requirements of the company. It can limit the case where its prior intervention is necessary if it wishes to give management a freer hand, or, on the contrary, extend its jurisdiction of powers by defining the type of decision it wishes to be subject to its consideration when adopting appropriate regulations.


Finally, the Committee sets out a number of rules which should be followed individually by the directors of listed companies, such as those concerning the ownership of a fairly significant number of the company shares, being assiduous and attending board meetings, being properly informed, considering themselves bound by an obligation of professional secrecy, informing the board of any conflict of interest, etc.

The various recommendations contained in the Vienot Report may be considered as far from revolutionary, but they offer the advantage of being realistic and thus easier for French companies to follow. As mentioned above, many French companies have already put into practice these recommendations by way of setting up specialised committees (Lyonnaise des Eaux, Credit Local de France) or appointing independent directors (Paribas).

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