As source of corporate governance in France.

As a EU member, the French legal framework for
corporate governance complies to the European Directives by the European
Parliament, though a certain degree of freedom is granted to the French
national legislation.  The High Level Group of Company Law Experts
chaired by Jaap Winter presented the Winter Report in 2002 to EU Commissioner
about company law and corporate governance named Communication from the
Commission to the Council and the European Parliament: Modernizing Regulatory
Framework for Company Law. The communication addresses issues such as public
listed companies’ mandatory publication of annual report on governance; greater
shareholder rights and influence; protection of employees; transparency of
CEO’s remuneration.


Communication, however, is not binding but designed for consultation purposes
and could be used by EU member states as recommendations.

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National Legal Source


The Code de Commerce is the major legal source
of corporate governance in France. It covers issues like the composition,
power, remuneration, liabilities of a company’s governing body. Three specific
basic laws — the Law on New Economic Regulations in 2001 (La Loi Sur Les
Nouvelles Régulations Économiques),  the
Law of Financial Security in 2003 (La Loi de Sécurité Financière) and the Law on
Trust and Modernization of the Economy
in 2005 (La Loi Pour la Confiance et la Modernisation de L’Économie). The first
addresses the sustainable development in regulating financial system,
competition and companies. The second law concerns birth of the Financial
Markets Authority (Autorité des Marchés Financiers, AMF) as a response of
protecting investors amith multiple financial scandals in the market.


The French
employers’ association AFEP and MEDEF issued three reports Viénot 1&2
Report and the Bouton Report as recommendations , together considered as the
AFEP and MEDEF  Code also serves as
another major legal source for public listed companies. The Viénot 1 Report
lays out issues on the board of directors of PLCs.  “It recommended the suppression of cross
directorships, a limitation of the number of board seats held, recourse to
independent directors, and the creation of board committees.”(Charreaux,
Wirtz) The Viénot 2 report proposes the separation of the functions of the
chairman, the board and the CEO, strengthening the role of the independent
directors etc.  the Bouton report
recommend further improvement of the board.Small
and medium sized public listed companies usually refer to the Middlenext Code.


The Code de Commerce is a binding hard law, while the Afep-Medef code is
not binding since it is a recommendation in the legal framework.


        What is the structure of
the board?  


In France, there are 5 main types of companies
as following:

SARL (société à responsabilité
limitée) – limited liability company

SA (société anonyme) – stock

SAS (société par action
simplifiée) – simplified stock corporation

SCPI (société civile de placement
immobilier) – real estate civil investment company

SIIC (société d’investissement
immobilier cotée) – listed real estate investment company

Among the 5 types of companies, we focus on the
3 following to discuss the board.

Société par actions simplifiée
(SAS): There is no obligation to have a board of directors but it can be
organized by the by-laws.

?     Société à responsabilité
limitée (SARL): There is no board of directors in SARL.

Société anonyme (SA): Must has a

Thus, here we only talked about the board in SA
(Société anonyme).


Shareholders of a société anonyme may choose
between a single board or two-tiered of board (board of management and board of
supervisors). This guideline only considers rules that apply to sociétés
anonymes with a board of directors, as most publicly traded companies belonging
to SBF 120 in Paris Euronext adhere to this structure  (these rules are applicable, adjusted as
necessary, to a société anonyme with a management board and supervisory board).

The board of directors consists of natural or
legal persons and must be represented by a permanent representative. The
chairman, the CEO and any deputy CEO(s) must be natural persons.


        What about women in boards? 

Is there any legal requirement?


In 2006, the French legislation was already
supporting women in the labour word by publishing an act on equal salary for
both gender. Then, they have adopted articles 21 and 22 that is implementing
that no more that 80% of the members of the board cannot be the same gender.
However, the Constitutional Council barred the law as it was considered as
violating the constitutional principle of equality.

In 2011, the Act of 27 January introduced the
Corporate Board Quota that enforces that the governing and supervisory boards
should reach at least 40% of female members in private companies in the
beginning of 2017. The private companies should be listed on a regulated market
or having at least 500 permanent employees during three consecutive fiscal

This gender quota has been established by the
Act of 27 January but also by the AFEP/MEDEF-Code. The soft law is suggesting
that companies should have 20% of women in their board within three years from
the later of their 2010 general meeting or when the company’s shares have been
admitted in the regulated market and of 40% within six years of either event.

In 2012, an act has been introduced to
implement it in public companies.


To be sure that companies are respecting the
quota, the French legislation has applied sanctions for non-compliance. By
non-compliance, it means non-compliance with the staffing principle or
non-compliance with gender quotas.

For the non-compliance with the staffing
principles, there is no sanction if the board doesn’t have a balanced
representation of both genders. Yet, the presidents of the boards should report
the composition of their bord and the application of the principle of balanced
representation of both sexes in the management report – added to the annual

If the company doesn’t comply with gender
quotas there are two sanctions possible.

?     Nullity of appointments made in
violation of the gender quotas

?     Suspension of payment of attendance


However, the non-compliance sanctions are
difficult to implement as there is not a proper instrument or body to ensure

In beginning 2017, the board of directors of
big companies didn’t reach the Corporate Board Quota. According to Leyders
Associates, a recruitment office, 39% of the members of the board of SBF 120
companies are women and for the CAC 40, 39,8%. However, according to a study
made by Spencer Stuart, an office headhunter, cited in Les Echos, 42% of the
members of the board of directors of the CAC 40 are women in the middle of the

It can be difficult to reach the quota for some
companies, specially for the SBF 120 firms, because the boards must wait that
the directors have finished their terms before hiring new directors. Also,
there is still a male chauvinism that is making the women integration in boards
of directors slow.


b.         What
is their profile?


Companies used to privilege financial profiles
but more and more companies are looking for women with an international
background. They are also seeking for women that are business unit/ subsidiary
manager in a foreign country or have a digital, juridic; HR or communication

According to the cabinet Eric Salmon and
Partners, 82% of the women in the boards have different diplomas from foreign

A study made by the Gouvernance &
Structures on January 2015, 26,6% of the board women members are managers. The
IFA, a French institut of managers, noticed that there are more operational and
foreign women that are in the boards of directors.

A Russel Reynolds Associates study, made on
September 2013, found that 51% of the CAC 40 managers are from a foreign country
and 23% of the SBF 120 except the CAC.

In 2015, the number of foreign women in the
board of CAC 40 decreased to 33% and to 21% for the SBF 120.

The same study showed that 70% of women
managers of the SBF120 have executive functions in the companies listed.


However, the study made by Gouvernance &
Structures highlight the fact that the diversification of the profiles is

Some fields such as technical, scientific or
production, trade, marketing and communication are not well represented in the board.


Concerning the age, generally companies are
hiring women in the board of directors between 40-50 years old according the
Governance & Structures study.

Another study made by Spencer Stuart showed
that the average age has increased to 55,9 years old. This shows that for women
the age is a tricky subject in France.


c.         Some
companies’ Corporate Governance examples in France


?     Accor Hotels group board of
directors is composed of 17 members : 10 male and 7 female



The women in BoD are from different background
and have different occupations.


Irish Knobloch is Vice President; Iliane Dumas
is director employees representative and project manager of Talent and Culture
in the Accor Hotel subsidiaries; Mercedes Erra is Executive President of Havas
Worldwide; Sophie Gasperment is General Director of the L’Oréal group, Finance
communication and Strategy prospective; Qionger Jiang is General and Artistic Director
of Shang Xia, Isabelle Simon is General Secretary and a member of the executive
committee of Thales and Natacha Valla is the head of the economic policy and
strategy of the BEI – European Bank of Investment.


?     Another example is the French
company Renault; its board of directors is composed of 30 members whose 5 are

As we can
see from the image below, they are from various background too and have various
position, M. Sepehri is the Executive Vice President and Office of the
CEO;  V. Sarlat-Depotte is an Alliance
Global’s Executive Vice President and Purchasing President of RNPO, M-F Damesin
is an Alliance Executive Vice President, Alliance Human Resources Executive
Vice President and the Groupe Renault Human Resources; N. Leclair, is a Senior
Vice President Expert Fellow and C. Delbos is the  Executive Vice President, Chief Financial
Officer Groupe Renault Chairman of the board of RCI Banque.


?     Finally, Nestlé is composed of 14
members : 5 women and 9 men


As from the
other two examples, the women members are from different background and have
different position. N. Lal Kidwai is a Chairperson of HSBC Group of Companies
in India, A.M Veneman is an Executive Director of the United Nations Children’s
Fund; E. Cheng was the Corporate Executive Vice President accountable for
Greater China and Southeast Asia Region, Amway Corporation; R. Khasaya Oniang’o
is the President Adjunct Professor of Friedman School of Nutrition Science and
Policy and Tufts University and R.M. Burns is the present Chairman of the Board
of Xerox Corporation.


To sum up,
we can see that the youngest female from the examples have 41 years old and the
oldest 71 years old. Most of them have a different background and different
position but most of them have a Business or Administration background.

Only Accor
Hotels group has reach the Corporate Board Quota with 41% of their members
being women. 


        What responsibilities and
rights do directors have?

board of directors jointly exercises its powers to determine the company’s
policy and supervise its implementation. The CEO of a company is however
invested with the widest power to act in name of the company. Those powers are,
however, subject to the respect of the company’s purpose and to the powers
reserved to shareholders’ meetings and to the board of directors.

board of directors have the right to delegate some of its power to any
individual (usually the CEO) for one or more than one particular issue. The
board of directors can create several committees to examine and give
non-binding opinion on definite matters. The board of directors determines composition and attributions of any
committee that undertake its task under the board of directors’ responsibility.
Afep-Medef Code recommends that the listed companies create an audit,
nomination and remuneration committees.

is responsible to act within powers this means that the director should comply
with the company’s law and decisions made under the law and to put into effect
the powers only for the reasons for which they were given. Directors must act
in a manner to ensure the financial stability of the company. The director is
responsible to attend the board meetings. Even if any of the directors is not
present, he or she will be liable for the decisions that might prove harmful to
company or any other third party. The directors must keep the privacy of the
board meetings and they must act for the best interest of the corporation.
Director can be held responsible for the breaches towards the company and/or
third parties like:breaches of laws and regulations, breaches in the articles
of association or mismanagement.

Director should exercise reasonable skill, care and
judgement. This means that a director should be diligent, careful and very well
informed about the company’s affairs. Also If a director has particular
knowledge, skill or experience relevant to his role (for instance, he/she is a
qualified accountant and acting as a finance director), the expectations
regarding his role will be judged according to that.

directors can even be accused of theft and fraud if they misuse corporate power
or pay fictitious dividends or present a rosy picture of the corporate
accounts. In the event of Company going bankrupt, the directors can be ordered
to pay off all or the part of debt.

should not accept benefits from any of the third parties except the company
itself, by reason of being a director or doing anything as director. The
company may authorise acceptance (subject to its constitution), for instance to
enable a director to benefit from reasonable corporate hospitality. Director
should not declare any sort of interest in a proposed transaction or any sort
of  arrangement. The declaration has
to  be made before the transaction is
entered into and the prohibition applies to indirect interests as well as
direct interests.

of corporate assets is often the most common criminal offence that is found
against directors. It consists of using the company’s assets against the
company’s interest and for one’s personal benefit. It is punishable with a
five-year prison sentence and a fine amounting to EUR 375,000.

to French highest court (Cour de cassation), each of the  director is assumed liable towards the
company and the shareholders in case of faulty decisions, whether intentional
or resulting from any sort of negligence and, in order to escape that
liability, a director should prove that he did not agree with the improper
decision. Directors can also be considered liable for not seeing properly the
management of the company.


        What rights do shareholders


The shareholders’ meeting is the independent
body of the company. It do have the authority to resolve on some of the most
important issues affecting the company, including the appointment and dismissal
of members of the board of directors and amending company’s articles of

There are only two kinds of shareholders’ meetings under French law:


?     The ordinary shareholders’ meeting:
It must be held at least once a year in order to approve annual financial
statements and is also very much competent to appoint or dismiss the members of
the board of directors or, the adoption of any decisions requires a majority of
50 % of the shares present or represented at the meeting.

?     The extraordinary shareholders’
meeting: It is competent enough to take decisions involving an amendment to the
company’s articles of association (for example, any capital increase, change
of  the corporate governance structure
and change in registered office); the adoption of such decisions requires a
majority of two-thirds of the shares present or represented at the meeting.

Mainly the right of a shareholder is the right
to attend & vote at shareholders’ meeting, such right are discussed as

?     Each shareholder must be assembled
to the shareholders’ meeting.

?     Each shareholder is entitled to
attend meeting in person or video conference,

vote by mail or by email (only if the company’s
articles of association allow) or
be represented by its spouse or by another shareholder, unless the company’s
shares are listed on NYSE. Euronext Paris or on Alternext, in which case the
shareholder can be represented by any person of his/her choice.

A shareholders’ meeting cannot be validly held
unless and until the following quorum is met:

?     for an normal shareholders’ meeting,
one-fifth of voting rights (and no quorum if the meeting is convened on second
notice); and

?     for any ordinary shareholders’
meeting, one-quarter of the voting rights (and one-fifth if the meeting is
convened on second notice).


Except for the preferred shares and for shares with
the double voting rights, each share holds the right of one vote. A law dated
on 29 March 2014 provides that shareholders who have been holding their shares
for more than two years automatically receives double voting rights, unless
provided otherwise in the companies bylaws.

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