Shareholder democracy and democracy: parallels that lead to support for the Pact law
Public and corporate governance raise similar issues
The demand for greater transparency and the essential question of trust are animating and even disrupting current debates in traditional democracies at all levels of society. The citizen – individually or collectively – now seeks to intervene in a more or less structured way in the decision-making process. Alongside the traditional intermediary bodies, relays and alliances are being made and unmade, facilitated by social networks allowing such mobilization of impetus. And, while public representatives are seeking the (lost) trust of citizens, companies are also measuring the need for ethical and sustainable governance, based on the concept of shareholder democracy.
A « new company » is built which not only integrates the stakeholders and broadens the concept of social interest to include societal and environmental considerations, but beyond that raises the question of a possible mission assigned to the company by its founders and/or shareholders (PACTE law).
It is therefore tempting to draw a parallel between shareholders who are encouraged to get involved with the help of new texts, including the Shareholders Directive , currently being transcribed, and the so-called laws on the moralization of public life. While corporate law reaffirms and extends the rights of shareholders in a final effort to encourage their involvement in the name of the company’s broader social interest, regulations concerning public decision-makers and private actors tend towards the same objective: to ensure a healthy democracy where transparency and equal access to information are guaranteed in order to obtain decisions that come as close as possible to the general interest.
Thus, between States and companies, despite the fact that players are changing, problems and solutions are similar. Both democracy and shareholder democracy revolve around the same issues: what about the quality of decision-makers? The transparency of the decision-making process? The ability of minority groups to intervene and make their interests heard? How can private and public interests be combined? What counter-powers?
3 essential concepts
Three concepts, simple to put down on paper but difficult to apply, underlie the answers: the principle of transparency, the presence of counter-moderating powers and a process of accountability are the founding principles of governance.
The organization of corporate governance depends on the perception of the company’s role in the country concerned. In the same way that the foundations of a state regime are steeped in history, but are today undergoing a common evolution linked to globalization and the emergence of new participative citizen demands, those of corporate governance are part of diverse cultural conceptions varying from state governance where the state has played an important role as in France and other Latin countries, wage governance where employees are associated as in the Rhine system, and capitalist governance where the place of shareholders dominates as in the United States. However, these systems are now intertwined, borrowing from each other, driven by a common evolution linked to the internationalization of the economy.
Corporate governance is framed by elements of corporate law and stock exchange law, but also by a large part of soft law, and to a finer degree: voting policies of institutional investors, recommendations of voting advice agencies (proxies), then choice of company statutes, individual governance practices, etc.
THE 1st CONCERN IS TO ENSURE TRANSPARENCY
Shareholders and stakeholders, including employees, are supposed to have access to as much information as possible (the limit being business secrecy); hence the multiplication of financial and then extra-financial reports, integrated reports, extensive governance reports , but also communications in the event of important events, the continuous dialogue instituted more and more often, beyond the major meeting that is the General Meeting . Beyond the right to obtain quick and clear answers to questions addressed to both the State and the leader.
THE 2ND IS PART OF THE BALANCE OF POWER
The balance of power is achieved in companies through governance mechanisms (single or dual board, separation of the functions of executive and Chairman of the Board of Directors or lead director, outside directors, committees, etc.) and specific measures to protect shareholders, particularly minority shareholders: voting rights but also the right to question, the right to submit resolutions, the possibility of appointing outside directors, etc. In addition, provisions that are usually legislative in nature in France, but are often included in governance codes, provide a framework for specific issues where conflicts of interest may arise: regulated agreements, executive compensation, etc.
THE 3RD FALLS UNDER THE PRINCIPLE OF GENERALIZED ACCOUNTABILITY OF DECISION-MAKERS
Boundaries between the interests of the company and the state are changing. We are moving from the economic to the political: with corporate social responsibility, the company is now evaluated beyond its financial dimension, by its social and environmental impact. The political system is now evaluated according to its democratic but also economic efficiency. Press freedom, accountability of politicians, clarification of the roles of representative bodies, responsible lobbying, open data are all factors allowing for a modern democracy where the direct expression of the citizen is integrated into his interests, whether private or categorical, professional, economic, societal, followed by the arbitration carried out by the authorities in the name of the general interest. The parallel is easy to draw for the company.
THE MORALIZATION EXERCISE
This parallel achieved, let us consider that the PACTE Law is to the company what the law of public moralization of July 2017 and its aftermath is to the company, having for purpose to reconsider in the second case the public governance, and in the first case that of the company. Proposing an enlarged role for the company integrating CSR considerations, or even a « mission », means questioning certain aspects of governance, including the role of employees: employee administrators  and the need for employee shareholders to have power, but also promoting the institution of a stakeholders’ committee (which Michelin is attempting this year). The need to transcribe the Shareholders Directive1 allows for greater transparency on regulated agreements, say on pay, institutional voting policy, and possible conflicts of interest in voting by consulting agencies. Finally, the improvement of dialogue with shareholders, with the prior ability to better identify the actual holders of shares in order to avoid errors in counting votes at the 2018 General Meeting. For these reasons, we support articles 60 and following of the PACTE law. The law must accompany a demand for changes in the role of the company and its governance, expressed by stakeholders and society.
By Viviane de Beaufort, Professor at the ESSEC Business School
 Ordonnance no 2017-1162 du 12 juillet 2017 portant diverses mesures de simplification et de clarification des obligations d’information à la charge des sociétés- CHAPITRE Ier Le rapport sur le gouvernement d’entreprise
 Gouvernance pérenne et montée de l’activisme actionnarial – https://www.slideshare.net/secret/7Kah78JuN1BcT