REFORME DES RETRAITES ET PRIVATISATIONL’expérience d’une Proxy Firm

OCDE Paris Sept 22. 1999

PROXINVEST, the first continental proxy firm focuses on

independence

expertise : in depth legal and financial research,

technology : First Web Full Proxy Station (88 resolutions, 60 criteria)

A very favorable regulatory framework

for a self-correcting democratic proxy practice

Full shareholder legal power «L’assemblée générale est

souveraine»

Full shareholder legal power AGM approval of accounts, dividends, related

party transactions, mergers ... No change in the by-laws or in the capital

structure without a 2/3 approval of the extraordinary meeting

Disclosure : BALO meeting agendas, COB tested Reference Document

No underwater rights issuances without PR

...offering rather time to management than obstacles to the shareholders 6 years maximum terms for Directors and

Auditors Possible Poison pills subject to the approval of

the Shareholders Possible Double Voting Right provision Possible vote limitations / unlimited

partnerships ...but no more than a third of Executive

Directors at the Board

Insist on a difference between the company’s interest and the shareholers interests

Defense of the PDG structure

Defines independence of directors

Ban cross-shareholding and cross-directorship

Limits external directorships to five for ED

Three commitees (independent for audit and remunerations)

The 1995 Viénot Code

June 30. 1998

A new set of Guidelines from the French Asset Management

Association following the 1995 Viénot Code

the

AFG-ASFFI Code

the AFG-ASFFI Code requests more (I)

board to serve the interest of all shareholders

diligent proxy voting ban on underwater options compensations and fees adjusted to

performance

the AFG-ASFFI Code requests more (II)

limit number of directors to 16 independent directors clearly defined three independent committees more dedicated directors: limits multi-

directorships to 3 mandates for non-independent directors

Shortening of the Directors mandates to 4 years

Yearly monitoring of the Board’s work

The Board and the committees should be

made of a third of independent directors

The 1999 Viénot II Code

July .1999

Proxy voting in France

Block your shares days before the meeting– The 5 days legal blockage allows to sell– Put a general request to your custodian

Obtain documents or use local service Execute and Send by yourself the proxy cards

or your delegation of vote to reach the company or its bank 3 days before latest

Modernizing French Practice, increasing taste for equity...

Withdrawal of the State: Eramet, CNP, Crédit Lyonnais, GAN...

Reduction of Cross-Shareholdings Still Endogenous and Cross Directorships Still many Double Voting Right provisions : 56% of the

250 French listed companies, 67% of CAC 40 Still almighty PDGs... But only 15 big listed companies are really locked (SCA, 10

years double voting rights, vote limitations, golden shares)

The BNP Soc Gen Paribas open battle

could not have occurred in Germany Netherlands or Sweden or Swizerland

Looking at the French Privatized Companies Corporate Governance :

not yet superior

16 out of the CAC 40 Companies are privatized

Comparing their Corporate Governance Features (I)

Number of Directors : 16 comparing to 14.5 (CAC 40)

Number of non independent directors: 12.2 (76%) comparing to 10.7 (74%)

Number of women : 0.5833 comparing to 0.5853

Number of shareholders : 552000 comparing to 337 000

Comparing their Corporate Governance Features (II)

Double voting right : 8/24 (33%) comparing to 29/ 40 (72%)

Vote limitations (Ceiling or SCA) : 5/24 (21%) comparing to 10/40 (25%)

Comparing their Corporate Governance Features (III)

Split Chairman CEO : 3/24 (12%) instead of 11/40 (27%)

Specialized committees : 1.9583 v.1.9512 Audit committees : 22/24 (91.7%) comparing to

34/40 (85%) Remuneration Commitees : 21/24 (87.4%)

comparing to 35/40 (87.5%) Nomination Committee : 6/24 (25%) comparing to

8/40 (20%)

Privatized companies are targets

8 out of 24 have been acquired or merged in the last years : UAP, AGF, Suez, Eramet, Paribas, Pechiney, Rhône Poulenc, Elf...

Why privatized companies are targets ?

Some lack of clear entrepreneurial objectives : Suez, AGF, Saint Gobain, CNP...

Lack of private markets culture at the top: Only 2 CEO out of the 24 companies have never been associated with the public service or governement, 20 have made most of their carreer in poublic service

General lack of equity culture : subsidized shareholding (rebates, low IPO)

Why privatized companies are targets ?

LOW INTERNATIONAL COMPARATIVE VALUATION :

WEAK FRENCH EQUITY MARKET FOR LACK OF EQUITY INVESTED SAVINGS

French shareholders become vote selective : examples

keep active the capital increase authorizations in time of public offer: 97% before 1996, 96% in 1996, 94% in 1997, 91% in 1998

global capital increase authorizations without preemptive right : 99% before 1996, 98% in 1996, 97% in 1997, 96 % in 1998

approve dividend reinvestment plan: 99.7% before 1997, 99.6% in 1997, 99.1% in 1998

but still approve shareholder unfriendly proposals : examples

election or reappointment of controversial directors (99.50% in 1998...99.?% in 1999)

mergers and financial operations : Kingfisher-Castorama Dubois merger, or Lagardère 1999 doubling of the unlimited partner fee : 97%

vote limitations and poison pills : Rhône Poulenc 1999 failed on its poison pill but passed its vote limitation

A need for ACTIVE COMMITTED

SHAREHOLDING PENSION FUNDS ARE NEEDED TO FUND

FRENCH PENSIONS THE ONLY OPPORTUNITY FOR

PARTICIPATION IS TO VOTE PROXIES NEW PENSION FUNDS AND EMPLOYEE

OWNERSHIP SYSTEMS SHOULD LEARN TO VOTE

www. proxinvest .fr the French Link

PROXINVEST