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Corporate France swims against tide on chairman independence
October 30, 2017 / 2:25 PM / in 24 days

Corporate France swims against tide on chairman independence

PARIS (Reuters) - Corporate France is bucking the global trend of splitting the roles of chairman and CEO, with Thomson Reuters data showing a steady growth in the number of French companies that have merged the posts in the past 15 years.

Almost three quarters of listed French companies tracked by Thomson Reuters now have or have had one person holding both positions, compared to 60 percent in the United States and fewer than 20 percent in Britain, Germany and Japan, according to an analysis of more than 6,500 companies.

On average, around one in three companies globally now combines the two roles, down from a little over 50 percent in 2002, when France was on a par with the global average.

The Group of 20 leading economies backed corporate governance principles in 2015 that deemed separation a “good practice” that could help strike “an appropriate balance of power, increase accountability and improve the board’s capacity for decision-making independent of management”.

But France is one of the few major economies not following that path, with yoghurt maker Danone becoming the latest to merge the two roles.

While investors and policymakers increasingly frown on the concentration of powers, data suggests shareholders are not necessarily suffering worse returns as a result, and French chairmen/CEOs are not on average pocketing higher pay packages, a Reuters analysis of corporate performance and pay shows.

Total shareholder returns, which include dividends and share price performance, are on average no worse for French companies that do not separate the roles than for those that do.

While U.S. CEOs who chair their boards earn more on average than those who do not, there is no meaningful difference in pay in France, which experts say is probably due to rules that require executive compensation to be put to shareholders.

In France, CEO pay packages average about 1.8 million euros ($2.1 million) whether the person heads the board or not, according to Thomson Reuters data. In the United States, chairmen/CEOs take home packages worth $8.6 million on average, compared to $6.8 million for those who do not.

Of course, splitting the leadership roles is not only about shareholder returns but also a means of increasing transparency and oversight. On that score some investors have raised concerns about France’s track record.

However, others are comfortable with the French trend towards combining the jobs and see benefits.

“We’re not dogmatic about separating the chairman and CEO posts, what interests us is management’s quality and that strategy is carried out with a long-term vision,” said Cyril Charlot, founding partner of Paris-based Sycomore Asset Management, which has 7.2 billion euros under management.

“It’s sometimes easier to carry out a long-term strategy when the two posts are joined, when the company is controlled by a family or a big shareholder,” he said.

Many of France’s largest companies count the founding family as their largest shareholder.

Despite the prevalence of chairmen/CEOs, French CEOs also fare well in international rankings of executive performance.

Fourteen French CEOs figured in a Harvard Business Review tally last week of the 100 best performers globally based on financial, environmental, social and governance criteria. There were three in the top 10, two of them combined chairmen/CEOs.

(For graphic on seperation of CEO and chairman roles, click: reut.rs/2ydG1YB )

Reporting by Leigh Thomas; editing by Luke Baker/Keith Weir

Our Standards:The Thomson Reuters Trust Principles.
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