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In May 2001, the French parliament adopted a law on "new economic regulations", aimed at adding an "ethical" aspect to financial practices, clarifying competition rules, improving social dialogue and enforcing consumer rights. On the industrial relations front, the new legislation strengthens to some extent the powers of works councils in takeovers, mergers and proposed share exchanges.
On 2 May 2001, the National Assembly adopted the final version of a law on new economic regulations (nouvelles régulations économiques) (later published on 16 May). The bill, initially tabled in the cabinet on 15 March 2000, was a response to issues raised by a number of recent events: the current wave of mergers and acquisitions, including that involving BNP, Paribas and Société Générale (FR9903169N); "Michelin's controversial" redundancy plan at a time of high profits, announced in autumn 1999 (FR9910113F); and a dispute between producers and super- and hypermarkets.
According to the Minister of the Economy, the new legislation, which aims "to use the financial system to stimulate growth and create jobs", puts in place effective tools to regulate financial transactions, competition and companies, "in order to ensure transparency in financial transactions and a level playing field for the various actors in the economy". The key aspects of the new law are that it:
Within this framework, the new law also contains provisions of direct relevance to the role of employees and their representatives, notably in takeover bids and proposed share exchanges.
Until now, section L.432-1 of the Labour Code provided that company chief executives were required to inform works council s of any takeover bid or proposed share exchange that they were aware of targeting their company. The works council could then invite the bidding party to present its plan.
Under the new law, this subsection of the Code has been replaced by provisions stipulating a specific procedure to be followed in the event of takeover bids or proposed share exchanges, which involves two meetings with the works council.
The first meeting is held immediately following the bid, so that the chief executive of the target company can inform the works council. The works council decides whether or not to meet the bidding party, which is required to submit to the works council the takeover bid documentation required by the Stock Exchange Transactions Board (Commission des opérations de bourse, COB), setting out the bidding party's employment perspectives, no later than three days after its publication. The works council may also pronounce on whether the bid is hostile or friendly.
The purpose of the second meeting, held two weeks after the publication of the takeover bid documentation, is to allow the works council to examine it and, if it deems it necessary, to meet the bidding party. The works council may make comments and seek the assistance of an expert. If the bidding party fails to attend the meeting, it may not "use the voting rights associated with the shares of the target company which it has either already obtained or could potentially acquire." This penalty is lifted on the day after the bidding party meets the works council, or after two weeks if the bidding party is not summoned to a new meeting within that period.
In addition, a new subsection of the Labour Code, L.432-1bis, requires company chief executives to convene a meeting of the works council when the company is involved in concentration transactions (mergers and acquisitions). The works council may opt to seek the assistance of an expert, who will give his or her view at a second meeting. This expert must have access to the files of all the companies concerned by the transaction.
Lastly, changes have been made to the rules on worker representation at companies' general meetings of shareholders. As a result, a new section L.432-6-1 has been added to the Labour Code. It gives works councils the right to "take legal steps to require that a commissioner responsible for convening emergency general meetings of shareholders should be appointed". The works council may also "require draft resolutions to be included in the agendas of general meetings". Two members of the works council are also permitted to attend general meetings of shareholders and must, if they so request, be able to express their views on any decisions requiring the unanimous consent of general meeting members. However, it should be pointed out that a section of the bill giving works councils the same powers as minority shareholders was scrapped by the Senate, with the approval of the government.
The law deals to only a limited extent with employees and their representatives. Therefore, it comes as no surprise that trade unions consider that it is inadequate, even if some of them - such as CFTC and CFDT- see it as useful. The unions believe that the new law lacks any real provisions that might check hostile takeovers, and that the international aspect of regulation has been ignored. For CFE-CGC, "meeting the bidding party at the beginning of the bid process makes very little sense", since in most cases, a significant amount of time elapses between the initial takeover bid and a final decision. In addition, CFTC, CFDT and CGT would have liked to see the presence and input of workers' representatives in company decision-making bodies.
The MEDEF employers' confederation has criticised the provisions penalising the bidding party in share exchange offers it it fails to attend meetings with the works council, taking the view that "this would create confusion between labour law and stock exchange law." For MEDEF, the prescribed penalty is ineffective in the light of the fact that it is lifted as soon as the bidder meets with the works council.
The new legislation aimed at regulating the French economy largely sidelines workers's interests. Few provisions concern employees directly and the main provisions in the original bill giving them a modicum of power were removed before adoption. A case in point are those sections designed to give workers the same powers as minority shareholders. In addition, the increased powers given to works councils in the event of mergers and acquisitions are limited by the weakness of the penalties for non-compliance. Lastly, the new law has the feel of a half-hearted attempt at regulation, demonstrating the government's commitment to the current rules governing international competition. (Simon Macaire, IRES)