European Comment: Vivendi’s cunning poison pill

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French companies should practise what they preach. It is all very well for Electricité de France to complain about Rome's continuing 2 per cent voting limit on the French utility's Edison stake, but several CAC40 French blue chip companies still maintain stringent voting right limitations.

Although some have moved to the fairer one-share one-vote system, others have maintained and reinforced mechanisms to protect management from strong shareholders.

Michelin and Lagardère remain fortresses thanks to their limited partnership structures. EADS and STMicroelectronics can dismiss shareholder resolutions if these are deemed not in the company's best interest because they are Dutch-registered companies.

Total, Danone, Alcatel, Schneider, Société Générale, Lafarge and Vivendi all have voting right limits. All are coming under pressure to change their ways, but bad habits die hard.

Take Vivendi. The entertainment and telecommunications group has bowed to investor demands to scrap its existing voting rights limits. But at its annual meeting later this month it is proposing a cunning and complex new mathematical formula that will reduce voting rights of large active shareholders while increasing the weight of small shareholders.

This may seem more equitable. Yet small shareholders generally give blank power to the chairman and CEO, thus strengthening management's hand. For under the formula, pioneered by Lafarge in the 1980s, the voting rights of large investors are reduced in proportion to the percentage of shareholders present at the meeting.

Shareholders should vote down Vivendi's latest wheeze to introduce a new poison pill by the back door.

Medef man

It can hardly compare to a papal election, but the cardinals of French industry on Monday launched their own conclave to appoint a new leader for the country's employers confederation - Medef, as the old patronat is now known. A surprise front-runner has already emerged to take over from Baron Ernest-Antoine Sellière, the aristocratic businessman due to take charge this summer of Unice, the European employers association.

Not that Francis Mer's election chances are cut and dry. Some Medef members are already expressing doubts, fearing the political ties of the former finance minister and steel industry boss risk undermining Medef's independence. These fears have been heightened by Mr Mer's intention of running in tandem with Guillaume Sarkozy, the textile entrepreneur and brother of presidential hopeful Nicolas Sarkozy, who would become Medef's vice-chairman should Mr Mer win.

But Mr Mer's short-lived government experience should not be held against him. As he wrote in a recent book, he found life as finance minister frustrating to say the least, far preferring his role as captain of industry. Indeed, he tried, unsuccessfully, to run the ministry as a business. Yet his time there has given him precious insight into government that should prove useful if elected.

Baron Sellière managed to revive an ageing institution, giving it greater national clout and influence. His successor will need to pursue his campaign to make French industry more competitive. Mr Mer, with his international stature and business experience, is well placed to do so.

No cause for rhapsody

Ferenc Gyurcsany, Hungary's prime minister, sacked his finance minister on Monday and replaced him with a party stalwart whom he hopes will have a better chance of getting Socialist colleagues to back cuts in tax and spending.

Janos Veres, who replaces ex-banker Tibor Draskovics, is the third since the Socialist-led government took office in 2002. Mr Gyurcsany wants to overhaul health and welfare and cut taxes to boost economic growth while keeping spending in check to get Hungary into the euro in 2010. Financial markets are sceptical. They believe it will be hard to resist party pressure for populist measures ahead of general elections next year.

Hungary aims to reduce its budget deficit this year to 4.7 per cent of gross domestic product from 5.3 per cent in 2004, but the deficit hit 47 per cent of the full-year target at the end of March. It needs the fiscal gap to fall below 3 per cent by 2008.

After three years of promises, markets are right to withhold approbation. Judge politicians by actions, not words.

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