Boards Make-up in France : A New Corporate Paradigm, for which Governance?
Traditionally, legislators have held boards to fairly low standards, the normative aspects being covered by fiduciary duties and liabilities in case of breach. In the aftermath of the global financial crisis, new concerns were raised in relation to boards’ effectiveness. In particular, there has been a growing debate about conflict of interests, interlocking mandates or turnover. Those factors have been viewed as crucial to assessing the effective involvement directors have in the strategic decisions of the company. Shareholder pressure and regulatory reforms have provided some requirements as to improve the make-up of boardrooms and new issues arise at a rapid pace.
Many European corporate governance models have generally adopted the view that executive governance and executive interaction with all stakeholders really matter. Boardrooms in France that were historically controlled by company executives (the P-DG model) have seen a dramatic change in a few years, being replaced with boardrooms that tend to be dominated by independent directors and be more stakeholder-oriented. Agreement has been reached on some recurring points (such as availability and expertise), but other topics (like independence, diversity, employees representation and turnover) are the subject of much debate. There is also significant debate about whether executive governance should be subject to substantive regulations or remain soft recommendations. Additionally, when such legal innovations are adopted from foreign legal systems, their reception in a specific legal and cultural context often creates legal transplant-related issues and disparate national provisions.
While the operation of executive bodies is one major corporate governance issue shared by all legal systems, reaching a consensus on convergence of all governance standards has proved difficult. As the composition of the board and their proceedings have become critical issues for corporate governance, this paper will strive to evaluate boards make-up as a new corporate paradigm in France and identify endogeneous and exogeneous obstacles to its effectiveness in meeting the firm needs.