Independent Directors and Advisors

1. Independent Directors and Advisors Edward Addey, FCA 12 October 2006

2. Independent Directors and Advisors • The downside. • Are they worth having? • French context. • What do ID’s do? • Why us? • What are we doing ? • ABAF Focus Group web site.

3. Independent Directors and Advisors • The downside. • Are they worth having? • French context. • What do ID’s do? • Why us? • What are we doing ? • ABAF Focus Group web site.

4. Experienced British Chartered Accountants asIndependent Directors and Advisors to Boards in France An unique source of benefit and added value

5. Independent Directors and AdvisorsIndex • British Chartered Accountants as Independent Directors • Requirements and Roles of all different types Directors • Requirements of all directors • The Role of the Non-Executive Director • The Effective Non-Executive Director • The Independent Non-Executive Director • Advisors to the Board • French context • Links • Association of British Accountants in France – Focus Group (Profiles)

6. Independent Directors and AdvisorsBRITISH CHARTERED ACCOUNTANTS ASINDEPENDENT DIRECTORS AND ADVISORS TO BOARDS OF DIRECTORS IN FRANCE British Chartered Accountants (CAs) who have worked in France for many years have certain unique qualities, well suited, to the position of Independent Director or Advisor: • Chartered Accountants – have a financially oriented business qualification which is internationally respected. They are required to carryout up-to-date training under a system of monitored Continued Professional Development (CPD). • Breadth of experience and international exposure – The CAs in this Focus Group have operated at board and senior management levels across many sectors including industry, commerce and financial services. They have been involved in international operations and have resided outside the UK with a unique exposure to international business practices and different cultures. • Diversity of roles - In addition to the frequent position of CFO, they have occupied many different senior management roles including Chairman, CEO, Commercial or IT directors working in industry, commerce, consulting, general practice, tax and audit.

7. Independent Directors and AdvisorsBRITISH CHARTERED ACCOUNTANTS ASINDEPENDENT DIRECTORS AND ADVISORS TO BOARDS OF DIRECTORS IN FRANCE(Cont) • Integrity – Intrinsic to the CA professional and ethical standards is "integrity" which is constantly and carefully monitored by the professional bodies. • Network – CAs with their international connections, through their professional bodies’ offices in every major country and other business connections have a strong global network. • Technical Support – The Institute of Chartered Accountants provides full technical support including specialised advice on corporate governance and best practices, with an extensive library and data base. International best practices and increasingly strict Corporate Governance regulations encourages companies to cast their nets more widely in the recruitment of Independent Directors. CAs come from a diverse range of backgrounds and have sound business skills and broad-based experience. This means that organisations can be assured of their relevance, quality and added value for the Requirements and Roles as described in the following pages.

8. Independent Directors and AdvisorsRequirements and Roles of Different Types of Directors REQUIREMENTS OF ALL DIRECTORS • Provide entrepreneurial leadership of the company within a framework of prudent and effective controls. • Set the company's strategic aims, ensure that the necessary resources are in place and review management performance. • Set the company's values and standards and ensure that its obligations to its shareholders and others are understood and met including compliance with all relevant laws, regulations and best practices.

9. Independent Directors and AdvisorsRequirements and Roles of Different Types of Directors (cont) IN ADDITION THE ROLE OF THE NON-EXECUTIVE DIRECTOR INCLUDES THE FOLLOWING: • STRATEGY. They should constructively challenge and help develop proposals on strategy. • PERFORMANCE. They should review the performance of management in meeting objectives and monitor the corporate reporting. • RISK. They should ensure the integrity of systems of management information and financial information and the adequacy of financial controls and risk management in accordance with best principles of corporate governance. • PEOPLE. They are involved in determining remuneration of executive directors, in management succession planning and in appointing and, where necessary, removing directors.

10. Independent Directors and AdvisorsRequirements and Roles of Different Types of Directors (cont) THE EFFECTIVE NON-EXECUTIVE DIRECTOR: • OBSERVES AND UPHOLDS the highest ethical standards of integrity. • SUPPORTS executives in their leadership while monitoring their conduct. • QUESTIONS intelligently, debates constructively, challenges rigorously and decides dispassionately. • LISTENS sensitively to others, inside and outside the Board. • GAINS the trust and respect of other Board members, and • PROMOTES the highest standards of corporate governance and seeks compliance with local Codes, where these exist.

11. Independent Directors and AdvisorsRequirements and Roles of Different Types of Directors (cont) THE INDEPENDENT NON-EXECUTIVE DIRECTOR: • DIRECTORS can be considered Independent only when they are independent in character and judgement, and there are no relationships or circumstances which could affect the director's judgement. • EXCLUDED are therefore: • Former employees until five years after employment, • Those with a material business relationship with the company, • Those receiving additional remuneration from the company apart from director's fees and those who are a member of the company's pension scheme, • Those with close family ties with any of the company's directors, advisers or senior employees, • Those who have cross directorships or have significant links with other directors, • Those who represent a significant shareholder.

12. Independent Directors and AdvisorsADVISORS TO THE BOARD OR TO MEMBERS OF THE BOARD At certain times, it may be deemed preferable to appoint an individual as an advisor (known as a “censeur” in France) to the Board or to individual directors to: • Represent a specific shareholder who has a minority interest • Represent a key financial institution • Provide technical support on specific issues; finance, strategy, production, regulation…… • Provide in depth knowledge of a specific industry • The role of the Advisor is defined by contract, whereas the role of the Independent Director is defined by statute.

13. Independent Directors and AdvisorsFrench Context • IN FRANCE, WIDELY HELD CORPORATIONS are recommended to have at least half the Board as Independent Non-Executive directors; in other companies it is at least one third of the Board. • The recommendations of the reports from Vienot (1999) and Bouton (2002) were consolidated into the AFEP and MEDEF report in 2003. Companies in the CAC40 generally follow these recommendations. To the contrary, many other quoted companies often are not in accord with the suggestions from Bouton, in particular, the real independence of "les administrateurs indépendants", the high number of Presidents who are also the CEO, and the number of cross-directorships. • In general, companies in France are less willing than those countries which have taken the lead in implementing good Corporate Government practice to appoint Independent Directors, which is partly explained by the lower number of shareholders and the higher quantity of “noyaux durs”. In some cases the Board of Directors prefers to appoint “censeurs" as independent advisors to the Board or to individual directors. • The above Codes, the “Code de Commerce” and the “Réglement de la Bourse” result in a comparatively high international Corporate Governance Rating for France, but one just below the U.K

14. Independent Directors and AdvisorsLINKS TO OTHER WEB SITES (Suggested) • Institute of Chartered Accountants in England and Wales • Association of British Accountants in France • Institute of Directors • Administrateurs Professionnels Indépendants Associés • Franco-British Chamber of Commerce

15. Independent Directors and AdvisorsTHE ASSOCIATION OF BRITISH ACCOUNTANTS IN FRANCE • Focus Group of Independent Directors and Advisors to Boards: • Edward Addey profile • John Dickinson profile • Richard Dubois profile • Ian Duncan profile • Chris Fewkes profile • Peter Hammett profile • Contacts: • addeye@wanadoo.fr • john.dickinsdon@libertysurf.fr