REFORME DES RETRAITES ET PRIVATISATION L’expérience d’une Proxy Firm

1. REFORME DES RETRAITES ET PRIVATISATIONL’expérience d’une Proxy Firm OCDE Paris Sept 22. 1999

2. PROXINVEST,the first continental proxy firm focuses on independence expertise : in depth legal and financial research, technology : First Web Full Proxy Station (88 resolutions, 60 criteria)

3. A very favorable regulatory framework for a self-correcting democratic proxy practice

4. Full shareholder legal power «L’assemblée générale est souveraine»

5. Full shareholder legal power • AGM approval of accounts, dividends, related party transactions, mergers ... • No change in the by-laws or in the capital structure without a 2/3 approval of the extraordinary meeting • Disclosure : BALO meeting agendas, COB tested Reference Document • No underwater rights issuances without PR

6. ...offering rather time to management than obstacles to the shareholders • 6 years maximum terms for Directors and Auditors • Possible Poison pills subject to the approval of the Shareholders • Possible Double Voting Right provision • Possible vote limitations / unlimited partnerships • ...but no more than a third of Executive Directors at the Board

7. The 1995 Viénot Code Insist on a difference between the company’s interest and the shareholers interests Defense of the PDG structure Defines independence of directors Ban cross-shareholding and cross-directorship Limits external directorships to five for ED Three commitees (independent for audit and remunerations)

8. A new set of Guidelines from the French Asset Management Association following the 1995 Viénot Code the AFG-ASFFI Code June 30. 1998

9. the AFG-ASFFI Code requests more (I) • board to serve the interest of all shareholders • diligent proxy voting • ban on underwater options • compensations and fees adjusted to performance

10. the AFG-ASFFI Code requests more (II) • limit number of directors to 16 • independent directors clearly defined • three independent committees • more dedicated directors: limits multi-directorships to 3 mandates for non-independent directors

11. The 1999 Viénot II Code Shortening of the Directors mandates to 4 years Yearly monitoring of the Board’s work The Board and the committees should be made of a third of independentdirectors July .1999

12. Proxy voting in France • Block your shares days before the meeting • The 5 days legal blockage allows to sell • Put a general request to your custodian • Obtain documents or use local service • Execute and Send by yourself the proxy cards or your delegation of vote to reach the company or its bank 3 days before latest

13. Modernizing French Practice, increasing taste for equity... • Withdrawal of the State: Eramet, CNP, Crédit Lyonnais, GAN... • Reduction of Cross-Shareholdings • Still Endogenous and Cross Directorships • Still many Double Voting Right provisions : 56% of the 250 French listed companies, 67% of CAC 40 • Still almighty PDGs... • But only 15 big listed companies are really locked (SCA, 10 years double voting rights, vote limitations, golden shares)

14. The BNP Soc Gen Paribas open battle could not have occurred in Germany Netherlands or Sweden or Swizerland

15. Looking at the French Privatized Companies Corporate Governance : not yet superior • 16 out of the CAC 40 Companies are privatized

16. Comparing their Corporate Governance Features (I) • Number of Directors : 16 comparing to 14.5 (CAC 40) • Number of non independent directors: 12.2 (76%) comparing to 10.7 (74%) • Number of women : 0.5833 comparing to 0.5853 • Number of shareholders : 552000 comparing to 337 000

17. Comparing their Corporate Governance Features (II) • Double voting right : 8/24 (33%) comparing to 29/ 40 (72%) • Vote limitations (Ceiling or SCA) : 5/24 (21%) comparing to 10/40 (25%)

18. Comparing their Corporate Governance Features (III) • Split Chairman CEO : 3/24 (12%) instead of 11/40 (27%) • Specialized committees : 1.9583 v.1.9512 • Audit committees : 22/24 (91.7%) comparing to 34/40 (85%) • Remuneration Commitees : 21/24 (87.4%) comparing to 35/40 (87.5%) • Nomination Committee : 6/24 (25%) comparing to 8/40 (20%)

19. Privatized companies are targets • 8 out of 24 have been acquired or merged in the last years : UAP, AGF, Suez, Eramet, Paribas, Pechiney, Rhône Poulenc, Elf...

20. Why privatized companies are targets ? • Some lack of clear entrepreneurial objectives : Suez, AGF, Saint Gobain, CNP... • Lack of private markets culture at the top: Only 2 CEO out of the 24 companies have never been associated with the public service or governement, 20 have made most of their carreer in poublic service • General lack of equity culture : subsidized shareholding (rebates, low IPO)

21. Why privatized companies are targets ? • LOW INTERNATIONAL COMPARATIVE VALUATION : • WEAK FRENCH EQUITY MARKET FOR LACK OF EQUITY INVESTED SAVINGS

22. French shareholders become vote selective : examples • keep active the capital increase authorizations in time of public offer: 97% before 1996, 96% in 1996, 94% in 1997, 91% in 1998 • global capital increase authorizations without preemptive right : 99% before 1996, 98% in 1996, 97% in 1997, 96 % in 1998 • approve dividend reinvestment plan: 99.7% before 1997, 99.6% in 1997, 99.1% in 1998

23. but still approve shareholder unfriendly proposals : examples • election or reappointment of controversial directors (99.50% in 1998...99.?% in 1999) • mergers and financial operations : Kingfisher-Castorama Dubois merger, or Lagardère 1999 doubling of the unlimited partner fee : 97% • vote limitations and poison pills : Rhône Poulenc 1999 failed on its poison pill but passed its vote limitation

24. A need for ACTIVE COMMITTED SHAREHOLDING • PENSION FUNDS ARE NEEDED TO FUND FRENCH PENSIONS • THE ONLY OPPORTUNITY FOR PARTICIPATION IS TO VOTE PROXIES • NEW PENSION FUNDS AND EMPLOYEE OWNERSHIP SYSTEMS SHOULD LEARN TO VOTE

25. www. proxinvest .fr the French Link PROXINVEST