Afep and Medef publish a revised version of the corporate governance code of listed corporations

Paris, 21 June 2018 PRESS RELEASE

Afep and Medef are publishing a revised version of the corporate governance code of listed corporations. For the second time, a public consultation launched on a dedicated site collected and took into account numerous contributions, including from international stakeholders. A summary of the responses to the consultation produced by Professor Bertrand Fages, independently of Afep and Medef, will be made public within the next few days.

This approach is part of an ongoing process of updating the corporate governance standards, which are revised every two years on average, making the French corporate governance code among the most demanding internationally.

The code introduces new advances in governance.

Keen to engage constructively in the debate on the tasks of the company and the latter’s contribution to the general interest, Afep and Medef have placed the tasks of the Board right at the beginning of the code. The code now states that the Board should endeavour to promote long-term value creation by the company at the same time as considering the social and environmental aspects of its activities, thus responding to the conclusions of the Notat-Senard mission.

The revised code also includes tighter non-discrimination and diversity requirements and takes greater account of CSR (corporate social and environmental responsibility).

It recognises the importance of appointing employee directors within the companies that take strategic decisions within a group.

To further enhance the efficient monitoring of the application of the code, it is increasing the number of members of the High Committee on corporate governance (HCGE), which will now include more diverse profiles, and is enhancing its powers of sanction by giving it the ability to “name and shame”.

This new version also addresses the deviations observed by the High Committee on corporate governance by imposing even stricter clauses relating to the departure of company officers (supplementary pensions with performance conditions and non-competition benefits).

The Afep-Medef Code is available on the following websites:

www.afep.com

www.medef.com

Press contacts: Afep: Tarick Dali, +33 1 40 70 11 89; t.dali@dgm-conseil.fr

Medef: Arnaud Delaunay, +33 1 53 59 17 77; presse@medef.fr

Main updates to the corporate governance code

Long-term value creation and risk prevention central to the Board’s tasks The code recommends that the Board of Directors should endeavour to promote long-term value creation by taking into account the social and environmental aspects of its activities, thus responding to the expectations of the Notat-Senard mission and of stakeholders. Afep and Medef note the legislative provisions introduced in the draft “Pacte” Law, at the same time as marking their preference for the subject of CSR, in which French corporations are world leaders, to be covered by soft law. The importance of CSR aspects provides justification for the code recommending the integration of one or more CSR criteria in company officers’ variable compensation. With regard to risk prevention, and in order to take into account comments made by respondents to the consultation, the code recommends that the Board should ensure the implementation of a mechanism to prevent and detect corruption and insider influence and, to this end, receive all of the necessary information to perform its task.

Employee directors placed at the proper strategic level

To ensure the representation of employee directors precisely where the strategic decisions are made within a group, they will sit on the Board of the company that states that it refers to the provisions of this code.

High Committee on corporate governance given new resources and prerogatives

To promote more diverse profiles and skills on the High Committee, it will be comprised of nine members by the end of this year instead of the current seven. To ensure a better balance between men and women on the HCGE, individuals who hold or have held directorships within companies that refer to the code may now be appointed, without them having to have held executive office. The names of the two new members of the High Committee will be disclosed shortly. Furthermore, among its prerogatives, the High Committee has been given the ability to “name and shame”. Consequently, if a company does not respond within two months of receiving a letter from the High Committee, it runs the risk of the content of this letter being made public, which should encourage companies to pay greater attention to the High Committee’s comments or requests for explanations.

Companies’ commitments regarding non-discrimination and diversity raised to the highest level

To expand the scope of the commitments regarding non-discrimination and diversity, the Board of Directors will have to ensure that the company officers implement a policy in this area that, notably, focuses on more balanced representation of men and women on the governing bodies which, as well as the Board, concerns the executive and management committees and, in broader terms, the senior management.

Further advances with regard to compensation as well as the imposition of even stricter clauses relating to the departure of company officers.

The code imposes even stricter conditions on non-competition clauses so as to avoid circumvention practices. In particular, there must be no possibility of concluding a non-competition agreement at the time of the company officer’s departure. For pre-existing clauses, the benefit cannot be paid in the event of retirement or above an age limit that the code sets at 65 years of age. Finally, the award of entitlements or compensation intended to constitute a supplementary pension scheme must be subject to performance conditions. These new provisions are in addition to the code’s existing ceiling on termination benefits.

Shareholders’ dialogue with the Board of Directors encouraged

To respond to calls from shareholders desiring direct dialogue with members of the Board of Directors, particularly in relation to corporate governance matters, and at the same time support the development of this practice, the code states that such dialogue may be entrusted to the Chairman of the Board or, if applicable, the Lead Director, with the latter having to report to the Board on their task.

Tighter ethical rules for directors on the subject of conflicts of interest

The code recommends, in the event of a conflict of interests, that the director concerned, who already had to abstain from voting on the related resolution, should abstain from attending the debate.

Improved transparency and clarity of the information regarding the Board of Directors

To ensure transparency, the code recommends that the report on corporate governance should report the attendance level of each director at Board meetings and at committee meetings. Furthermore, to enable informed voting by shareholders on the appointment or reappointment of a director, the company should state the reasons for proposing his or her appointment to the shareholders’ meeting. Finally, appended to the code is a standard presentation for information about the Board (membership, independence, regular attendance).