France Board Governance Study 2020

Russell Reynolds Associates recently undertook an analysis looking at governance trends across CAC 40 and SBF 120 companies over the past 12 months. The report highlights the main trends in France, which include the importance of CSR and purpose, female representation on boards, the impact of COVID and the effects of the PACTE law.

Key Points 2019/2020

CSR And Purpose 

• Progress in the adoption of purpose in line with PACTE
• CSR more and more at the heart of the business model
• Boards increasingly concerned with integrating sustainability into the corporate culture

CEOs And Executive Committees 

• Increasing proportion of foreign CEOs in SBF 120
• Further female representation on the executive committees

Remuneration

• Slight increase in salaries which will be impacted by the COVID crisis

Board Profiles 

• A relatively similar composition compared to the previous year
• Strong growth in CSR committees
• An increasing number of employee representatives
• France still at the top of the list in terms of female representation compared to its European counterparts

CSR and purpose now at the heart of Boards of Directors

More than half of SBF 120 companies now have a CSR committee

This year, 6 companies have created a CSR committee:

• Vivendi (CAC40)
• Worldline (CAC40)
• Thalès (CAC40)
• Ubisoft (Next20)
• Lagardère (CAC Mid60)
• Wendel (CAC Mid60)

75% of the CAC40 Board of Directors have a committee in charge of CSR issues.

33% of them have a committee exclusively dedicated to CSR.

50% of the SBF 120 Board of Directors, excluding CAC, have a committee in charge of CSR issues.

25% of them have a committee exclusively dedicated to CSR.

SBF excluding CAC 

Increase in the number of CAC 40 companies that have a committee in charge of CSR issues 

The increasing focus on corporate social responsibility (CSR) observed in recent years continues in 2020, reinforced by the COVID crisis in the first half of the year. Now, half of the SBF 120 companies have a committee that deals with CSR issues, as do 75 percent of the CAC 40. Among CAC 40 boards, 33 percent have a committee exclusively dedicated to CSR, a number which has almost tripled in three years. CSR is also widely taken into account in the remuneration of executive directors of the CAC 40. Ninety-five percent of companies integrate CSR into the determination of short-term objectives and 32 percent in long-term incentives.

In line with the enforcement of the May 2019 PACTE law (Plan of action for the growth and transformation of companies), more CAC 40 companies adopted the notion of “purpose” in order to define and specify their usefulness within society. To date, 65 percent of CAC 40 companies have formulated a purpose.

CSR has also found increased representation on executive committees. Thirty-five percent of CAC 40 companies had a CSR manager on their executive committee in 2020, up from 23% in 2019.

The COVID crisis significantly impacts compensations and dividends. 

Choice of companies in terms of dividends in % 

The AFEP, which includes the 110 largest French companies, recommended the companies resorting to partial unemployment to reduce their dividends by 20% in times of crisis.

On Monday, March 30, the ACPR (French regulator) asked the banks not to pay any dividends before October, in accordance with the guidelines provided by the BCE, and not to make any commitments for fiscal years 2019 and 2020 as a result of the crisis caused by the pandemics.

The State asked the companies in which it holds interests not to pay any dividends and announced a vote against it in GA.

A marked impact of the COVID crisis on compensation and dividends

The COVID crisis has had effects at every level. One-third of CAC 40 companies and 26 percent of SBF 120 non-CAC companies have announced a reduction in the remuneration of their board chairman and/or directors. The compensation of CEOs is also part of this trend, with 63 percent of CAC 40 CEOs announcing a reduction of their pay. Finally, COVID has had effects on the distribution of dividends. This can be seen in the CAC 40, where 40 percent of companies did not distribute dividends and 38 percent decided to reduce them.

France, still the European leader in championing women on boards, accelerates female representation on executive committees

The enforcement of the PACTE law and of its new method of calculating female/male representation (excluding directors elected by employees or representatives of employee shareholders) slightly lowers the average level of female representation on boards. Twelve CAC 40 companies now have less than 40 percent female representation. Nevertheless, with women comprising 45 percent of board members overall, France remains the European driver of gender parity, way ahead of Germany (33%) and the United Kingdom (35%).

The number of women on executive committees has also increased at a sustained pace. The proportion of women within the Comex in CAC 40 and SBF (excluding CAC 40) now reaches 21 percent, an increase of 3 percent since 2019. However, the majority of women have functional responsibilities: only 34 percent hold operational positions within the executive committees of the SBF 120 (although this figure is up from 24 percent in 2018).