The French Resolution: Why shareholders are fighting for change in the heartland of responsible investment

The French SIF is leading a campaign to change the country’s shareholder voting system

Despite France’s position as a global leader on responsible investment, filing a resolution at a company AGM isn’t easy. According to Grégoire Cousté, General Secretary of the country’s forum for responsible investment (FIR), the system is “a nightmare”.

Shareholders must hold 0.5% of a French firm’s capital to put forward a proposal, and determining its admissibility is the sole responsibility of the company’s board of directors, forming an additional obstacle – as seen time and time again around the world, big companies don’t always like resolutions, especially ESG resolutions. 

Even if a resolution does make it onto the ballot, Cousté says the lack of electronic voting and the number of intermediaries involved further complicate things. “We know that, in the past, some actors didn’t have their vote recognised in the final results. If you have 2% of capital in a company and you vote against a resolution, and the resolution is accepted with 98.5% approval, your vote clearly isn’t represented. It’s not transparent at all, it’s not an easy process and that needs to change.” 

As a result, the FIR, also known as the French Sustainable Investment Forum, whose members include some of France’s most powerful asset owners and fund managers, is recommending a number of fundamental changes to the French system. 

"In France, there’s a great contradiction. We are global leaders in ESG, but we’re held back by bureaucracy. There is so much effort needed to make positive change" –  Loic Dessaint, CEO of Proxinvest

Backed by investors including Meeschaert, La Banque Postale and Ecofi, the proposals include the facilitation of collaborative engagement on environmental and social issues, as well as ensuring more resolutions make it to the ballot. 

The FIR suggests changing the rules so that proposals can be co-filed by a consortium of shareholders – at least 100 – instead of a single investor having to own 0.5% of stock. Loic Dessaint, CEO of Paris-based advisor Proxinvest, says such consortiums will allow for “a more open, democratic process and active and engaged shareholders”. 

The FIR is also recommending that the French Financial Markets Regulator, the Autorité des Marchés Financiers (AMF), takes on a similar role to the Securities and Exchanges Commission in the US, arbitrating on the admissibility of any proposal that the company wants struck off the ballot. Cousté told RI that the FIR “no longer wants the decision to only be taken by the board. The AMF should instead decide if resolutions are admissible”. 

While the FIR acknowledges that shareholder engagement at AGMs is “one of the key levers available to investors to exercise their responsibility for the sustainable development of companies,” the forum suggests that lending shares to campaign groups and activists so that they can engage as shareholders on social and environmental issues must be closely supervised. A stronger future focus should instead be placed on the tabling of resolutions by investors themselves, it says.  

According to the FIR, AGM debates that offer firms a chance to hear from investors on strategic direction should be considered a “privilege”, but Cousté says that the French system is “stuck in the 19th century”. 

It's a view echoed by Dessaint, who says: “In France, there’s a great contradiction. We are global leaders in ESG, but we’re held back by bureaucracy. There is so much effort needed to make positive change. Even the paperwork needed to prove you’re a shareholder is a nightmare, and if you’re not French, it’s even more complex.” 

As such, the FIR is calling for the general simplification of the process, by using electronic procedures and votes, and reducing levels of bureaucracy. “It’s crazy that in the modern world, we still have AGM practices like this," Cousté tells RI. "It is procedure-heavy and must be eased.”  

The FIR is also sending a set of ESG-related questions to companies in the CAC40, France's market benchmark, including topics such as company activities that aren't compatible with the Paris Agreement, plans for labour changes as a result of automation, and disclosure on salaries and gender equality. According to French law, the companies must reply publicly and the FIR plans to publish a study once they receive the answers.