I
There is no longer a consensus on the liberal intellectual framework that prevailed up to now. New players are entering the fray and the company cannot do without careful consideration of these upheavals in its reflection on its social function and responsibilities. The liberal paradigm is no longer the measure of all things. It is contested from a political point of view, at a time when we are witnessing a strong resurgence of calls for national preference in some countries – even a form of exalted nationalism. The forceful return of States can be an opportunity to think afresh about the concepts of regulation, long-term investment and how a company’s nationality is decided, but it can also be a major factor of instability. Contesting the liberal paradigm also has significant consequences for the economy when open borders and free trade are called into question. This contestation also raises questions about the primacy of the shareholder and the management principles resulting from this shareholder governance. Finally, this paradigm is contested at the societal level, where demands take the form of a strong requirement to integrate the principles of respect for people and the environment into the heart of corporate strategy. These new demands are driving companies to develop a theory of engagement and adopt an openly pro-social behaviour. As a result, companies have to clarify their projects and the consequences of their actions in society. In parallel with the changing economic situation, new players are emerging: this is the case of the new generation, which stands out by its strong commitment to environmental and social issues, but spurns traditional methods of expressing demands, such as voting. This contestation is multi-faceted and has multiple goals, and it is also expressed by consumers, NGOs and whistle-blowers, each of whom have access to major social, legal and human channels. Taking the time to characterise this social demand, made up of multiple and sometimes contradictory requirements, allows us to better understand the changes affecting the company and calling into question its governance.
II
As a result of the proliferation of demands, the company is becoming an arena for the expression of power relationships between stakeholders. We need to invent mechanisms for arbitration, for conciliation between the different interests seeking to take over the company. In this respect, the role of the business leader is undergoing a profound change. Business leaders are becoming the conciliators of these interests: it falls on them to create corporate governance strategies to ensure that all voices are equally heard. What are the tools needed to develop an effective system within the company that will enable societal interests to be combined with financial performance requirements as widely as possible? To what extent does incorporating a risk criterion contribute to better understanding the consequences for investment management of the notion of corporate social interest? There is almost unanimous agreement on the importance of the company’s societal role and on the fact that a great deal of work remains to be done to propose ways of taking this societal interest into account in corporate governance. We then propose to examine three governance reforms. Firstly, the consequences of appointing workers’ representatives to company boards: while the French Pacte Act proposes lowering the threshold for the mandatory presence of employee directors, what responsibilities can they be assigned on boards of directors? Secondly, the relevance of separating the functions of chairman and chief executive officer should be examined in the specific context of safeguarding the public interest. Finally, the question of the role of the CSR committee within the Board of Directors needs to be further explored. What powers should this committee have if it decides each year on the conformity of the company’s guidelines with the CSR commitments made, or even the social interest?
III
On what basis should one define the concept of purpose, or “raison d’être”? As a result of the multiplication of social and environmental demands, legal risk is bound to grow structurally. The starting point for our reflection on raison d’être should be the observation of the increasing judicialisation of society. We can then attempt to understand how defining a raison d’être can contribute to limiting, or controlling, the risks weighing on the company, rather than increasing them. On the face of it, raison d’être does not appear to be a dangerous or protective concept: it all depends on how it is defined and then applied within the company. It must represent the company as an institution that responds to the multiple demands of various stakeholders such as shareholders, clients and also employees. It must contribute to making the company attractive to young talent. To what extent can soft law enable raison d’être to become an effective tool for the company? Unlike an inclusion in the company’s by-laws, the soft law approach attempts to limit the risks of proceedings being brought before a court. The working group will explore the consequences of introducing corporate interest at the level of soft law on the directors’ conduct of the company’s business.
IV
Finally, the idea is also to promote a new vision of the shareholder through the criteria of responsible investment. This proposal requires some clarification: a definition from the investor’s point of view is welcome, but it must not overshadow the diversity of players in the investment world. Criticisms of shareholder governance are mostly directed at activist funds, but these funds are a minority in the investment industry. The majority of savings are managed by institutional investors such as pension funds, asset managers and insurance companies. By the very nature of their activity, these players are structurally concerned about the long-term performance of companies. The question for the responsible investor is therefore really the following: how can one ensure that the voice of the majority, that of institutional investors, returns to the forefront in corporate governance? This question calls for a second, more general question: how can one promote a European vision of responsible investment and governance? Today, around 60% of the CAC 40’s shareholders are US pension funds, which have a virtual monopoly in defining governance practices. While 30% of American savings are invested in the financial markets, only 6% of European savings are used to finance companies. This shortfall in invested savings has atrophied the European investment industry. Europe thus faces a paradox: although it is far ahead in defining criteria for social and environmental responsibility, it remains dependent on the standards set by UK and US funds, which are lagging behind these practices.