GAIA G2

What is necessary for French Mid-Caps’ corporate governance to comply with European standards? More people, less meetings

Some governance practices are explained by companies as the idiosyncratic consequences of their history and their shareholding structure. It is indeed common to see strategic committees among state-owned companies as well as founders being both chairman and CEO of their companies.

A quick look at the data shows that mid-sized French companies have a higher probability of being managed by a single person holding both the chairman and CEO positions than their wider European counterparts.

The clear result is that in France and in other European countries, the bigger the company is the higher the probability of a split of responsibility between the chairman and CEO roles. However, in France, the proportion of companies with one head, both chairman and CEO, is 5 times bigger than elsewhere in Europe. This might be thought to be explained by the fact that 75% of French mid-sized companies have a controlling shareholder with more than 34% of the equity. However, the results are not that different between the two samples. National regulations may not be sufficient to explain the difference between countries.

The second point is the difference in the prevalence of strategic committees. Again, there is a much higher probability of a French mid-sized company having a strategic committee than for other European companies of similar size. And this difference may not be explained by the size of the company nor by its controlling stake.

So when French companies would like to get closer to wider European corporate governance standards, our advice would be to hire more people, notably to split the roles of chairman and CEO, and to create fewer committees – notably to dissolve these strategic committees.