Embracing activism in France

An Insightia interview with Diane Lamarche and Saam Golshani, partners, and Simon Martin-Gousset, associate, White & Case.

3 min read

How is shareholder activism evolving in France?

Saam Golshani: 2022 activist campaigns provided further evidence that activism is now firmly embedded within the French markets. Market participants are more accepting of activists and willing to engage. This is reflected in a number of campaigns being undertaken behind closed doors on a confidential basis, and dialogue between activists and issuers is becoming increasingly effective in overcoming issues or concerns.

Activists' tactics are also becoming more sophisticated from a legal perspective, with activists exercising their rights as minority shareholders to their advantage. As an example, activists who once sought to minimise contact with the French regulator, the Autorité des Marchés Financiers (AMF), are now, at times, actively seeking its support.

At TotalEnergies' 2022 annual meeting, climate-related resolutions proposed by a group of 11 investors were rejected by the company's board for attempting to dictate the strategy of the company in this area. The shareholders requested that the AMF intervene, which it declined to do.

Nonetheless, seeking to involve the AMF in the first place can be seen as a significant development when compared with past practice. This comes against the backdrop of public positions taken by the AMF in 2020 and 2021, which pointed to the potential benefits of shareholder activism as contributing to the proper functioning of markets and to an improvement in the corporate governance and management of issuers.

Did 2022 spur any notable developments regarding “say on climate” in France?

Diane Lamarche: As was anticipated, the "say on climate" initiative gave rise to one of the most prominent campaigns of 2022, that of TotalEnergies. The focus on "say on climate" and corporate climate transition plans confirms the importance of ESG and strongly suggests that ESG (climate change in particular) will remain a central issue in investor engagements in 2023. Without existing legislation in place, influential market participants are lobbying issuers to include "say on climate" resolutions on a voluntary basis.

In response to the rise in such campaigns, the AMF published a statement on shareholder dialogue on environmental and climate issues. In its statement, AMF calls on companies to strengthen shareholder dialogue by presenting their climate strategy at each general meeting and facilitating discussion. The strategy should be accompanied by precise targets with follow-ups arranged at regular intervals. The AMF also noted that it would be appropriate, in the future, for this information to be approved by shareholders, similar to the approval of annual financial statements.

Which debates and/or changes in the regulatory framework occurred in France in 2022?

Simon Martin-Gousset: France has not seen any substantive legislative developments directly impacting activism in 2022. However, a strong debate arose concerning the ability of shareholders to vote on certain corporate issues, in particular resolutions regarding the company's climate strategy.

In the context of this debate, several prominent think-tanks and academics have expressed the view that legislative reform in this area is not necessary. In light of the AMF confirming that it is unable to rule on the allocation of powers between shareholders and their board of directors (i.e. how shareholders should be able to influence company strategy), it is anticipated that investors whose proposed resolutions are excluded from annual meeting agendas will instead seek to challenge such exclusions in the commercial courts.

In addition, we note a strong trend in Europe of introducing environmental- and social-related requirements into company law and we would anticipate that investors will push for French companies to comply with such requirements and/or use new legislation as tools in future campaigns.

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