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France proposes worker veto on hostile takeovers

by Paul Whitfield In Paris  |  Published January 4, 2013 at 11:52 AM
France's government plans to create a new law that would give employees representation on their companies' boards and powers to block hostile bids.

The proposed legislation is among 15 new laws that France's Socialist government will put to parliament this year as it seeks to revitalize France's moribund economy and cut an unemployment rate that has crept above 10%.

"Legislative provisions allowing employees to sit on the board of directors to veto certain pay practices and to protect enterprises against hostile takeovers will be presented to the cabinet before the end of the first quarter," Prime Minister Jean-Marc Ayrault said.

French politicians from the country's two main parties spent much of last year's election campaign claiming that France needed to be more like Germany. The new law appears to be styled on Germany's long-held policy of co-determination, or Mitbestimmung, which stipulates that workers' representatives make up just under half of the supervisory board of German companies employing more than 2,000 workers.

The German practice has been credited with avoiding the type of confrontational relationship between management and workers that dominates French industrial relations. In France, workers' committees are currently required to review a takeover plan but have no option to veto a proposal.

The new laws were sketched out in a five-page "work plan" issued to government ministers on Thursday. The launch of the plan comes amid growing dissatisfaction with Ayrault's handling of the economy and in the wake of polls that suggest his popularity is as low as 30%. President Francois Hollande's support has dipped to about 35%, just six months after his Socialist Party took power.

Ayrault on Thursday described France as being at a crossroads but insisted that it was within its own power to both arrest a competitive decline and honor its commitments to "liberté, egalité and fraternité."

"The temptation is great to put the responsibility on others, to accuse liberalization of trade and finance, competition from low-cost countries and the policies of Europe," he said in an article written for French paper Le Monde. He then went on to cite liberalization of trade and finance and trade inequalities as dangers that could "not be denied."

Hollande and his ministers have won few friends amongst French business managers since taking power. At the end of last year, France's finance minister was forced to back down on plans to increase capital gains tax to 60% from 30% in the 2013 budget after small and mid-sized business owners mounted an online campaign claiming the government was treating them as "pigeons," or suckers.

The government suffered a new credibility blow in recent weeks when a court ruled that the structure of a 75% tax on income beyond €1 million was unconstitutional. Hollande has promised to rewrite the tax and resubmit it.

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Tags: Francois Hollande | hostile takeovers | Jean-Marc Ayrault

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Paul Whitfield

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