French business leaders want tougher governance rules

According to the authors, French rules are already more efficient than US ones but now have to become even more stringent to respond to unease among investors over recent corporate scandals.

Following the recommendations of the Bouton report, the board of directors must give prior approval for any large investment, acquisition or disposal undertaken by the management, and should be regularly informed about the financial situation of the company. To avoid conflicts of interest, half - instead of one third - of a company's directors must be independent.

Next concern for the board of directors is to ensure the regular assessment of its own operations and performance. In concrete terms, this requires a formal evaluation of the board's work and results at least once every three years. The proportion of independent auditors in the audit committee should be raised from one third to two thirds.

The report also calls for a stricter supervision of grants and allowance. The compensation committee should be constituted by a majority of independent directors and cannot include any corporate officers. The report also recommend tightening up French restrictions on stock options a little more, proscribing discounts in their pricing and imposing fixed intervals for their granting.

Clearly promoting stricter rules, the report nonetheless concludes that it is the spirit and not the letter of the rules that should guide business leaders when improving their governance practices and behaviours.

Please click here for the full report "Promoting Better Corporate Governance in Listed Companies"