CHAPTER 1. ESSENTIALS OF CORPORATE GOVERNANCE: DEVELOPED COUNTRIES’ EVIDENCE 124 1.7. CORPORATE GOVERNANCE IN FRANCE (2008-2016) Emilie Bonhoure Laurent Germain 1.7.1. Overview of the French Legal Framework of Corporate Governance On the practical side, the AFG (Association Française de la Gestion Financière) defines corporate governance as a field that “focuses on the division of powers between various stakeholders, including company’s governance bodies, the board (board of directors or supervisory board) and shareholders, with the aim of ensuring a balance of power within a company. [It] encompasses the rights and obligations of corporate management with regard to the others stakeholders, as well as the mechanisms that the other stakeholders’ can use to control the activities of corporate management” 29 . The French legal framework will be detailed further in the corresponding parts, but very generally European countries have implemented reforms in the corporate governance field for the last twenty to twenty-five years for three main reasons (Enriques & Volpin, 2007): 1. To increase the attractiveness of their national markets; 2. To implement a common regulatory framework at the European level; 3. As part of a response to the many scandals of the 1990s and 2000s. In France, these reforms have mostly focused on:  The strengthening of internal governance mechanisms, in particular, to limit self-dealing and to improve board effectiveness.  The increase in minority shareholders’ powers.  The increase in disclosure requirements, in particular on general corporate governance issues, along with self-dealing and insider, compensation, and financial reporting and audit issues.  The reinforcement of public regulation and sanctions. Regarding disclosure requirements, firms now have to disclose any corporate governance arrangements, non-routine transactions 30 , the whole compensation of board members including their stock options. They also have to mention whether they comply with the national corporate governance code (we discuss below) following the comply-or- explain principle. Since 2002 (effective in 2006), they make their financial statements following IFRS norms. Regarding the reinforcement of public regulation, French supervisory authorities have been merged into one single, the AMF – Autorité des Marchés Financiers (http://www.amf-france.org/en) in 2003. Criminal sanctions for market abuses have also been implemented since the 1970s in France (with a reinforcement in 1996), in addition 29 AFG website (http://www.afg.asso.fr/index.php/en) states that “Le gouvernement d’entreprise […] s’intéresse à la répartition des pouvoirs entre les diverses parties prenantes, notamment les organes de direction, le conseil (d’administration ou de surveillance) et les actionnaires, et vise à garantir l’équilibre des pouvoirs au sein de l’entreprise. [Il] recouvre donc les droits et les devoirs de la direction d’une entreprise vis-à- vis des autres parties prenantes, mais également les mécanismes dont disposent ces dernières pour contrôler les activités de la direction”. 30 From 2001, revised in 2003 and 2005. Virtus Interpress ©