There is no one perfect corporate governance model, just as there is no one perfect financial structure. The ultimate aim of corporate governance structure must be that it is continually re-evaluated so that the governance structure itself can adapt to changing times and needs.1
France is often associated with its long history of political revolution, typically marked by marches to Versailles and uprisings in the streets of Paris. Today a different type of revolution, sparked by recent allegations of corruption against French corporate executives, is taking place in the boardrooms of France's most powerful companies.2 In response to these allegations the French business community has started to rethink traditional managerial roles in an effort to reform corporate governance.
The term "corporate governance," or le gouvernement d'entreprise, has a range of meanings depending on how one uses it. Some authors, such as Andrei Shleifer and Robert Vishny, define corporate governance from an economic perspective as "the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment."3 Other authors, such as Robert A.G. Monks and Nell Minow, take a more political approach, defining corporate governance as the connection of "directors, managers, employees, shareholders, customers, creditors and suppliers . . . to the corporation and to one another."4 For purposes of this article, corporate governance basically involves the relationship between corporate directors and shareholders.
Reformers of corporate governance generally seek a governance structure under which directors are responsible agents acting on behalf of their shareholders and making decisions based on the best interests of these shareholders, not their own best interests.5 In addition to encouraging directors to represent shareholder interests more actively, reformers seek a structure that ensures a more equal balance of power between executive and non-executive directors.6 By designing ways to curb executive power and to increase shareholder voice in management, reformers seek to increase shareholder value.
The effort to reform corporate governance began in the United States in the 1970s7 as a challenge to self-interested directors who regularly neglected minority shareholder interests.8 This effort resulted in a string of hostile takeovers, the dismissal of many directors,9 and the emergence of such publications as Principles of Corporate Governance by the American Law Institute10 to instruct directors on proper management techniques. The trend spread to Great Britain where, on the heels of corporate scandals involving such companies as Poly Peck, BCCI, and Maxwell, Sir Adrian Cadbury established a committee that published The Code of Best Practice, a nineteen-point code for improving corporate governance intended to be used by those companies listed on the London Stock Exchange.11
The effort to reform corporate governance only recently has arrived in France, where legislators and business people are struggling to reform a corporate culture that has been highly centralized around government affairs since the time of Napoleon I. These reforms are encapsulated in two influential reports: the Vienot Report of 199512 and the Marini Report of 1996.13 Both reports suggest ways to improve director accountability to shareholders.14 Although this effort to "re-democratize"15 French companies is based largely on the Anglo-Saxon model, France's corporate governance movement should not be construed as a wholesale purchase of the Anglo-Saxon model.16 Rather, one should view France's corporate governance movement as an effort to incorporate elements of the Anglo-Saxon model into the French system while developing national solutions to problems that are unique to the French business landscape.17 On a micro level, these reforms should result in greater financial returns …