Annual Report 2014
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AnnualReport2014
Contents
Annual report 2014
About us
Large companies and the French economy
Business issues
Taxation
Company law & corporate governance
Financial affairs
Work, jobs & social protection
Competition, consumers & intellectual property
Environment & energy
Corporate social responsibility
AFEP & Europe
AFEP activities in 2014
. Presidents’ information meetings
.Meetings with public authorities and key economic figures
.Working groups and consultations
Our team
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President’s foreword
The publication of the 2014 annual report of AFEP, the FrenchAssociation of Large Companies,offers an opportunity to set outthe major themes underpinningour activities. Improving the competitiveness of our businessesto ensure growth in jobs is ourcentral priority.
2014 was a difficult year in economic and social terms, andunfortunately the results fall short of our expectations:
− The progress made in terms of restoring order to the public finances is insufficient. In 2014, efforts to reduceexpenditure were intensified but have been limited to“stemming the rising tide”;
− The fall in receipts for compulsory contributions stemsfrom the increases adopted between 2011 and 2013,which raises questions as to whether the current economic policies are appropriate;
− Although the Government has taken measures to reducethe cost of labour - following the introduction of the taxcredit for competitiveness and jobs (CICE), the Pact ofResponsibility introduced an initial reduction on low salaries implemented until 2017 - this is not sufficient to
restore the competitiveness of those French businessesmost exposed to international competition;
− Restoration of business profit margins remains uncertain.When the situation for business improves, progress onjobs and investment will follow. New measures must betaken to encourage jobs, including the unemploymentbenefits reforms (UNEDIC) and complementary pensions.
Simplification efforts, which are both necessary and awaited, have begun but must be further intensified. Economic operators still are faced with too many newconstraints, which undermine business development andput the country at risk in relation to keeping business decision-making within our borders.
Businesses have initiated a number of important measures which have been implemented in the area ofgovernance; and the effectiveness of professional regulation has been demonstrated. The introduction ofthe new corporate governance code ensures greatertransparency while retaining the necessary flexibility. The High Committee on Corporate Governance (HCGE),set up in 2013 on the initiative of the professional bodies,has proved particularly responsive and helped answerquestions about the interpretation of the code and followup on the recommendations.
Annual report 2014
The competitiveness of businesses also depends on choices with regards to energy policy, both in France andinternationally. The international Climate Change Conference in Paris in December 2015 (COP 21) will provide businesses with an opportunity to make theirvoice heard and promote a cost-effective transition, facilitating retention and development of industry and stimulating innovation. During the year, AFEP also workedto promote the capacity of French businesses in contributing to sustainable towns and cities and the circular economy.
Our businesses are active at a European level, seeking to contribute to policy-making so that European policieswill allow to facilitate their development in the context of aregulated internal market, without creating a disadvantageat an international level. The defense of the euro, strengthening financial markets, and a common economicand industrial policy that makes the right choices with regards to regulation, competition and the protection ofintellectual property rights are issues of major importancefor businesses. Businesses are hopeful that the recentlyre-elected European institutions will take initiatives to foster growth from 2015 onwards. With this in mind, AFEPhas drawn up propositions for presentation to the European institutions.
The involvement of AFEP members’ CEOs and top specialistsas well as AFEP staff has facilitated the success of such initiatives. I wish to express my sincere thanks to them.
AFEP and its member companies are proud of theirFrench identity. They play a major role in the French economy and aim to contribute to the development of thecountry, even though their growth and sales are also occurring beyond our borders. France can count on them.
Pierre PringuetPresident of the AFEP
Annual report 2014
About us
Since 1982, Afep is the association which brings togetherlarge companies operating in France. The Association isbased in Paris and Brussels.
Afep aims to foster a business-friendly environment andto present the company members’ vision to Frenchpublic authorities, European institutions andinternational organisations.
Restoring business competitiveness to achieve growthand sustainable employment in Europe and tackle thechallenges of globalisation is Afep’s core priority.
Afep is involved in drafting cross-sectoral legislation, atFrench and European level, in the following areas:economy, taxation, company law and corporate
governance, corporate finance and financial markets,competition, intellectual property and consumeraffairs, labour law and social protection, environmentand energy, corporate social responsibility.
Afep’s work relies on:
- the direct participation of business leaders and theirteams in defining economic and social policy directions,as well as in determining the actions to be taken forgrowth and employment;
- direct and sound exchanges with public authorities,which are based on analyses and well-foundedproposals;
- active and constructive contributions to French andEuropean public consultations.
AFEP has 113 members. More than 8.5 million peopleare employed by AFEP companies worldwide, and 2 million in France.
The Association's website (www.afep.com) providesmore information on how it operates and its recentwork, as well as on the role of the large companies in theFrench economy.
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List of members 2015
Annual report 2014
ACCORADECCO FRANCEAIRBUS GROUPAIR FRANCE KLMAIR LIQUIDEALCATEL-LUCENTALSTOMALTRAN TECHNOLOGIESAPERAMARCELORMITTAL FRANCEARKEMAARTEMISAVIVA FRANCEAXABNP PARIBASBOUYGUESCAPGEMINICARREFOUR CASINO GUICHARD PERRACHONCGG CIMENTS FRANCAISCOMPAGNIE DE SAINT-GOBAINCOMPAGNIE IBM FRANCE COMPAGNIE PLASTIC OMNIUMCOMPASS CONSOLIS GROUPCREDIT AGRICOLE DANONEDELPHI FRANCE EDENREDEIFFAGEELIORELISERAMETESSO SAFEURAZEOEURONEXTEUROTUNNEL
EUTELSAT FAURECIAFFPFIVESFNACFONCIERE DES REGIONSGALERIES LAFAYETTEGDF SUEZGE FRANCEGENERALE DE SANTEGENERALI FRANCE GROUPAMAGROUPE INDUSTRIEL MARCEL DASSAULTHERMES INTERNATIONALHSBC FRANCEILIADIMERYSINGENICOINTERNATIONAL SOS JC DECAUXKERINGKINGFISHER FRANCEKLEPIERRELAFARGELAGARDERE LAZARD FRERESLEGRAND L'OREALLVMH - MOET HENNESSY LOUIS VUITTONMANPOWERMERSENMICHELINNATIXISNESTLE FRANCENEUFLIZE OBCNEXANSNEXITYORANGE
PATHÉ PERNOD RICARDPEUGEOT PHILIPS FRANCEPUBLICIS GROUPE REMY COINTREAURENAULT REVEVOLREXELRIO TINTO FRANCE ROTHSCHILD & COMPAGNIE BANQUESAFRANSANOFISCHLUMBERGER SCHNEIDER ELECTRIC SCORSEBSEQUANA SIEMENS FRANCE SOCIETE DES PETROLES SHELLSOCIETE GENERALESOLOCAL GROUPSOLVAYSTMICROELECTRONICS NVSUEZ ENVIRONNEMENTTECHNICOLORTECHNIPTHALESTOTALUNIBAIL-RODAMCOVALEOVALLOURECVEOLIA VINCIVIVENDIWENDELZODIAC AEROSPACE
With 2 million employees in France, and 8.5 millionworldwide, AFEP businesses have an important rolein the French and world economy. Although all ofthe companies are international, they have a majorrole in French production, which benefits jobs,innovation and tax revenue.
According to INSEE, large businesses (243 in 2011 outof a total of 3.1 million businesses) are those with morethan 5,000 employees in France or with a turnovergreater than or equal to €1.5 billion.
Large companies and the French economy
Micro business
SMEIntermediate enterprises
Large companies
Employees Valueadded
Exportturnover
R&D
Structure of the French economy
100%
75%
50%
25%
0%
Source: AFEP based on INSEE. Scope: non-agricultural businesses, excluding financial and insurance business.
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Annual report 2014
Taxation
1. Context
2014 will have been a year of paradox for corporatetaxation: the recognition of the crucial role of business inthe economic recovery has yet to be translated intopractical measures reflecting this new awareness.Regulatory provisions contrary to the pro-businessoutlook have been adopted on occasion, and measuresthat contradict this message have been implemented bythe authorities.
On 31 December 2013, in his New Year’s Eve message tothe French people, the President of the Republicproposed a Pact of Responsibility with the objective ofrestoring the competitiveness of French businesses.Primarily focused on reducing labour costs, part of the
Pact was to be devoted to tax cuts amounting to 10billion euros. Besides measures with a budgetary impact,major simplification initiatives would also contribute torestoring competitiveness.
After four years of successive increases in tax and socialdeductions applicable to businesses, AFEP has of courseimmediately been supportive of the principle of reducingtax and social deductions and simplifying businessobligations. However, beyond principle, questionsconcerning the details of the implementation of the Pactquickly came to the fore.
2. Challenges and achievements in 2014
In the context of international tax competition, AFEP hasargued that in order to produce the desired effects interms of economic recovery, the reduction in tax andsocial deductions needs to happen quickly, be visible andrespond to both the objective of restoring thecompetitiveness of our business as well as makingFrance an attractive place to do business. At theRoundtable on business taxation, AFEP requested amajor reduction in the corporate income tax rate inorder to restore France to the European average. Thisproposal took into account the conclusions of theRoundtable, according to which the tax base for Frenchcompanies is comparable to that of other EuropeanStates, whilst the French corporate income tax rate is thehighest.. However, AFEP’s endeavors have not yet led tomake public the data on tax concentration in relation tobusiness size, and AFEP has therefore decided to carryout a new survey of its members (see below).
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The solutions finally proposed by the authorities fallshort of a full response to these findings.
The choice was made to apply progressive reductions totwo types of deductions (social solidarity contributionand corporate income tax) instead of a drastic reductionin the rate of corporate income tax. The abolition of thesocial solidarity contribution (C3S) will be introduced overa period of three years: firstly, a billion euros reduction in2015 in the tax base (i.e. a tax reduction limited to 5,200euros per business); secondly a billion euros reduction inthe tax base in 2016; and finally the abolition of thecontribution in 2017 (a fiscal effort of 3.5 billion euros).
There is a lack of precision in the commitments inrelation to the reduction in corporate income tax. In hisgeneral political speech of 08 April 2014, the PrimeMinister indicated that the general rate would bereduced to 32% in 2017 and to 28% in 2020. Thesecommitments are set out in the Report on the PublicFinances Law of 29 December 2014:“The exceptionalcontribution on corporate income tax will be abolished in2016. The nominal corporate tax rate will be reduced fromthe current 33.33% to 28% in 2020, with a first step in 2017”.
Overall, the outcome of the Pact of Responsibility in2014 has been less than satisfactory to largebusinesses: the reduction to the C3S has hardlybenefitted businesses given the chosen terms (reductionof the tax base instead of a uniform reduction in therate). The exceptional contribution of corporate tax of10.7% has been extended by a year, in contradiction withthe commitment previously made by the Government.
Thus, the tax burden has increased for over 90% ofAFEP’s members since 2011, despite the introduction ofthe CICE (tax credit for competitiveness andemployment).
Furthermore, the public authorities chose not to respondpositively to the request from AFEP to enact the tax cutsannounced for 2016 and 2017 as part of the Finance Actfor 2015. Aside from issues with the timing forimplementation, it would be useful to add to the existingproposals of the Pact of Responsibility some additionalproposals in order to resolve the issues in relation to theloss of attractiveness of our country. In this regard, theAssociation firmly advocates that individual taxation andcorporate taxation should be addressed together toachieve this objective: the presence of high added-valuepersonnel in our country should be encouraged as this isinextricably linked with the presence of decision-makingcenters. In this regard, the provisions included in thedraft law on growth and business for improving thetaxation of performance shares are a step in the rightdirection.
Throughout 2014, AFEP has emphasised that thebudgetary efforts granted by public authorities shouldnot be undermined by aggravated taxation or by harmfulpractices of the administration.
The Association has stressed out the damaging effects ofprovisions presented as an attempt to combat fraud, butwhich in practice only impact international businessescarrying out their traditional economic activities. TheAssociation opposed initiatives which would have
Annual report 2014
resulted in increased difficulties for applying the regimeof research tax credits. The Association also resisted thepremature introduction by France of provisions set out inthe OECD program “base erosion and profit shifting”(BEPS): for example, the amendment seeking tointroduce financial reporting obligations on a country-by-country basis, or the amendment aiming at restrictingthe parent-subsidiary regime. On this last point, AFEPwelcomes the decision of the Constitutional Court, whichsanctioned a provision excluding the application of theparent-subsidiary regime where dividends weredistributed from tax-exempt revenues. In general, AFEPtakes the view that this regime is a cornerstone of theFrench taxation policy and essential for supporting theexpansion of French groups throughout the world. Basedon this conviction, AFEP, along with some of its members,submitted an application for a preliminary ruling onconstitutionality (QPC) with a view to ensuring thatbusinesses can enjoy the parent-subsidiary regime whenestablished in non-cooperative States for operationalreasons, and independently of any tax-avoidanceintentions. This QPC was favorably welcomed by theConstitutional Court (Decision n° 2014-437 QPC of 20January 2015).
AFEP also insisted on having the favorable politicalcommitments implemented by a “business-friendly”administration, whose newly “business-oriented”behavior should be illustrated both in its commentary onthe taxation law and in its way of carrying out tax audits.In this regard, 2014 has been a truly disappointing year,despite repeated announcements regarding
simplification of the business environment. Businessescannot fail to notice the proliferation of retroactivemodifications to administrative practice presented as“corrections”. More and more businesses have noted thattax audits are now mainly focused on achieving profitability,which goes beyond the proper application of tax law.
3. Outlook for 2015
Therefore, AFEP continues to emphasise that reducingtax and social contributions, in particular, a reduction inthe corporate income tax rate is crucial to ensuringcompetitiveness and making France an attractive place todo business.
AFEP wishes to ensure the adoption of its proposals onsimplification drawn up with the help of its members. Inorder to ensure an effective debate on reform, anambitious approach must be taken to definingsimplification. AFEP is of the view that simplificationshould not be limited to the abolition of a fewunnecessary formalities. It must also cover the possibilityfor business to anticipate regulations and how they willbe applied. On this basis, AFEP has proposed three areasfor simplification: a reinforcement of legal certainty inregulatory design (non-retroactivity, stability ofregulations and administrative doctrine, etc.); animprovement of relations with the tax administration inthe application of the tax law (independence of thehierarchical appeal system during tax audits, capping ofthe penalties for failures to meet compliance obligationswithout prejudice to the Treasury); as well as a reductionof the reporting burden in the area of compliance
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(abolition of unnecessary reporting forms andformalities). AFEP will take care to ensure that suchmeasures are discussed as part of the preparation ofthe draft law on simplification and transparency.
Finally, AFEP will continue to draw attention to the workundertaken at international level in the field of taxation.In this regard, the OECD (BEPS) action plan is animportant point of interest. Contrary to widespreadbelief, the OECD recommendations do not containmeasures to combat fraud. The recommendationsmainly focus on updating OECD principles regarding thesways of sharing consolidated profits of multinationalbusinesses between States. In that framework, newproposals are mainly introduced by non-OECDcountries, which were invited to participate in the OECDwork and are expressing increasingly frequentopposition to traditional tax principles.
The focus on aspects related to combatting fraud in theBEPS plan has led France, and perhaps even Europeancountries in general, to underestimate the impact of allthe other strategic discussions not specifically linked totax fraud. AFEP takes the view that France and Europeabsolutely must face the true impact of the BEPS actionplan, and determine an approach in accordance withtheir interests and those of their businesses, in line withtheir shared interests.
Three priorities for AFEP in 2015 are: a reduction insocial and tax deductions for businesses, strengtheninglegal certainty, and building partnerships with theadministration in order to protect French interestsabroad.
of French nationaladded value
of the employmentin the private
sector
of total ODs borne by companies in
France
The amount of obligatory deductions(OD) paid by large companies[1]
1 2013 financial year data.
Corporate tax paid by the 88 companiesin relation to theiradded value is higherthan the nationalaverage:
of the added value(average of the 88 companies)
of the addedvalue (national
average)
22% 18% 14%
18%10% 12%
of total ODs onproduction
factors
of total ODson labour
of total ODs on profit
The 88 Afep companies that responded tothe survey represent:
The tax contribution of the 88 companiesby taxable asset is distributed as follows:
3,1%4,3%
Annual report 2014
Public finances in 2014 and outlook for 2015
In 2014, the economic policies pursued by France have yet again been marked by the fiscal consolidation effortsinitiated in 2011. Given the increasing public debt which was at €1,950 billion, or 92.2% of GDP at the end of 2013,financial laws, i.e. the Finance Act and the Social Security Funding Act for 2014 have set an objective of reducing thedeficit from 4.1% of GDP in 2013 to 3.6% in 2014. This involved €15 billion in “natural” savings and relatively stable ratesof mandatory contributions, including but not limited to, firstly, an increase in the taxation on large businesses througha renewal of the “surtax” on corporate tax, an increase in pension contributions for businesses and employees and anincrease in household income taxes, along with the first payments to businesses pursuant to the “tax credit forcompetitiveness and employment” (CICE).
The new path presented by the Government in the Finance Act for 2015 revealed a significant discrepancy with theinitial forecast: rather than falling, the public deficit will have risen in 2014 (4.4% of GDP), hence a new increase in thepublic debt. The fact that the reduction in the deficit has ground to a halt is worrying given that France is still far frommeeting its European commitments, in terms of both headline and structural deficit. Although initial efforts tomoderate expenditure have contributed to slowing its increase, they also owe much to the historically low interestrates on sovereign borrowings, as a result of an accommodating monetary policy and “financial fragmentation” withthe Eurozone, i.e. the reluctance of investors to buy bonds from the so called “Southern” EU member states. The fall intax revenue is the main source of the deficit: while the deterioration in the economic situation has undoubtedly had animpact, with growth in GDP at just 0.4%, compared with an initial forecast of 0.9%, it is worth looking at the economicimpact of the massive increases in mandatory contributions (+3.4 percentage points of GDP between 2010 and 2013)which, by all accounts, have weakened the tax base.
A slight reduction in the deficit is expected in 2015, with the deficit falling to 2013 levels, and a trajectory pointing to atotal deficit of less than 3% of GDP in 2017. However, this prediction is based on the assumptions of 1% growth in2015, 1.7% in 2016 and 1.9% in 2017, indicating a greater increase than potential growth (1.3%) for these last two years,which appears optimistic given the weak national and European environment.
AFEP takes the view that pursuing the strategy of reducing deficits is crucial, and the only way of ensuring nationaleconomic sovereignty and intergenerational equity. Efforts to rationalise public expenditure must continue andintensify through the swift adoption of a strategy and measures applicable to the State, social security and localGovernment. With regards to mandatory contributions, the measures set out in the “Pact of Responsibility andSolidarity” should be fully implemented by 2017 in accordance with the commitments given by the Government. Inorder to ensure that the provisions are fully effective, they must not be watered down, corrected, or undermined bycontradictory measures such as increases in local or sectoral taxes. More generally, AFEP would emphasise that policiesaimed at fostering business competitiveness should be integrated into all decisions and also affect all businesses,regardless of their size.
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1. Context and issues
2014 was marked by a number of developments in thearea of corporate governance and company law. TheCommittee on Corporate Governance (Haut comité degouvernement d’entreprise) took office for the first time,and its activities are presented in its annual reportpublished in October 2014. Similarly, the discussions heldwithin the AMF (French Financial Markets Authority) onthe transfer of assets will provide an opportunity toclarify the corporate governance code on the role of theAGM when a transfer of assets results in radicallychanging the face of a company. On the other hand, anumber of regulations have given cause for concern tobusinesses. As expected, Florange Act creates some
difficulties with investors and voting consultancies, whounanimously defend the principle of “one share, onevote”, and are opposed to any defence against takeoverbids. Furthermore, AFEP has concerns about theproliferation of proposals for legislation which runscounter to the simplification movement to whichmembers of parliament have indicated their commitmentFinally, proposal for a European Directive revising theDirective on shareholders’ rights contains a number ofprovisions which, if adopted, will lead to the transfer ofcertain decision making powers from the Board to theshareholders’ AGM.
2. Achievements and developments in 2014
In order to prepare for the AGMs in 2014 and to supportthe implementation of the shareholders’ vote on paypolicies (“say on pay”), the guide was updated in January2014 to include guidance on applying the corporategovernance code. More details were provided to ensureclarity and transparency in the information presented toinvestors. As the AMF has found, almost all companieshave implemented the recommendation in the codeand 90% of companies have drafted a specific paragraphabout “say on pay” in the relevant document. The votewas concluded without difficulty with an averageapproval rate of 92%, which demonstrates theeffectiveness of “soft law”. The guide was updated for asecond time in December 2014, in co-operation withbusinesses and the authorities, in order to take intoaccount the clarifications sought by the Committee on
Company law & corporate governance
Annual report 2014
governance issues such as independent administratorsor the variations in the pay for executive directors, thusfacilitating continuous improvements in practice.
Furthermore, AFEP has published a number ofdocuments on supporting businesses with preparatorywork for the AGM. AFEP has drawn up a comparativetable of the voting policies advocated by the main proxyadvisors and a table on the attendance fees allocated tothe administrators of SBF 120 companies. A survey of theperformance conditions applicable to variouscomponents of pay along with a survey on “say on pay”,specifying the approval rate whether the company iscontrolled or not, have been distributed. Following theAGMs, AFEP produced a survey of its members offeringan overview of the highlights and trends in the votes onresolutions. Finally, AFEP supported the Committee inpreparing a statistical study on the application by SBF120 companies of corporate governance principles.
In light of the expected difficulties of upcoming AGMswith proxy advisors and investors with regards to theapplication of the Florange Act – which entails theautomatic granting of a double voting right for registeredshares and strengthening the powers of the Board duringpublic offering periods – AFEP has held a number ofmeetings during the final quarter of 2014 with theirrepresentatives in order to obtain clarification on theirposition and expectations with regard to the drafting ofresolutions.
With regards to simplification, AFEP supportssimplification measures and advocates that they should
not be limited to the existing provisions and should alsoserve to hold back the tide of new texts drawn up in theabsence of consultation, or where consultation withbusinesses is insufficient. AFEP has concerns aboutcertain initiatives which run counter to the simplificationmovement. Such texts relate to corporate socialresponsibility, the bill on the duty of care applicable toparent companies and contracting companies, whichcreates an almost conclusive presumption of responsibilityfor damage caused by subsidiaries and subcontractors,and the proposals for the protection of SMEs andmidmarket companies, which complicate themanagement of groups.
Positive measures include the law on simplification ofthe business environment which provides for adelegation of authority by order to reduce the minimumnumber of shareholders in unlisted private companies. Abill introduced by the Senate also includes usefulprovisions such as the use of technology at AGMs forunlisted companies, a modification to the rules onshareholder abstentions at AGMs which will no longer becounted as No votes, and the rationalisation andsimplification of the rules on blackout periods for shareoptions and bonus shares. Although the text is unlikely tobe adopted in its current state, AFEP asks that theseprovisions be reproduced in subsequent texts.
Finally, with the extended application period for the lawauthorising the Government to take measures to simplifyand secure the business environment, AFEP respondedto a Chancellery consultation on the draft order on therules governing regulated agreements, with the objective
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of integrating the recommendations set out in the AMFreport on AGMs.
AFEP participates in AMF discussions on the transfer ofsignificant unlisted assets by a listed company. Theobjective of the AMF is to determine whether the existingprovisions should be strengthened in stock exchange law,company law, or soft law. A majority of the working groupfavoured a modification to the AFEP-MEDEF code, giventhat the application of the “comply or explain” rule offersflexibility and adaptability to issuers, the AMF will need tospecify the level of information expected on theseoperations. With regards to the cumulativeadministrative and criminal sanctions in relation to thestock market, AFEP submitted proposals to the AMF witha view to achieving greater clarity on the role of the AMFin the criminal justice system.
At a European level, the year was marked by theproposal for a Directive revising the shareholder rightsDirective which covers a number of important issues forbusinesses. AFEP has brought together a number oforganisations representing European issuers in order topropose shared amendments to the proposition fromthe Commission, in particular with regards to thefollowing issues:
‒ The requirement for intermediaries to offer businessesthe possibility of identifying their shareholders. AFEPtakes the view that this provision as sought by the issuersneeds work. Firstly, this provision will not coverintermediaries outside the European Union. Secondly,some countries, including Germany, are in favour of
thresholds above which the identity of shareholderswould be required, which runs counter to the initialobjective of the proposal.
‒ The rules applicable to proxy advisory firms: This is animportant point of progress which will facilitate betterregulation of the activity of such firms.
‒ The provisions on “say on pay”: AFEP advocates that theDirective should be limited to specifying the principle ofthe shareholders vote on pay, leaving Member Stateswith a choice between an ex ante or an ex post vote,which may be either a consultation or a binding vote. TheCommission proposal includes a binding vote every threeyears on pay policy (ex ante vote) and a consultative voteeach year (ex post vote). This highly detailed provision,inspired by English law, gives rise to a number ofproblems, particularly in relation to the identification ofthe executives concerned, the introduction of a payequity ratio, and the unsuitability of the provision withregards to the recruitment of new executives.
‒Approval of transactions with the parties bound thatrepresent more than 5% of the company assets, alongwith those likely to have a significant impact on profitsand turnover: this text is a particular cause for concernand could paralyse the functioning of groups. France isnot alone in its criticism of the Commission proposal.Under the influence of European issuer organisations,work in the Council has now allowed for greater flexibility.
AFEP has responded to two ESMA consultations on themeasures for the application of the Directive on marketabuse with a particular impact on insider lists, the
Annual report 2014
dissemination of inside information and transactionsmade by persons discharging managerial responsibilityover company securities. Furthermore, a letter has beensent to the AMF in order to draw their attention to themost worrying positions taken by ESMA in itsconsultation document on alternative solutions open toMember States and regulators in order to limit theadditional constraints to which businesses are subjected.
3. Outlook for 2015
At a national level, 2015 should be marked by theadoption of the law on growth and business whichshould include some governance issues, with regards inparticular to the limit on the number of corporatepositions held and more strict regulation of definedbenefit private pensions schemes, even though theseissues are already dealt with in soft law.
Another draft law on economic transparency wasannounced for Spring 2015, with provisions on corporatesocial responsibility. Following the failure of the nationalinter-professional agreement, the issue of employeerepresentatives on company boards may be relaunchedby the Government, to extend the scope of the
companies covered. In this regard, AFEP would argue thatthe representativeness of employees on the boardshould include the possibility to include employees fromforeign subsidiaries. The reform of contract and tort law,for which a delegation of authority to the Governmenthas been provided for, will be implemented following aconsultation period over the course of the first quarter.
With regards to corporate governance, the Committee onCorporate Governance should focus on the themes setout in its annual report, in particular, the integration ofemployee representatives designated under the new law,the number of positions held by non-executive boardmembers and the rules applicable to multi-annualvariable pay.
At a European level, AFEP will continue to follow thework on the adoption of the Directive revising theshareholders’ rights Directive, particularly in light of theEuropean Parliament vote, and the adoption of theDirective on women on boards quotas, which has beenblocked at the Council up to now, as well as the adoptionof level two measures in the regulation on market abusewhich is then expected to be integrated into the AMFGeneral Regulations.
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■ Corporate governance rules drawn up by businesses and pro-fessionals offer a number of advantages:
− in many cases, they are more ambitious than the law;
− ethical issues are integrated and take the form of ethicscodes, the corporate governance code and the integrationof environmental and social risks;
− they may be international in scope, covering the sphere ofactivity of the companies in question;
− they empower the actors in question to take responsibility;
− they are sensitive to the realities of business and evolvemore easily than laws and regulations (the AFEP-MEDEFcode is revised every three to four years on average);
− the “comply or explain” principle underpinning corporategovernance facilitates adaptation to diverse situations.
■ Professional regulation has proven to be effective: therecommendations in the AFEP-MEDEF code are followed uprigorously, as found in the report by the Committee onCorporate Governance. In its 2014 annual report, the AMFonce again found “improvements in terms of the informationprovided and the development of practices, some of whichhave attained the status of alternative regulation”.
Almost all businesses are applying the recommendations on:
− Board members;
− attendance fees and making available distribution rules;
− inclusion of the participation rate in Board meetings;
− establishment of committees (audit, pay and appointments);
− number of positions which may be held;
− individual pay for each Executive Board member, with theuse of standardised tables, and the criteria for determiningvariable pay;
− option pricing and performance measures;
− capping severance and non-compete compensation.
■ The Committee on Corporate Governance is now an essentialplayer in the field of corporate governance. The Committee has adual role:
− monitoring the application of the code:
■ responding to requests on interpretation, i.e. questions fromboards, which are not published save in the situations set outbelow;
■ investigations on its own initiative, either on the foot of currentaffairs or on the initiative of the Committee itself, particularlyupon reading reference documents or notices of AGMs.
Companies that decide not to follow the opinion of theCommittee must report and give reasons for this in their annualreport. Shareholders shall be fully informed of the investigationand the response of the company.
Furthermore, the Committee has published a guide for theapplication of the Code to support companies in drafting theirannual report/reference documents, with the last update being inDecember 2014.
− Proposals for revising the code: The code has been revised sixtimes since the first report (Viénot 1995). Although the codeshould not be revised more often than necessary, theCommittee is expected to draw up proposals based on theirexperience and following consultation with the stakeholders(investors, AMF, etc.).
Company law and corporate governance
Annual report 2014
1. Context
At a European level, the first European semester 2014was marked by intense legislative activity, with the Counciland the Parliament seeking to see through as manyinitiatives as possible (banking union, audit, markets infinancial instruments, etc.). The outgoing Commissionsought to present some last proposals close to its heartas quickly as possible (banking structural reform andIORP II in the financial field). Some progress was madeduring the second semester on legislation not adoptedunder the previous legislature and work has begun in thenew Commission on a “Capital Markets Union”.
This legislation is mainly aimed at ensuring financialstability and strengthening market regulation, financial
products and players. However, towards the end of theprevious term, EU institutions displayed greater concernand commitment to strengthening the long termfinancing of the economy.
At a global level, we would emphasise that theInternational Integrated Reporting Council (IIRC), with theassistance of major audit firms, has been making greatefforts to secure the adoption by legislators andregulators of a sophisticated and detailed framework forintegrated reporting, including more detailed financialand non-financial reporting, thus widening the scope ofmandatory controls.
In France, certain audit firms see this project, along withinitiatives in the area of social and environmentalreporting, as an opportunity to develop their businessand increase their turnover.
2. Issues for companies
With the multiplicity of rules adopted and envisaged at aEuropean level, consideration should be given to theircombined impact on businesses and how they will befunded. Even the stability of the system is at play, forexample, whether reduced financial intermediationshould lead to the development of the shadow bankingsystem. The initiative of the Commission with its GreenPaper on the long-term financing of the EuropeanEconomy and upcoming work on the Capital MarketsUnion offer opportunities to develop a common visionon the European economy, to ensure the coherence ofpublic policy and that greater account is taken of European
FinancialAffairs
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interests. However, it remains to be seen how theseinitiatives will be implemented.
European regulation and certain initiatives taken atnational and/or international level give rise to a numberof challenges for businesses:
− Possible difficulties in relation to financial instrumentsand hedging transactions related to a sometimesinsufficient understanding of the impact on the realeconomy and factors contributing to crises, as well asunfavourable policy on investment in assets andsecurities (tax, inappropriate liability rules, prudentialrules);
− attention should instead be focused on markettransparency, the continued expansion and depth ofreporting and auditing constraints with an impact onbusinesses, despite the simplification measuresexpected from the French and European legislators;
− the European dogma on competition may, unlessservices are adapted, affect the quality of certainservices needed by investors − statutory audits inparticular. This dogma is expressed throughmechanisms that limit the choices of businesses,without taking measures to develop services, forexample, obligatory rotation of audit firms;
− the multiplicity of rules applicable in an internationalenvironment.
Such constraints impact the cost of doing business,performance and/or understanding of third parties, andthere is a risk that businesses will be required to takeunnecessary measures in the area of liability, and
communicate sensitive information, in particular tooutside players, or may be left at a disadvantage interms of competing with foreign competitors.
3. Achievements and developments in 2014
In 2014, the European institutions committed to finalisingthe banking union, in particular in relation to resolvingbanking crises. The Council and the Parliament haveadopted legislation on the single resolution mechanism(SRM), bank recovery and resolution (BRRD) and depositguarantee schemes (DGS). The European Central Bankhas begun to step into its role as the single supervisor ofthe Eurozone banks with the publication of the results ofstress tests on 128 European banks. The institutions arenow focused on the implementation of all the legislationon the banking union.
Although priority has been given to the banking union,this is far from being the only area of activity.
The final adoption in early 2014 of the European reformon statutory audit marks real progress compared withthe Commission proposal. The main point of innovationis the introduction of the principal of mandatory rotationof audit firms. This provision is less restrictive thaninitially planned, with a total possible period of 24 yearsfor joint audits, compared with an initial period of 9years. However, its application is likely to lead to adeterioration in the quality of audits on large companies,due to insufficient appropriate audit offer for thissegment and the absence of measures to develop suchservices. Overall, AFEP has succeeded in securing the
Annual report 2014
adoption of pragmatic solutions, involving limited costswhich are compatible with the organisation andfunctioning of businesses, management and the auditcommittee: the role of this committee has beenstrengthened, but its organisation has been maintained,and the content of audit reports determining the scopeof the statutory auditor’s functions is now morebalanced. The ban on large firms providing major public-interest entities any service other than statutory audithas fallen by the wayside, along with the evaluationapproach to internal auditing and risk management.
2014 also marks the completion of the revision of therules governing markets in financial instruments (MiFIDDirective and MiFIR Regulation). These texts meet mostof the expectations expressed by AFEP on the regulationof high frequency transactions, the conditions for theintervention of non-financial counterparties onderivatives and CO2 quotas. However, although thescope of transparency obligations has been widened toall systems for the execution of orders and financialinstruments, such progress, given the stakes involved, isinsufficient for two reasons: the delay in setting up aEuropean post-negotiation consolidated database andthe lack of complete transparency pre-negotiation. Thefollowing key points of these two texts are worthmentioning: the creation of a category of organisednegotiation systems reserved for debt instruments andderivatives; the introduction of a non-discriminatoryprinciple of access to order execution systems, theclearing houses and indicators used for negotiation andcompensation, and the introduction of the possibility for
national authorities to limit their investment incommodities.
A less ambitious text has also been adopted onPRIIPs/Packaged Retail and Insurance-basedInvestment Products. Following the requests made byAFEP, and reiterated by the European Issuers association,the regulation no longer covers corporate shares andbonds. The inclusion of company corporate shares andbonds would have had major consequences forbusinesses, as it would have involved a series ofobligations that are difficult to comply with, along with anindependent liability regime.
The outgoing Commission introduced two proposals forthe first semester 2014.
At the end of March 2014, the European Commissionadopted a proposal to revise the directive on theinstitutions for occupational retirement provision (IORPII). The proposal is designed to meet four mainobjectives: improve pension fund governance and riskmanagement; strengthen the transparency of theinformation provided to members and beneficiaries offunds, by promoting a level playing field at Europeanlevel; facilitating cross-border activity of funds; andencouraging funds to make long-term investments. Inaccordance with the requests made by AFEP, the scope ofthe revision does not cover the rules on solvency ofpension funds, which could only be covered at a secondstage.
The Commission also published a proposal on bankingstructural reform in January 2014. In line with the
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adoption by US regulators of the Volcker rule inDecember 2013, to come into force by 2015, theEuropean initiative includes a ban on proprietary tradingfrom 2017 onwards, and the possible separation ofpotentially risky activities (market making, securitisationand derivatives other than foreign exchange and interestrate hedging derivatives eligible for compensation). The European legislative proposal concentrates on bankswith a systemic or significant impact. Following amandatory evaluation of the competent supervisors,they will be granted the power to take decisions on theseparation of activities into a separate legal entity, wherethe thresholds to be adopted by the Commission havebeen reached, or owing to specific circumstances, suchas a threat to financial stability necessitating systemic riskprevention, financial tensions or bankruptcies. Nationalderogations from separation obligations will be possibleunder certain circumstances, if the Commission certifiesthat the Member State has taken equivalent measures.
The proposal for a European financial transactions taxhas been a cause for concern for businesses rightthroughout the year. Positive steps have been taken inthe negotiations between the 11 participating MemberStates in 2014, with a progressive reduction in the taxbase to shares and certain derivatives. However, littleprogress was made on key issues such as the residenceprinciple and the allocation of revenues. However, thedeclaration of the authorities at the beginning of 2015 infavour of a wider tax base and lower rates underminesthis development and may be welcomed by other States.
4. Outlook for 2015
At a European level, 2015 is likely to be an importantyear, as the Commission will need to choose whichfinancial issues to focus on during its period in office. The British Commissioner, Hill, with responsibility forfinancial stability and financial services, who is moreliberal than his predecessor, intends to focus on theimplementation of the significant volume of legislationadopted over the past few years. The Commissioner alsointends to take a business-friendly approach and not tointroduce burdensome regulation.
The European Commission has indicated that it intendsto establish a “Capital Markets Union”. This conceptinvolves, first and foremost, the development of non-banking financing in Europe, in light of the limitations to banking credit in Europe due to banks scaling downtheir balance sheets. In particular, a more diversified,competitive and resilient banking system will bedeveloped in order to respond better to long-termfinancing needs. The concrete measures the Commissionintends to take are not yet widely known, apart from theproposal to develop high quality securitisation. InFebruary 2015, a Green Paper was published to launchthe consultation and discussion period on the content ofthe Capital Markets Union.
AFEP will of course contribute to the consultation. Inorder to stimulate the non-banking financing and tosignificantly develop capital markets, existing marketregulation needs reform. The following objectives shouldbe emphasised: simplify regulation currently dissuading
Annual report 2014
companies from market access, develop insurers’ andpension funds’ investments in the real economy, bringtogether tax incentives to finance business and long-term projects and avoid penalising investment in the realeconomy (e.g. FTT).
AFEP will continue to emphasise the impact of thefinancial transactions tax (FTT) on business financing. Ifnegotiations were progressing owing to the impetus ofthe French President, the undesirable effects of a FTT fornon-financial businesses should be emphasised, i.e.costs passed on by the banks and significant effects onbusiness transactions (transactions on derivativecontracts, hedging transactions, intragroup transactions,recourse to market making activities on equity and debtsecurities, or even foreign exchange spot transactions,etc.). Raising awareness of the negative impact for theentire economy in the countries affected is of majorimportance in this debate.
With regard to the structural banking reform, theimportant issue for non-financial businesses on theseparation of certain banking activities – market makingin particular – is to ensure that the reform does not affectthe issuance of securities, the conditions for bank lendingand counterpart activities, in particular hedgingtransactions.
AFEP will also closely monitor the follow-up measurestaken by the Commission on the Maystadt report oninternational accounting standards and theconsultation on the implementation of the IAS regulation.In this regard, and as part of the EFRAG reform alreadyunder way, AFEP will continue to put forward three majordemands: better representation of private stakeholdersdespite the reluctance displayed by the Commission andMember States; strengthening the conditions for theadoption of IFRS and the possibility for the EU to modifythe standards in clearly defined cases.
In France, AFEP will take steps to ensure that theapplication of the European reform on statutory auditdoes not lead to a deterioration in the quality of auditingservices or give rise to excessive constraints forbusinesses and executive or supervisory boards,particularly with regards to services other than auditing.
For all the issues addressed, the need to promote long-term approaches and to maintain the conditions forbusiness financing will continue to guide the actiontaken by AFEP. While strengthening the security ofmarkets and financial players is crucial, it should notserve to erode the competitiveness of businesses orprevent a return to sustainable growth.
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1. Context and issues
Employment has remained a central concern in 2014,marked by a significant increase in the number of jobseekers (181,000 during the first 11 months and +5.8%over the course of one year). The reforms undertaken inthe area of labour and employment policy with theimplementation of the Securing Employment Act, anincrease in the number of jobs schemes for youngpeople and intergenerational contracts (state subsidised)have not been sufficient to prevent the rise inunemployment, owing to sluggish growth. Excessiveregulation largely explains the failure of internal staffmobility provisions and measures to preserveemployment voted in the Act, with only six agreementssigned under the latter.
Labour relations have been characterised by tensionsaround the personal account for occupational riskprevention and the discussions on the implementationon the Pact of Responsibility. A number of discussionshave already led to the signature of branch agreementsincluding commitments on hiring new employees anddeveloping apprenticeship programmes.
2. Achievements and developments in 2014
A number of important inter-professional negotiationshave been held throughout the year, including negotiationson unemployment insurance and the modernisation oflabour relations. AFEP submitted proposals as part ofboth negotiations, to ensure closer involvement of largecompanies in the drafting of these structural reforms onthe development of the labour market.
An agreement was concluded in March on unemploymentinsurance (UNEDIC: National Professional Union forEmployment in Industry and Trade). A number of newmeasures have been introduced, including rechargeablerights to unemployment insurance designed to provide afinancial incentive for returning to work, a longer periodof deferral before receiving benefits, a reform of the part-time back to work allowance and the rules on benefitsfor temporary workers, and the creation of a socialcontribution on working older employees (over the legalretirement age). Although the new deal will generate€400 million in savings, this is insufficient to restore thefinancial balance of the UNEDIC owing to the accumulateddeficit of €22 billion, in the absence of structural reformson the duration of benefits and the qualification period.
Work, jobs & social protection
Annual report 2014
Negotiations on the modernisation of labour relationsbegan in October. The objective pursued by businesseswas to improve the capacity of employee representationbodies (IRP) for adaptation, to simplify both the functioningof the IRPs, through merging the various bodies, and theconsultation/negotiation obligations and to introducebetter regulation on recourse to expert opinions, in orderto make labour relations a source of competitiveness.The negotiations ended in failure in January 2015, with amajority of unions refusing to merge the current IRPsinto a single body as proposed by employer organisations.
Following the Labour Conference held in July and thereport by COPIESAS (a special committee on employeesavings), a discussion between employer and employeeorganisations on employee savings was initiated inDecember. The profit-sharing bonus (created in 2011)was abolished in the Social Security Funding Act, asrequested by AFEP which also supported the modulationof the specific tax on employee savings, based on thelength of the fixed savings period in order to encouragelong-term savings.
With regards to legislation, the Professional training,Jobs and Social Democracy Act of 5th March 2014 is anaccurate rendering of the National Inter-professionalAgreement (December 2013) signed by social partners.This law reforms funding for professional training,introduces greater transparency to the funding of tradeunions and employer organisations, with the abolition ofdeductions from company professional training funds tofinance such organisations and the creation of a dedicatedfund for this purpose. The law also includes provisionson the certification of works councils accounts. A number
of proposals drawn up by AFEP have been adopted,including the abolition of the compulsory tax of 0.9%allocated to the company training plan, and, instead, thecreation of a 0.2% contribution for the funding of theindividual training account held by each employee .However, AFEP has expressed its reservations about thegovernmental reform on apprenticeship financing whichdiminishes the options open to businesses in financinghigher education institutions, with greater powers givento the local authorities (regions). Having noted the drasticfall in the uptake of apprenticeships in 2013 continuinginto 2014, the Government has partly reneged on thisreform with the Amending Finance Act.
The first step in the Pact of Responsibility was adoptedin July as part of the Amending Social Security FundingAct with a reduction in employer contributions onsalaries of less than 1.6 times the minimum wage,equivalent of a total reduction in labour costs of €4.5billion. The Government has indicated that the reductionin employer family contributions will be extended to allsalaries below 3.5 times the annual minimum wage in2016, equivalent of an additional reduction of labour costof €4.5 billion. However, the latter has not been includedin the Act, as advocated for by AFEP, in order to allowsufficient time for businesses to anticipate this evolution.
Despite the Government’s stated ambition to simplify thebusiness environment, a number of parliamentaryinitiatives have been voted this year that increase thecomplexity businesses are dealing with. AFEP has actedin order to limit the negative impact of such initiatives. Asan example, the Internships Act adopted in July hasstrengthened the obligations on the employer, with
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mandatory registration of interns on staff registers,introduction of paid holidays for interns, and access tothe company canteen. Most importantly, a limit has beenintroduced to the number of interns that can be taken onby a company at any one time, which is likely to make iteven more difficult for young people to secure aninternship, thus making it more difficult for them to accessthe jobs market. Similarly, although the Combattingunfair competition Act pursues the legitimate objectiveof fighting fraud with regards to posted workers, it goesbeyond the European requirements of the Directive withthe introduction of joint liability of contracting companiesand subcontractors in all the economic sectors
AFEP has contributed to the report by Michel de Virvilleon the implementation of the personal account foroccupational risk prevention, voted in the PensionsReform Act. While the report led to the adoption of someimprovements, particularly with the focus on workpositions, rather than on individual monitoring ofemployees, the provision remains particularlyburdensome for the companies affected in terms ofidentification of the jobs covered, managing employeefiles, not to mention the risk of litigation in the event ofdisputes with employees or the administration on theactual exposure to occupational risks. The employers’contribution will undoubtedly be subject to increaseswith the progressive scaling up of the law. The responseof businesses to these difficulties has resulted in theGovernment deciding to postpone to 2016 theimplementation of 6 out of 10 exposure risks, i.e. therisks whose evaluation is the most complex.
With regards to private pensions, AFEP has continued to
discuss with the Government on the issue of themechanisms which need to be put in place in order toguarantee employees’ pension rights, should a companyfails to meet its obligations. While the initial governmentalproposal set a short deadline for compliance - a majorburden for the affected companies - consultation led toan extension of one year to draft the order. Theproposals introduced by the business community havealso facilitated the establishment of a timeline for thetransposition of the European Directive proposed by theFrench authorities to the Commission, based on adeadline for the implementation of the Directive, aminimum guarantee, a cap per beneficiary and a largerange of solutions in relation to the details of guarantees.
AFEP has continued to advocate for a revised tax andsocial security framework for a portable career-longprivate pensions regime, in accordance with theEuropean Directive adopted in 2014. The need to revisethe current framework is even greater given theparliamentary amendment to the Social Security FundingAct introducing a heavier tax burden on private pensionsand in light of the announcement by the Government oftheir intention to revise the Growth and Activity Bill basedon the recommendations made by the dedicatedadministrative committee to which AFEP submittedproposals.
As a follow-up to the “Youth and Enterprise” (see sidebar)initiative in 2013, 60 AFEP member companies tookmeasures with a view to securing access to jobs foryoung people, upon completion of a apprenticeshipprogramme or a Masters degree. The initial results areencouraging.
Annual report 2014
A working group of company Presidents was also set upto pursue more in-depth discussions on the labour marketand to draw up proposals.
3. Outlook for 2015
Following the failure of the discussion between employerand employee organisations on the modernisation oflabour relations in early 2015, the Government indicatedthat they would meet with the social partners to studythe outcome of the negotiation. A draft law might beintroduced based on the recommendations set out in theGovernment green paper. The business community willclosely follow the initiatives taken by the Government inthis area, given the crucial impact of rationalisation andsimplification of procedures in terms of improving thequality and effectiveness of social dialogue.
Discussions between social partners on compulsorysupplementary pensions should begin in March in ahighly fragile budgetary context, in particular with theexpected exhaustion of the AGIRC (Fund coveringmanagerial and executive staff) reserves by 2017. Whilethe agreement from March 2013 instituted a moderateincrease in the contractual contribution rates, along withindexing pensions below the rate of inflation, any newrise in contributions would have a negative impact onemployment and should therefore be excluded. Priorityshould be given to identifying savings by postponing theretirement age in order to ensure the sustainability ofthese supplementary pension regimes.
In terms of legislation, 2015 will be marked by the debatein the Parliament on the Growth and Activity Bill, which
includes a number of measures affecting companies,including a reform on Sunday and night work legislation,which is not sufficiently ambitious, a change in theSecuring Employment Act, a reform on the employmenttribunal procedures as well as a section on employeesavings to which amendments will be added. AFEP isworking with the rapporteurs and Members ofParliament to make some improvements to the Bill, inparticular in relation to employee savings schemes.
On 1st January 2015, two new individual rights foremployees will be introduced: with the individual trainingaccount, each employee will be entitled each year to 20hours of training towards a qualification, up to 150 hours,with an option for employers to make additionalcontributions. Employees will not lose their rights if theymove to a new employer or become unemployed. Thepersonal account for occupational risk prevention willalso come into force on 1st January for 4 risk factors outof 10 in total (night work, shift work, repetitive work, workin a hyperbaric environment):businesses must draw up aprevention sheet for affected employees above theaverage annual thresholds, although this may only berequired by employees from January 2016 onwards. Tosupport the various sectors in drawing up instructions,Michel de Virville will deliver a progress report in summer2015, to which AFEP will contribute. Christophe Sirugue,Member of Parliament, and Gérard Huot, who managesa SME, have also been tasked with drawing up proposalsfor the simplification of the provisions, and ensuring legalcertainty and the prevention of sources of litigation andco-ordination with business prevention policies.
With regards to defined benefit private pensions, by
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In 2013, 60 AFEP companies committed to the “Youth and Enterprise” initiative to strengthen measures for youth trainingand employment and to promote collective initiatives for hiringpeople on apprenticeship programmes, access to jobs foryoung university graduates and hiring young people. One yearafter the launch of this programme, AFEP published the initialresults.
■ Apprenticeship towards employment: a youth recruitment portalTo encourage the hiring of young people trained by businessesas part of an apprenticeship programme, an innovative portalwas launched, at www.engagement-jeunes.com, where youngpeople can post their CV in a database accessible to other recruiters, other large groups, mid-market companies, SMEs joboffers and apply. To date, approximately 100 businesses haveactivated an account with the website, including 57 SMEs/mid-market companies. 2,327 young people on apprenticeshipprogrammes have been invited by their employers to activatean account, and 1,634 have done so. Company mentors canleave a comment about the candidates. In total, 2,283 jobshave been made available to young people in 100 companies.
■ Access of young university graduates to the job market: guidance towards employment with “Booster”Given the gaps between the needs of businesses and the skillsof candidates, particularly for graduates from certain universitycourses, the business community took the initiative to launchthe “Booster” programme. This initiative is designed to facilitateaccess to jobs for young graduates of Masters programmesand to help them in their search for their first job, by makingthem aware of the expectations of businesses. Boosterincludes several phases: meetings at universities with younggraduates, an interview preparation day provided by the companies, and interviews with the companies if suitable jobsare available. Eight AFEP businesses have participated in thisinitiative launched in March 2014 as a pilot programme in partnership with Aix-Marseille, Paris-Est, Créteil, and Pierre andMarie Curie universities. In 2015, an objective has been set tosupport 1,000 young people in accessing stable jobs in companies.
In 2015, AFEP will also partake in FACE, a Foundation for actionagainst exclusion, by supporting the video CV initiative.
AFEP’s commitment to youth employment with the “Youth and Enterprise” programme
June, the Government must present the order transposingthe Directive on the protection of pension beneficiaries inthe event of employer insolvency. In anticipation of theCommission’s response to the comments submitted atthe end of November 2014 by the French authorities,AFEP is continuing to work with the Minister for Social
Affairs to find solutions that do not penalise businesseswith excessive constraints or deadlines. AFEP also closelyfollows any possible modifications to these provisions as part of the Growth and Activity Bill, regardingperformance and the rules on how quickly annualpension rights are acquired.
Annual report 2014
1. Context
At the French and European levels, the year was markedby the adoption of a number of regulatory texts oncompetition, consumers and data protection. Althoughpositive developments have taken place in the field ofintellectual property, new constraints have emerged inother areas.
European Union legislation, although designed to protectconsumer-citizens, including legislation in the pipeline(the proposal for a European Regulation on dataprotection, the European Commission consultation onthe White Paper entitled "Towards more effective EUmerger control.”) or final (Directive on certain rulesgoverning actions for damages under national law for
infringements of the competition law), imposes a greaterburden on businesses without achieving a satisfactorybalance in the context of a globalised economycharacterised by ever-increasing competition betweengeographical areas. Conversely, consensus was quicklyreached amongst Member States on the proposal for aDirective on the protection of undisclosed know-how andbusiness information (trade secrets) against theirunlawful acquisition, use and disclosure, designed toprotect business research and innovations. A firstreading of the text in the European Parliament will takeplace during the second quarter of 2014.
In France, AFEP has taken a number of measures on theheels of the decrees adopted pursuant to the ConsumerLaw of 17 March 2014 related to: class actions, whichentered into force on 1st October 2014, and on thetransparency of information published on paymentterms, which is currently being drafted. AFEP has pointedout the company’s expectations with regards of the DraftLaw on growth and activities introduced by the Ministerfor the Economy. In the field of intellectual property,AFEP supports the efforts of the authorities to establish a Unified Patents Court.
2. Issues for companies
Competition, consumers and intellectual property aremajor issues for the competitiveness of businesses andmust be dealt with in a legally sound manner.
At the European level, AFEP has sought to strengthenthe competitiveness of European businesses in relation
Competition,consumers
& intellectualproperty
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to other areas in the world, where there is often a greaterfocus on pragmatism. Therefore, it was important topartly limit the scope of the Directive on antitrustdamages actions, which entered into force on 25thDecember 2014, and to ensure that the White Paper onmerger control rules does not result in an excessiveburden on the acquisition of minority interests. AFEPalso pursued this objective throughout its exchangeswith the authorities on the proposal for regulation on thepersonal data protection. In fact, parliamentarydiscussions were focused either on the need to protectcitizens or on the importance of limiting the activities ofsocial networking sites, but little attention has been givento the particular needs of businesses in terms of theirrelationships with employees or clients. Following theconstraints imposed by the European Parliament onbusinesses (administration, consent procedures,sanctions, etc.), Member States are now also takingburdensome measures (one-stop shop, greaterresponsibility for those responsible for data processingand subcontractors, etc.). Penalty rates are extremelyhigh, at up to 5% of worldwide turnover if parliamentaryrecommendations are adopted for the upcomingtrialogues. It is also with regard to competitiveness and amore secure framework for R&D, that AFEP alsosupported the Directive on trade secrets when proposedby the European Commission, as well as before theCouncil and Parliament. AFEP is also supporting thedevelopment of a unified court in Europe, with the seatof the Court of First Instance in Paris.
In France, AFEP has advocated for pragmatism in drafting
various regulatory texts including the decrees adoptedpursuant to the Consumer Law, the first of which coversclass actions published on 24th September 2014 and theother on the transparency of reporting on companypayment terms, which is currently being drafted. Moregenerally, AFEP has pursued its work in order to improveinter-company relationship, on business relationships,delays and payment terms, sharing research and skills, etc.
3. Achievements and developments in 2014
At the European level, the main achievements forbusiness are in the field of state aid and the proposal fora Directive on trade secrets.
In May 2014, the European Commission adopted twomajor pieces of legislation on state aid: the new GeneralBlock Exemption Regulation (GBER) and the newregulations on state aid for research, development andinnovation (RDI). AFEP co-operated with various businessorganisations (BDI, Industry Club and MEDEF) to maketheir voice heard by the Commission on state aid for RDI.As a result, the Commission has dropped the netadditional cost calculation method for evaluating theproportionality of individual state aids as a general rule,but it is now limited to the alternative scenario of projectsnot in receipt of aid. With regards to the Directive onantitrust damages actions agreed on 24 March, thework of AFEP and various other national and Europeanorganisations resulted in a limitation on the bindingeffects of the decisions of the national competitionauthorities (NCA). If an NAC finds a breach of competitionlaw, this presumption will only be conclusive in that
Annual report 2014
Member State. In other Member States, such a findingwill have the status of prima facie evidence.
The text on the protection of trade secrets was adoptedby the Competitiveness Council of Ministers of 26 May2014. Positive points include the choice to define tradesecrets in accordance with international agreements onintellectual property (TRIPS). In accordance with therecommendations by AFEP, it has also been specified thatthe commercial value can be either real or potential.However, other positions adopted by the Council createdifficulties. The list of means for the unlawful acquisitionof trade secrets has been shortened, with theft, bribery,deception and breach of a confidentiality agreement nowexcluded. The conditions for ensuring confidentiality inlegal proceedings have been relaxed with the creation ofa “confidentiality club” composed of one person fromeach party, their lawyer and the court officers(particularly the clerk), which increases the risk of tradesecret leaks. The start date for calculating the limitationperiod is no longer specified, making implementationconsiderably more complex. In their discussions withMEPs in the run up to the reading of the text in early2015, AFEP has sought to highlight the importance ofmaintaining the definition of trade secrets and improvingcertain aspects of the proposal. AFEP has also emphasisedto have a start date allowing for calculation of the limitationperiod and to lead this period from 3 to 6 years. TheDirective must be transposed soon into national law withfull effect.
At the national level, under the decree on class actions,only the County Courts (Tribunaux de grande instance)
will have territorial jurisdiction. This measure should helpto avoid dispersal of class actions across the country andfacilitate earlier uniformity in case law, and betteradministration of justice. With regards to simplified classactions, efforts to inform plaintiffs of the outcome are leftto businesses only. Conversely, a number of provisionsremain unsatisfactory. In this new and complex type oflitigation, the fast-track appeals procedure has beenconfirmed despite the fact that class actions cannotsystematically be deemed to be “urgent” or “easy” cases.The order of the pre-trial judge on difficulties that havearisen in the implementation of the judgment on liabilitymay not be appealed, and the rules on participation inthe class action remain vague. Pursuant to the same Law,discussions have been held with the authoritiesthroughout the year on a draft decree on companytransparency on payment terms. There is no agreementyet on the most appropriate way of defining latepayments in relation to the payment terms. Thegovernment wishes to publish information based on thecash outflows to suppliers and cash inflows from clients,whereas companies recommend an information basedon the account balances, to limit the complexity andheaviness in the preparation of the information.
4. Outlook for 2015
At the European level, AFEP will reiterate to the EuropeanCommission the importance of avoiding complexity inthe acquisition of non-controlling minority shareholdings.AFEP will continue to press the issue of data protectionwith the Member States, who intend to close this matter
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by June 2015, in particular on the reduction of the rate ofpenalties and the revision of consent procedures. Theobjective in relation to the Directive on trade secrets willbe to minimise modifications to the text during theupcoming reading by MEPs. In addition, the Afep willseek to emphasise to the Commission the importance ofharmonisation in relation to patents, and, more generally,the certification process, which entails an increasinglyvital competitive dimension for European businesses.
In France, during the examination of the competitionissues of the draft law relating to growth and activity,Afep shall highlight the need to strike a balance between
the necessary competitive vitality and an overly intrusiveapproach for businesses (structural injunctions). TheGovernment may implement different initiatives inrelation to class action in the health, discrimination anddata protection fields. Businesses will reiterate the needto conduct an impact assessment of the action carriedout before considering an extension. The association willcontinue to monitor the draft decree on transparency inrelation to payment deadlines which comes under awider intention to improve inter-company relationshipin order to boost the competitiveness of the companiesand improve their capacity to export within the context of a better structured ecosystem.
Annual report 2014
1. Context
In France, the summer of 2014 saw the bill on the energytransition for green growth be presented. This presentationfollowed the nomination of Ségolène Royal, in April, asthe Minister for Ecology, Sustainable Development andEnergy. Prior to this presentation, AFEP, during the firstquarter of 2014 and in collaboration with the Cercle del’Industrie, had presented the governmental authoritieswith the recommendations of the working group ofpresidents on energy, chaired by Jean-Pierre Clamadieu,President of the Executive Committee of Solvay, so as toencourage them to include favourable arrangements forbusiness competitiveness in their work. The bill onbiodiversity was adopted by the Council of Ministers on
26 March. Following a year in which work was suspended,the taskforce for modernisation of environmental lawwas re-launched through the creation of seven themedworking groups, at the beginning of the autumn. In parallel,the laws on simplification have enabled regionalexperiments to be launched in particular for the purposeof a single environmental authorisation and a projectcertificate aiming to formalise the key steps in upstreamadministrative decisions, in order to secure investment.The Committee on Environmental Tax suspended itswork in summer 2014 following guidelines issued by theEcology minister in regard to “punitive” taxation.Transposition into French law of the provisions forauditing energy efficiency as laid out in the “energyefficiency” Directive was completed by the end of 2014.
At a European level, 2014 saw a plethora of leadinginitiatives be introduced, amongst which was theadoption of the new “package on air quality”, providingfor a revision of the Directive on national emission ceilings,as well as a proposed Directive on reducing pollution frommedium-size combustion plants. Subsequently, theCommission adopted its new “climate and energypackage”, under the 2030 framework, which contains, , aproposed Directive introducing “stability reserve for theETS market” from 2021 in order to integrate the 2 billionallowances considered as surplus at the end of 2020 andto rectify the allowance average price. Numerous othertexts on energy and climate were also adopted by theCommission, notably the new guidelines on state aidrelating to the environment and energy, which significantlymodify the national systems. The other texts adopted
Environment & Energy
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relate to the energy security strategy, the list of ETSsectors subject to carbon leakage for the 2015-2019period, a communication on energy efficiency and aconsultation on carbon leakage linked to the ETS systemfor the 2021-2030 period. On 23 and 24 October, theEuropean Council defined the European objective ofreducing greenhouse gas emissions under the 2030framework, to the 1990 levels, in order to position Europefor the Paris Conference of Parties in December 2015(COP 21).
In terms of AFEP’s proactive initiatives, 2014 wascharacterised by the launch of a preparatory mission increw of a Sustainable City Institute, in order to implementplace pilot projects for sustainable cities in France in 2015and the working group on the circular economy chairedby Jean-Louis Chaussade, the Managing Director of SuezEnvironnement.
2. Issues for companies
Energy prices and energy supply security were the majorsubjects in national and European policies in 2014, ayear characterised by the Ukraine crisis. Nonetheless, the multitude of European texts on energy published in2014 demonstrates the difficulty of dealing with this issuein an appropriate and consistent manner at European level,given the sovereignty of Member States on the choice oftheir energy mix.
The economic actors’ wishes to be informed in advanceof the new European 2030 energy and climate framework– in particular concerning the ETS system – have been
taken into account by the Commission. The objective is tobe better prepare for “low carbon” investments.However, on the initiative of DG Climate Action, theimplementation modalities of an extended carbon signalbefore the 2021-2030 period was not subject to anoverall reform, but rather of sequential legislativeprojects. These introduced significant uncertainty intothe legislative process. The “back-loading” measure wasadopted in 2013, independently from the “marketstability reserve” system presented in early 2014, whilethe increase of the allowance average price could only be possible if temporary withdrawal allowanceswere transferred to the market stability reserve or werecancelled.
In the context of the UN Conference in Paris on climatechange (COP 21) in December 2015, the Foreign AffairsMinister, Laurent Fabius, the future president of theconference, chose to entrust Laurence Tubiana withpreparing the international negotiations. AFEP and Cerclede l’Industrie member companies wanted to play a role as a “source of proposals” vis-a-vis the governmentalauthorities by supporting the implementation of a“business dialogue” before COP 21 and continuingafterwards. AFEP also chose to support the “BusinessClimate Summit” organisation, initiated by GlobalCompact France and Entreprises pour l’Environnement, by contributing to the international support for the eventwhich is planned for 20 and 21 May 2015, in particularwith the World Business Council for SustainableDevelopment (WBCSD) and the International Chamber ofCommerce.
Annual report 2014
At a national level, the Government’s desire to simplifyenvironmental legislation, in order to avoid “punitive”taxation and to promote “environmental solutions”implemented by pioneering companies appeared to, apriori, correspond to the requests made by the economicactors. The accumulation of new regulatory measuresand exceptions - which are plentiful in the environmentfield - under the principle of “silence from the authoritiesfor two months means agreement” does nonetheless callfor caution, as declarations of intent are not alwaysfollowed by action.
3. Achievements and developments in 2014
Considering the bill on energy transition for greengrowth, the adoption of this bill by the National Assemblyin October enabled positive evolutions compared to thetext adopted by the Council of Ministers: the integrationof competitiveness objectives into the national economy,the greatet technological neutrality in defining cleanvehicles, the nationwide testing of single authorisationfor classified facilities, and the integration of energy-intensive companies which consume large quantities ofgas in the public transport network tariffs (TURPE). In thecontext of the bill being examined by the Senate, theassociation stressed the need to consider the aim ofreducing greenhouse gases as a priority objective at aglobal level and the need for a regulation and taxframework which is favourable to France’s attractivenessfor those industries exposed to carbon leakage. Otherissues were also highlighted, with the aim of promotingthe development of energy performance projects, in
which the time of return on investment is under 10 years,or to encourage facilities for solid recovered fuel. Inaddition, the association also pointed out that cappingthe total authorised nuclear capacity at its current level –without including the capacity linked to the new EPR –could be problematic when the new EPR enters intooperation. To conclude, AFEP underlined the significantrisks of increase of the contribution to the publicelectricity service (CSPE), linked to the different provisionslaid down in the bill.
In relation to European level efforts, the most significanttext concerning energy prices is the Commissionguidelines on state aid in terms of environment andenergy, adopted by the Commission in April. The textadopted provides for electricity taxes, linked to thedevelopment of renewable energy, to only be capped at4% of the gross added value for moderately electricityintensive businesses and at 0.5% of the gross addedvalue for electricity intensive companies. In this context,the European Commission considers that the currentcapping conditions for the CSPE in France is not in linewith the guidelines given the existence within the CSPEof, in addition to a “renewable energy” component,“cogeneration”, “non-interconnected zones” and “socialtariff” components. It is therefore the entire CSPEcapping system, by site and in accordance with theadded value level, that may be called into question notonly for the future but also for the past. The risks foreconomic actors are potentially very significant, whichled the Association to alert the French public authorities.The objective was to achieve an acceptable solution, by
35
the end of June 2015, for both the European Commissionand the economic actors, modelled on the rapid transitionthat took place in Germany to comply with the newEuropean rules.
The other important theme is about the 2030 climateand energy objectives which were adopted by theEuropean Council in October 2014. These objectivesseems ambitious, in particular in relation to theadditional efforts expected from the economic actorsunder the ETS directive: the climate objective for 2030 forthe EU is -40% less in 2030 compared to 1990 (excludingproject mechanisms) with more significant efforts forthose actors subject to the ETS directive (3/5th of theefforts) than for other sectors (2/5th of efforts), giventhat the non-ETS objective still needs to be sharedbetween all Member State. A European objective of atleast 27% of the renewable energy consumed between1990 and 2030 and an objective to improve energyefficiency from 27% in 2030 (instead of the 30% initiallyrequested) have been decided on, without obligations at state level. The objective of 10% of electricalinterconnections was also adopted with a target of 15%envisaged for 2030. Given these mid-term objectives, theeconomic actors were happy to welcome the renewal, for the 2014-2019 period, of the list of sectors exposed to carbon leakage and those benefitting from freeallowances up to the best 10% of performance in theirsector. They were, however, concerned by the debate onthe market stability reserve which, in late 2014, focusedon bringing forward the implementation of this reserveby 2017 and filling the reserve with back-loaded
allowances, and will therefore not be placed back on the market.
In terms of combatting local pollution, the work of theCouncil has made it possible to achieve positivedevelopments concerning the proposed directive onmedium-size combustion plants (MCPD). Furthermore,the Council adopted the idea of cancelling uniformemission limits at a European level in the case of zoneswith high levels of local pollution, in order to enableMember States to set these limits according to thecharacteristics of each site, in accordance with theprinciple of subsidiarity. One area of concern remains:stricter emission limits than in recent French decrees inrelation to large combustion plants.
4. Outlook for 2015
At an international level, AFEP calls for the Governmentsof G20 countries and certain developing countries as well as representatives of international companies indifferent geographical areas and from different sectors to engage into a dialogue with one another, by means ofmeetings before COP 21 which will continue afterwards,with the aim of harmonising “carbon” policies globally.The main expectation of the economic actors for theParis conference will be the establishment of internationalcommitments for after 2020, in order to achieveharmonised efforts to control greenhouse gas emissionsamong the major emitting countries.
2015 will be a decisive year with a review of Europeanpolicies by the new Commission. Late 2014 was
Annual report 2014
characterised by the will of the Commission, in particularof First Vice-President Timmermans, to abandon theproposed directive on national emission ceilings and tocritically examine the “circular economy package”published in July 2014.
Early 2015 should offer an opportunity for theCommission to present a communication on “EnergyUnion”, based on the current treaties. A new proposal forlegislation is due to be published in early summer by theCommission concerning the ETS system in the 2021-2030period, with one of the most controversial points beingthe carbon leakage risk and the risks of redirectinginvestments outside of the European Union.
At a national level, an important challenge relates to the capacity of public authorities to incorporate the
simplifications and improvements in the field ofenvironmental law which have been detected under themodernisation taskforce, in particular concerning publicconsultation, a subject which has come to the forefrontsince the Sivens drama. The first quarter of 2015 shouldalso offer an opportunity to identify pilot locations inFrance for sustainable urban development projects ona significant scale, which will make it possible to illustrateto the international community the capacity of Frenchcompanies to create solutions for sustainable citieswhich are resource-efficient and which provide servicesand contribute to the quality of life for its inhabitants andusers. The conclusions of the AFEP working group on thecircular economy will also be presented as part of theBusiness Climate Summit.
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Many AFEP companies – Alstom, Bouygues, Compagnie deSaint-Gobain, Eiffage, Gdf-Suez, JC Decaux, Lafarge, Michelin,Orange, Peugeot, Renault, Schneider Electric, Suez-Environnement,Total, Veolia, Vinci – in partnership with other organisations –Advancity, COSEI, Edf, Egis, RATP, SNCF, Syntec Ingénierie, Vivapolis – have taken measures over the past years with a view to developing a range of French services focused on sustainable development, both for France and for export.Proposals in this vein have been drawn up within AFEP.
■ The following three aspects are essential to successfullybuild a global French offer in this area:− The development of a competitive and distinctive range of
services at international level;− The implementation of physical and virtual pilot projects on
sites in France with innovative, top-performing andsustainable urban development, to demonstrate thecapacity of French players – public and private, largecompanies and SMEs – for designing and implementingsuch solutions;
− Communication and promotion of the services atinternational level.
■ Advantages of pilot sites:− Demonstrate the implementation of new technologies,
the combination of a range of existing technologies and the contribution of innovative services;
− Demonstrate the capacity in France for innovative design ofcollaborative multi-function solutions: housing, business,services, transport, energy, etc;
− Draw up overall objectives in partnership with the client(consumption per person converted into CO2 emissions orkWh consumed), thus offering measurable advantages, and taking performance evaluation beyond sector-based
measurements (such as measuring kWh/m² for a building or consumption of a tramway, or even a percentage ofwaste recycled);
− Work in active cooperation with the client.
■ Significant improvements in performance associatedwith pilot sites:− A significant reduction in wasted heat, energy, water,
transport, non-recovered waste, etc.;− Emergence of businesses generating innovation and local
jobs;− Leveraging the expertise of French businesses, both large
and small;− Combatting climate change;− Improving well-being in urban areas (quality of life);− Preparing towns and cities for development in urban
planning, towards greater density and reduced use oftransport.
■ Challenges in relation to implementation:− The need for clients to draw up single combined contracts,
rather than separately or on a piecemeal basis;− More complex projects, as business models are currently
lacking focus on the circular economy;− The need for public contracting authorities to draw up
overall performance objectives;− The need for an interface between the client and the
various operators;− Grouping operators for each pilot site into integrated
consortiums, assigned to build operating pilot site in thelong-term. A consortium should not only work towardsimproving the real estate value, but also towards ensuringperformance in relation to the circular economy once theproject is up and running.
Building a range of services for sustainable urban development
Reason for the urgent need to develop pilot sites
Annual report 2014
1. Context
AFEP member companies have, for several years now,integrated social responsibility challenges (CSR) into theirstrategy. They implement a number of policies andactions to increase the positive impact and limit thenegative impact of their activities. CSR, which is a factorin competitiveness, enables the businesses to respond tosociety’s needs in a sustainable way thanks to social andenvironmental innovation and constant interaction withthe actors involved in their ecosystem.
The French legal framework is undoubtedly one of themost ambitious frameworks in the world. While theyrecognise the usefulness of this framework, companiesare also keen on being able to carry out their CSR
activities in a way that is adapted to their work and in astabilised normative framework.
Throughout 2014, AFEP’s work was guided by the attemptto balance the legislative and regulatory texts at both aFrench and European level; to represent businesseswithin the national CSR platform, which, one year afterbeing set up, has already enabled detailed debates totake place, as well as to enhance the taking into accountof the businesses’ point of view in drafting national andinternational frameworks and guides.
2. Issues for companies
The large French companies are amongst the mostadvanced in terms of the use of preventative and remedialmeasures, enabling them to manage the social, societaland environmental risks of their activities (see box). Theirapproaches are now facing the problematic juncturebetween the public governance of states and the privategovernance of companies and between hard law and soft law.
Companies fear the legalisation of relations betweenstakeholders, which would not be in line with the damageprevention objectives they are seeking to achieve. Forthis reason AFEP does not support the adoption of lawproposals (PPL) submitted to the Parliament on the dutyof care. AFEP considers that the introduction of apresumption of quasi-irrebuttable responsibility in a badlydefined field, would lead to the legalisation of relationsbetween parties without contributing to the objectivesbeing met in terms of damage prevention. The approach
Corporate Social
Responsibility
39
of this proposal - which has not been adopted by anyother state - is not the right answer for a delicate subjectwhich calls for different solutions such as reporting ondue diligence measures, improving OECD NationalContact Points, mechanisms for non-judicial remedies,and, as the case may be, the introduction of an obligationto set up an average basis of disclosure obligations.
3. Achievements and developments in 2014
At the French national level, AFEP has actively participatedin the work of the “CSR platform” which is an innovativespace for ongoing dialogue between all stakeholders.Even though difficulties in understanding the economicworld may remain, AFEP contributes to promoting anambitious and constructive vision of CSR, recalling theneed for a stable and predictable legislative andregulatory framework which takes into account theoperational reality.
In order to enable companies to better understand therole of the French National Contact Points (PCN) for the implementation of the OECD guidelines formultinational enterprises, and the way in which theywork, on numerous occasions AFEP invited its SecretaryGeneral and President. These discussions made itpossible, in particular, to clarify the scope of the notionsof “due diligence” and “business relations”, and topresent good practice in the implementation of the OECDguidelines by large French multinational groups.
AFEP also contributed to drafting the Afnor guide onverifying social and environmental information.
This guide focused on ensuring that independent thirdparties in charge of verifying social and environmentalinformation act in accordance with the regulatoryframework.
The professional standard applying to statutory auditorsrelating to the provision of services linked to CSRinformation has also been set up in order to introduceflexibility for companies who should have the option tolimit the scope of the information covered by theservices, or to emphasise that there is a need for specificprofessional skills to be recognised in the CSR field.
At a European level, AFEP companies have welcomed the adoption of the European Directive on disclosure ofnon-financial information. This text harmonises thetransparency requirements which large companies listedin the European Union will be subject to. The companiessupport greater transparency on “due diligence”measures, which they will carry out in accordance withthe OECD and UN guidelines (conduct codes; CSRcharters; alert procedures; contractualisation ofresponsible purchasing practices; mapping CSR risks;evaluating suppliers and sub-contractors; correctiveaction plans; CSR audits carried out by independent thirdparties). In addition, the directive replaced the obligationfor businesses to provide financial and tax informationfor each country, with a more thorough and co-operativeEuropean system. Although the companies supportaction carried out to combat tax fraud in a co-ordinatedinternational context, they believe that the publication ofcertain “gross” economic data (turnover, workforce, profitor loss, tax paid), without taking into account the
Annual report 2014
economic and tax environment in which the companiesare evolving, would lead to incorrect judgments andwould undermine the businesses in relation to theircompetitors and the tax authorities of third countries.
At an international level, AFEP outlined its position onthe “integrated information framework” proposed bythe IIRC (International Integrated Reporting Council).Although the framework is voluntary in terms of itsapplication and may help companies to take intoconsideration the main consequences of their actions,the companies pointed out that its application or avoluntary reference to this framework, would entailobligations, some of which are excessive. The applicationof certain key elements of the integrated informationframework (measurement of assets and the creation ofvalue, information connectivity) entails major conceptualdifficulties and would result in disproportionate costs forcompanies, without a guarantee that the informationpublished would be relevant and reliable.
AFEP regrets that French (and European) companies stilldo not have an international fair level playing field whichwould enable them to compete on a sound basis withthose companies that are less concerned with complyingwith international CSR norms, and which would make itmore difficult for products manufactured in a mannerthat does not comply with these international standardsto be sold on the European market.
4. Outlook for 2015
AFEP will work to constructively support parliamentarydebates on proposed legislation relating to duty of care
obligations for parent companies and the companiesplacing orders, by emphasising that the companies are infavour of transparency in relation to “due diligence”,which they implement in accordance with the OECD andUN guidelines. AFEP will continue dialogue with thenational contact point in order to promote thecontribution it makes to resolving potential difficulties incompanies’ respect of OECD guidelines.
AFEP will also make suggestions regarding thetransposition of the European Directive on disclosureof non-financial information into French law, most likelyin relation to the bill on transparency in economicmatters announced by the Minister for the Economy, and will continue to actively participate in the CSRplatform where this issue will also be debated.
In addition AFEP will contribute to the drafting ofguidelines for the prevention of corruption incommercial transactions for French companiesproposed by the ‘Service Central de Prévention de laCorruption’ (SCPC - Central Corruption PreventionDepartment). This training and support approach iswelcome. It is nonetheless important to ensure that theconcepts used are sufficiently defined and that therecommendations can be adapted to the size or activityof the company.
Finally, to improve the extent to which CSR is taken intoaccount in international commerce, AFEP intends toemphasise its point of view regarding CSR at the Multi-Stakeholder Forum, set up by the European Commission,as well as in its contact with the OECD.
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In order to prevent and manage the social, societal and environmental risks of their activities, large companies both inFrance and overseas implement numerous processes whichthey explain in their management reports or specific reports.Non-financial rating agencies evaluate these efforts and practices.
■ Social, environmental and ethical codes of conduct andcharters:− approved at the highest level of the business;− disseminated and applicable to all employees;− publicly accessible;− accompanied by procedures to evaluate local practices and
anonymous ethical alert measures.
■ Contractualisation of CSR ethical and compliance efforts:− responsible purchasing policy;− supply chain management policy;− code of conduct for suppliers and sub-contractors;− obligations for leading suppliers or sub-contractors to
comply with social and environmental requirements of thegroup;
− communication of these requirements to second or thirdtier suppliers;
− prohibition of sub-contracting without prior authorisation.
■ Risk identification and evaluation:− supply chain management mapping;− identification of suppliers and sub-contractors depending
on significant risk factors such as: product or service family;country of supplier or sub-contractor; sales or service volume;
− prioritisation of evaluations to be carried out.
Due diligence measures implemented by large companies
■ Evaluation of suppliers and sub-contractors:− documentary and questionnaire-based audits;− on-site audits, social and environmental audits;− selection or granting of tenders in accordance with CSR
evaluations.
■ Corrective actions plans:− awareness-raising and training, with the support of local
NGOs, as required;− monitoring suppliers and sub-contractors in the case of
non-compliance;− requirement to remedy the identified shortcomings;− break down of contractual relationship in the case of grave
violations or refusal to make progress.
Numerous collective initiatives have also been set up inorder to pool CSR analyses carried out amongst suppliers orsub-contractors, with the aim of achieving broader objectives,carrying out thorough audits in a more efficient manner andputting in place corrective measures (the Global SocialCompliance Programme for the retail sector, the BusinessSocial Compliance Initiative for an ethical supply chain, theSocial Clause Initiative which brings together 20 companiesworking to improve working conditions and to monitorsuppliers in a responsible manner, the Joint AuditCooperation, bringing together telecommunicationsoperators, and Together for Sustainability, launched bychemical groups for a sustainable supply chain).
Annual report 2014
1. Context
2014 was characterised by the renewal of the Parliament,the Commission and the European Council Presidencyand changes to the European political structure.
Against a backdrop of growing dissatisfaction with theEuropean Union and the economic crisis, a large numberof new MEPs were elected following the elections of 22-25 May. For the first time the “Spitzenkandidaten” (thecandidates presented by the major European politicalparties) campaigned individually to access the post ofPresident of the Commission. Despite this initiative, theparticipation rate was the lowest ever registered (42.54%).On the one hand, the conservatives of the EuropeanPeople’s Party won the relative majority of the seats, led
by Jean-Claude Juncker, the now President of theEuropean Commission. On the other hand, the populistparties on the right and left won many seats.Nonetheless, a coalition between conservatives, liberalsand socialists enabled the college to be approved.Juncker Commission took office as of 1 November 2014.
President Juncker, a supporter of a Europe which is “moreambitious on big things, and more modest on small things”,has restructured the Commission around six projectteams, each of them led by a vice-president. This newstructure also intends to stop the “silo” approach, amethod often questioned by economic actors. The vice-presidents are responsible for co-ordinating theCommissioners and filtering the legislative initiatives.Their true political weight is still uncertain and willdepend, to a large extent, on their personalities as well astheir relationships with the Commissioners of their team.President Juncker also appointed a new First Vice-President,Frans Timmermans. Timmermans is a key figure whomanages a broad portfolio including improving Europeanlegislation, inter-institutional relations and the rule of law,and is supported by a significantly improved Secretariat-General.
Along with the European Parliament and Commission,the European Council has also been renewed withDonald Tusk, from Poland, taking office as the Presidentof the Institution from 1 December, replacing HermanVan Rompuy.
Following these institutional changes, French influencehas decreased both in the European Parliament (the
Afep & Europe
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number of MEPs from populist parties is equal to thenumber of MEPs from conservative and socialist partiesin certain committees which are important for business)and the European Commission (for example, amongCommissioners’ Heads of Cabinet, four are German andjust one is French).
2014 was also characterised by strong pressure fromindependence movements in Member States, in particularthe Scottish referendum in September (which ended infailure for those in favour of independence), the presenceof Flemish nationalists in the Belgian Government inOctober, and the “yes” vote (non-legally binding) on Catalanindependence in November.
In order to communicate its priorities for the next fiveyears to the new European Commission and Parliament,AFEP drafted a document entitled “Help Europe Win theGlobal Race” and presented it to European stakeholders(see below).
2. Challenges for companies, achievements and
developments
Given the institutional changes, the outgoing Commissionused the final months of its mandate to propose its lastlegislative texts: the 2030 climate and energy package, airquality, business secrets, banking structural reform,shareholder rights and pension funds. In 2014, negotiationswere completed under both the Greek Presidency (1st
quarter) and the Italian Presidency (2nd quarter) whichresulted in important developments corresponding tothe expectations of businesses: non-financial reporting,
damages in antitrust cases, packaged retail insurance-based investment products (PRIIPs), state aid reform, andthe European Council conclusions on the 2030 climateand energy package.
Throughout 2014 AFEP worked to support the developmentof a regulatory environment which would encouragebusiness competitiveness. It supported the texts alongthis line (reform of state aid, protection of trade secrets,managing the list of exposed sectors in the framework ofthe ETS system) and also worked to amend those textswhich could have increased the regulatory burden. These potential burdens relate, in particular, to businessfinancing (tax on financial transactions, bankingstructural reform), their competitive environment andtheir relations with their clients and suppliers (considerationof minority shareholdings in the context of mergercontrol, data protection reform), their production andinvestment activities (2030 Climate and Energy package,introduction of a market stability reserve for CO2allowances, air quality) or their obligations in terms ofcorporate governance (shareholder rights).
AFEP developed and improved its links with the newEuropean institutional actors. Many meetings took place,in order to enlarge AFEP’s European network and tocontribute to informing decision-makers of all politicalbackgrounds and all nationalities of the association’spriorities.
3. Outlook for 2015
Early 2015 has been characterised by the Commission’sfirst major initiative: the Juncker plan, which complements
Annual report 2014
the budgetary responsibility and structural reformobjectives to help Europe exit the crisis. The Commission’s2015 work programme, while narrower in scope thannormal, contains important initiatives: the package onthe digital single market, the energy union, the capitalmarket union, the strengthening of the economic andmonetary union and the fight against tax evasion.
Throughout 2015, key legislative reforms are due to becompleted, such as on data protection, the protection of trade secrets, air quality (medium-sized combustionplants), shareholder rights and gender balance inboards of directors.
The future of the financial transaction tax remainsuncertain, although the new French position may movenegotiations forward. In addition the Commissionannounced its intention to withdraw a series of textswhich were not likely to result in an agreement. Thesetexts relate to directives on national emission ceilings(2nd component of the air quality package), waste andenergy taxation. The environmental texts have led to atug of war, in particular regarding air quality, contributingto making the Commission's work more difficult. TheCommission has committed to pursue its work on a
common consolidated corporate tax base (CCCTB) bylaunching new approaches which will be presented in acommunication in the future.
Moreover, energy and climate issues will be high on thepolitical agenda with two major events; at the Europeanlevel the revision of the ETS Directive announced beforethe summer and at the international level theorganisation of the COP21 conference to be held inDecember in Paris with the aim of reaching a bindinginternational agreement on climate change.
Europe will be particularly focused on three MemberStates where the situation is of concern, in differentways: Greece where elections in late January brought theextreme left to power, the United Kingdom where a winby conservatives or UKIP in the May elections wouldundoubtedly lead to a referendum on leaving theEuropean Union and France which must urgently addressits public finances and carry out structural reforms.
Throughout 2015 AFEP will continue to strengthen itslinks with the new MEPs and the new Commissioners, inparticular through targeted meetings with the Presidentsof member businesses.
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To exit the economic crisis, European solutions should entail serious macroeconomic adjustments as well as, more thanever, restoring economic competitiveness. To “help Europe win the global race” the European Union should address thefollowing five challenges:
■ reform and deepen the internal market to support business competitiveness:− make the European companies’ competitiveness the guiding
principle for future reforms of the internal market;
− build an integrated vision of the fundamental policies of theinternal market: fundamental freedoms, competition,intellectual property and the business environment;
− simplify the regulatory environment for companies topromote their development, assess the cumulative effect ofthe existing legislation and the impact on new measures oncompetitiveness before creating any new rules andguarantee “zero additional administrative burdens” forbusinesses;
− introduce a tax framework fostering the competitiveness of European businesses;
■ integrate the requirements of competitiveness and financing in climate, energy and environment policies:− engage work on the "Climate and Energy package for 2030"
in a coherent and structured schedule, taking into accountthe result of international negotiations on climate change in2015;
Help Europe Win the Global Race
− set cost-effective targets for air quality;
− encourage financing of the energy and ecological transition;
− improve governance and transparency for the techno-economic models used by the Commission for the design ofpublic policies (e.g. GAINS, PRIMES);
■ improve the financing of the economy:− allocate resources primarily to productive investment,
preserve banking maturity transformation and betterorganise alternative sources of financing;
■ facilitate access to third country markets:− pursue an aggressive policy for access to third country
markets.
■ modernise European economic governance:− encourage Member States to carry out reforms and to
comply with the Eurozone rules;
− transform the economic governance of the Eurozone.
Annual report 2014
Geneviève FiorasoMinister for Higher Education and Research
Pierre GattazPresident of MEDEF
Angel GurríaSecretary General of the OECD
Jean-Pierre JouyetSecretary General of the Presidency of the Republic
Bruno Le MaireMember of Parliament (Eure)
Philippe MartinMinister for Ecology, Sustainable Development and Energy
Didier MigaudPresident of the Court of Audit
Pierre MoscoviciMinister for Economy and Finance
Jean Pisani-FerryChief Commissioner for Strategy and Forecasting
François RebsamenMinister for Labour, Employment and Social Dialogue
Ségolène RoyalMinister for Ecology, Sustainable Development and Energy
Michel SapinMinister for Finance and Public Accounts
Jacques AttaliPresident of PlaNet Finance France
Nicole BricqMinister for Trade
Harlem DésirState Secretary in charge of European Affairs
Mario DraghiPresident of the European Central Bank
Christian EckertState Secretary for the Budget
Laurent FabiusMinister of Foreign Affairs
Presidents’ informationmeetings
The activities ofAfep in 2014
47
Isabelle Falque-PierrotinPresident of the French Data Protection Authority (CNIL)Mathias MoulinDeputy Director of Protection of Rights and Remedies at CNIL
Margot Fröhlinger Principal Director of Patent Law and Multilateral Affairsat the European Patent Office (EPO)
Laurence GatesDelegate General of the French Committee for World SkillsDaniel VatantTechnical Consultant for Apprenticeship and work-linkedtraining at the Ministry for Labour, Employment, Professional Training and Social Dialogue
Jean-Christophe Gracia Deputy Director for Civil Affairs and Seals in the Ministry of JusticeCyril Noël Head of the Public Law Office in the Directorate for Civil Affairs and Seals of the Ministry of Justice
Alain LacabaratsPresident of the Social Chamber of the Court of AppealPierre BaillyLaurence Pecaut-RivolierAdvisors
Bruno LasserrePresident of the French Competition Authority (ADLC)
Amra BalicManaging Director of BlackRock
Jean-Luc Barçon-MaurinHead of the Legal Department for Taxation at DGFiP
Zineb BennaniHead of Governance Research and Engagement at Mirova
Pierre BollonDelegate General of the French Asset Management Association (AFG)Valentine BonnetBusiness Governance and Deontology Manager at AFG
Jean-Louis BühlHead of Social Data Simplification and Harmonisation Unitat the Ministry for Social Affairs and HealthStéphane EustacheDeputy Head of UnitElisabeth Humbert-BottinDirector General of GIP-MDS
Jean-Nicolas CaprasseDirector of ISS Europe (Institutional Shareholder Services)Catherine SalmonHead of Governance Research of ISS Europe
Pierre Ducret Deputy Director General for Sustainable Development at the Deposits and Consignments Fund and President ofCDC Climat
Meetings with public authorities and key economic figures
Annual report 2014
Olivier Sivieude Head of Tax Monitoring Office at DGFiPBastien LlorcaSub-director of Tax Monitoring Office
Maylis SouqueSecretary General of the French National Contact Point(PCN) for the Implementation of the OECD's Guidelines forMultinational Enterprises
Carla TopinoAssociate Vice President, European and Emerging MarketsPolicy at Glass Lewis & Co
Boris Vallaud Head of Cabinet of the Minister for Productive Recovery
Michel de Virville Master of the Court of AuditorsHardship Department
Frédéric VersiniEurope Advisor
Cédric LaverieManager for Corporate Governance of Amundi
Bénédicte Legrand-JungAmadis DelmasDirectorate General for LabourMarie Anne JacquetDenis LebayonDirectorate for Social Security
Jacques MenthonnexColonel in charge of Adapted Military Service (SMA)
Pierre PelouzetInter-business Relation Mediator
Jean-François PilliardDelegate General of IUMM (union des industries et de métiers de la métallurgie)Antoine Foucher Director of Social Relations at MEDEF
Charles SarrazinHead of Financial Stability, Accounting and Governance Office at the Treasury DirectorateVincent PerrotinDeputy Head of Office at the Treasury Directorate
Alexandre SaubotNegotiator of MEDEF for Inter-professional Negotiations on Social Dialogue
Jean-Dominique SimonpoliDirector General of the Association Dialogues
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Taxation of savings and financing of the economy by individuals ■ Reform of the capital gains of individuals - Draft policy
■ Performance actions - Preliminary draft on growth and
business
■ Holding companies - Preliminary draft policy
■ Seconded employees - Difficulties in applying tax exemption
to revenue from premiums from work abroad
Relations between taxation authorities and businesses ■ “Transfer pricing” declaration - Mock-up and draft policy
■ Measures to simplify business procedures - Drafting of
proposals
■ “Let us hear it once” programme - Simplification measures
proposed by the authorities
■ Balance statement on corporation tax - Consultation draft
■ Accounting record files - Monitoring of the implementation
of this new obligation
■ Communication between businesses and the taxation
authorities - Legal department of the DGFiP and the taxation
monitoring department
■ Tax on company vehicles - Simplification measure
European and international taxation ■ Negotiation of international conventions - Convention
difficulties and taxation problems at a local level
■ Conference on the current situation and schedule of
negotiations and renegotiations for taxation conventions by
the DLF
■ France/Kuwait Convention - Difficulty in applying Article 10 of
the taxation convention on fees
■ Non-cooperative dependent and associated territories
Taxation
Taxation update■ Fiscal committees
■ Finance bill for 2015
■ Finance Amending bill for 2014 (1) and (2)
■ Foundations of taxation - Positions and proposals
■ Information mission of the National Assembly on the taxcredit for competitiveness and employment
■ Mission of the Directorate General for taxation on “generalheadquarters”
Direct taxation ■ Financial and hybrid charges - Draft policy
■ Research and sub-contracting tax credit - Financial impactand proposals of companies
■ Research tax credit - Information leaflet
■ Innovation tax credit - Information leaflet
■ Comparison of the effects of ending the family contributionversus a CICE increase
■ Tax on high income - Draft policy
■ Buyback by a company of its own shares - Draft policy
■ Application modalities for the measure to increase paid-upcapital with due and payable debts - Draft policy
■ Deductibility of financial costs linked to slow-moving inventory - Draft policy
■ Financial contribution to corporate Value Added Tax andconsolidation modalities for turnover - Draft policy
Indirect taxation ■ Waste taxation - Recent work of the Committee for
Environmental Taxation
■ Internal consumption tax (TIC) and energy-intensive facilities - Draft certification
Working groups and consultations
Annual report 2014
Regulation of financial markets ■ ESMA project - Alternative performance measures■ Electronic reporting formats - ESMA consultation
External audit ■ Reform of legal audit: compulsory rotation and selection of
audit companies■ Application of the European audit reform in France
Information & communication■ Meeting on the preparation of the Afnor guide on manda-
tory CSR monitoring■ Integrated reporting
Work, employment and social protection
Supplementary pensions schemes (transposition ofthe European Directive on guaranteeing the rights ofretired people)■ Meetings with the Directorate for Social Security■ Meetings with businesses
Young people and businesses ■ Implementation and launch of the “Alternance” portal
Draft law on professional training, employment andsocial democracy
Cost of labour ■ Reduction in family contribution/CICE
Economic and social database ■ Examination of circular project■ Setting up
Inter-professional negotiation of the quality of socialdialogue■ Preparation of Afep proposals■ Promotion of trade union approaches
Sunday work (Draft law on growth and activity)■ Preparation of Afep proposals
Personal account of prevention of hardship■ Recommendations of Michel de Virville■ Setting up
Company law, securities law and corporate governance
Company law and corporate governance■ Revision of shareholders’ rights Directive■ European Commission consultation on cross-border mergers
and divisions■ Choice of governance formula■ Presence of employees on the Boards of Directors■ Update of the Afep-Medef Code application guide■ Multi-annual variable remuneration■ Draft legislation on company law
General meetings ■ European harmonisation of general meetings and transactions
with securities■ Preparation of 2015 general meetings (double voting rights
and increasing the powers of the Board)■ Report on 2014 general meetings■ Meeting to exchange views with proxy advisors and investor
representatives
Securities law ■ Simplification of company law and securities law■ Consultation with ESMA on implementation measures of the
market abuse regulation■ “Florange Act” - Provisions on takeover rules■ Amending the general regulations of the AMF, following the
”Florange Act”■ Accumulation of administrative and criminal penalties
Miscellaneous ■ Proposal for a law on protection of business secrets■ CPCS consultation on guidelines to prevent corruption
Financial affairs
Finances ■ Separation of banking activities
51
■ Guidelines on environment and energy state aid■ Modernisation of environment law and areas for
simplification■ Preparation of the Sustainable City Institute - Steering
Committee■ Preparation of the environmental conference of October
2014 on COP 21■ Release of waste statute - Draft decree■ Climate contribution - Draft application decree■ Fluorinated GHGs - Draft decree■ Draft national environment health plan for 2014 - 2018■ Air quality■ National ecological transition to sustainable development
strategy 2014 - 2020
Energy■ Energy audit - Draft decree■ Energy efficiency certificates■ Prospective scenarios for energy, climate and air for 2035 -
Participation in information and steering committee■ Energy supply security - Commission draft communication■ Energy transition bill
Corporate social responsibility (CSR)
■ Results of CSR reporting questionnaire■ Afnor guide on verifying social and environmental
information published by companies■ Draft bill on the duty of care of parent companies and
companies placing orders■ Businesses and human rights■ Integrated reporting■ Consultation of the European CSR strategy■ International Standard on responsible purchases■ Preparatory meeting for the November 2014 CSR
conference at the French economic, social and environnemental council
■ Transposition of the Directive on the publication of non-financial information
Competition, consumer affairs and intellectualproperty
Competition ■ RDI state aid■ Commission white paper- merger control■ PPL simplification - measures on competition■ Structural injunctions■ Marcon draft bill - Measures on competition
Consumer affairs■ Electronic billing/payment periods■ Payment periods■ Consumption law - future applicable decrees■ Draft decrees on implementing group shares■ Draft law on health (group shares)
Intellectual property■ Trade secrets: Directive proposal■ Data protection■ Unitary patents: Central division in Paris■ Patents and standards
Environment and energy
Environment ■ Storage facilities for non-hazardous waste - draft
ministerial regulation■ Risk management in classified facilities for environmental
protection, subject to authorisation■ Report on greenhouse gas■ Carbon leakage post 2020 - European Commission
consultation■ Circular economy: Working groups of Presidents■ Pricing of ETS registers for 2014 - Consultation■ Market Stability Reserve and list of companies exposed to
carbon leakage■ Amendment of general requirements applicable to wind
turbines■ Financial guarantees: consultation of amending decision■ Bill on biodiversity■ Project certification experimentation■ “Waste” taxation: work of the CFE
Our team
PresidentPierre Pringuet
Director GeneralFrançois SoulmagnonAssistant: Françoise [email protected]
DirectorStéphanie RobertAssistant: Sylvie [email protected]
Taxation Laetitia de La RocqueAmina TarmilAssistant: Isabelle [email protected]
Legal affairsOdile de [email protected]
Financial affairs Francis DesmarchelierAssistant: Sandrine [email protected]
Social affairsFrance Henry-LabordèreAssistant: Sylvie [email protected]
Competition, consumer affairs and intellectual propertyEmmanuelle Flament-MascaretAssistant: Sandrine [email protected]
Environment and energyFrançois-Nicolas BoquetAssistant: Valérie [email protected]
Corporate social responsibility /international affairsElisabeth GambertAssistant: Valérie [email protected]
Chief economistOlivier ChemlaAssistant: Françoise [email protected]
Research departmentAude-Solveig Epstein
European affairsJérémie PelerinJustine Richard-MorinAssistants: Catherine du Bus de WarnaffeSylvie [email protected]@afep.be
Secretary generalOdile JouaultAssistant: Sylvie [email protected]
AccountingDominique [email protected]
General affairs and technologydepartmentDavid RoblesHervé RossVincent Timelli
ReceptionNathalie [email protected]
Annual report 2014
www.afep.com
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Tel.: +33(0)1 43 59 65 35 Tel.: +32(0)2 219 90 20
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