Institutional contradictions of the French State as shareholder

• DOI: https://doi.org/10.1108/CG-08-2019-0241
• Pages: 545-558
• Date: 07 April 2020
• Published date: 07 April 2020
• Subject Matter: Corporate governance,Strategy
• Author: Carine Girard,Stephen Gates

Institutional contradictions of the French

state as shareholder

Carine Girard and Stephen Gates

Abstract

Purpose –This paper aims to demonstrate that state shareholders are confronted with contradictory

logics leading to institutionalcontradictions that activist shareholderscan exploit. The competing logics

of the state as shareholder and their impact on corporate governance and shareholder activism offer

fertilegrounds for research advances in CoordinatedMarket Economies (CMEs).

Design/methodology/approach –Through an extensive literature review of state ownership,

institutional contradictions and shareholderactivism, this paper analyzes two case studies involving the

FrenchState as shareholder.

Findings –In the French context, these two cases illustrate how institutional contradictions result in

opportunities for shareholder activism. By focusing on the institutional contradictions of the state

shareholder, this investigation suggests a need for experimental research to observe how shareholder

activistsadapt to each institutional changein CMEs. This experimentation canhelp policymakers to avoid

creatingadditional conditions that shareholder activistscan exploit.

Research limitations/implications –This focuses only on France and its state shareholdings. To

generalizeresults, studies of other CMEs and state shareholdersare needed.

Practical implications –Policymakers should consider all legislative proposals for their potential to

deviate from corporate governance practice by experimenting with them in a laboratory setting.

Shareholder activists can compare state shareholders’ actions against the state’s legislation to

emphasizeinstitutional contradictionsthat counter minority shareholders’rights.

Originality/value –This research is the first to analyze how the state as shareholder can exploit its

competing logics to resist against shareholder activism andsupport management or to become itself a

shareholderactivist.

Keywords Institutional contradictions, Shareholder activism, State ownership, France

Paper type Research paper

Introduction

Shareholder activism is increasing, intensifying and internationalizing. Lazard’s annual

study reveals that in 2018, shareholder activists initiated 247 actions against 226

companies, up from 188 companies in 2017 (Lazard’s shareholder advisory group, 2019).

Moreover, the greater their investment capacity grows in terms of billions of assets under

management for hedge funds, the more that shareholder activists’ activity intensifies in the

USA (Becht et al., 2010;Bebchuk et al.,2015) and in Europe (Bessler et al.,2015). Lazard’s

2019 study also shows that shareholder activism is expanding in Europe where 58 activist

campaigns were launched in 2018 comparedto 52 in 2017.

Shareholder activism practices, originating in Liberal Market Economies (LMEs) such as the

United Kingdom and the USA, with a common law tradition, are entering into Coordinated

Market Economies (CMEs) such as France, Japan, China and Russia. CMEs typically have

codified civil law and significant state regulation of financialmarkets, and consequently, the

prospects for shareholder activism depend heavily on their legal and institutional

environments (Hall and Soskice, 2001).

Carine Girard is Professor

in the Department of

Finance, Audencia

Business School, Nantes,

France.

Stephen Gates is Emeritus

Professor of Strategy,

Audencia Business School,

Nantes, France.

Received 5 August 2019

Revised 29 November 2019

11 February 2020

Accepted 13 February 2020

DOI 10.1108/CG-08-2019-0241 VOL. 20 NO. 3 2020, pp. 545-558, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 545