The AMF, the French equivalent of the FSA, has finally published an English language version of its February 7th report on the conduct of General Meetings at French listed companies.

The report deals with the four broad themes of dialogue between shareholders and issuers, shareholder voting at general meetings, the board of the general assembly and its role, and voting on regulated items.

Naturally, as a proxy voting agency we are particularly interested in the theme of shareholder voting at meetings, especially the experience of foreign shareholders at French meetings.

Disappointingly, though perhaps understandably, the paper makes little change to the paper that came out in May 2011 which was aimed squarely at the role of proxy advisors in the pre-meeting process. It certainly seems clear that the AMF is not minded to review some critical anomalies on the topic. Ironically, despite insisting that they are looking to improve communications between shareholders, issuers and proxy providers, the AMF has so far failed to respond to Manifest’s letter of May 2011 which sought clarification on their regulations.

Firstly, the notion that proxy research should be vetted by the target company prior to publication flies in the face of market conventions regarding research objectivity. Brokers who make buying and selling recommendations work to strong market guidelines which  explicitly prohibit analysts from sharing their recommendations with issuers prior to publication.

Secondly, the AMF runs the risk of making itself the latest in a long line of regulators and quasi-regulators who have chased down the blind alley of assuming that every intermediary in the chain of intermediaries is essential to passing votes from pillar to post. It is the very length and complexity of this chain that prevents it from working properly. With such a blind insistence that the chain is fit for purpose, in spite of evidence to the contrary, can investors really be blamed for believing it too?

Thirdly, the AMF and French issuers continue to think that analysts misunderstand the significance of a provisional meeting announcement (avis de réunion). We can’t speak for others but we well understand that many agendas **may** remain unchanged on the avis de convocation, but without a guarantee that reports won’t need to be re-written at the busiest time of year because of subsequent changes to the agenda, where is the incentive to undertake research early?

The paper even manages to make good news look bad. Despite the encouraging appearance of requirements  to publish English language documents for foreign shareholders, the absence of any mention as to when such documents should be made available does not fill us with re-assurance that laggards will be rushing for their Oxford English Dictionaries any time soon. All the more so when we consider the four week gap between the publication of the original French and the English translation of the AMF’s own consultation paper.

We have until the 31st March to respond.

Plus ça change…

Report of the Working Group on General Meetings of Shareholders of Listed Companies

Last Updated: 16 March 2012