French companies improve corporate governance disclosures

The findings of the 2010 AMF report on the corporate governance of listed companies, based on a sample of 60 companies (34 in the CAC 40 and 26 in the SBF 120), show improvements both in practices and in transparency with regard to corporate governance and executive compensation. However the AMF highlights some areas of concern for companies to address in the coming year.

Some of the key findings on corporate governance are:

60% of companies reporting non-compliance with some of the AFEP/MEDEF Code’s provisions, with one-fifth of these not including any explanations;
An average of 55% of boards are comprised of independent directors, while 88% of audit committees and 79% of compensation committees are chaired by an independent director. Some companies in the same however did not identify which directors the board considered to be independent;
9 companies in the sample have introduced (or intend to introduce) a lead independent director or deputy chairman with responsibility for governance;
Two-thirds of companies undertook a board evaluation during the year.

The AMF has been encouraged by progress on the number of female directors but urges companies “to pursue a broader-based approach to boardroom diversity”. The AMF also comes out in favour of tougher rules on multiple directorships.

On director independence, the AMF highlights the need to provide detailed and sufficiently clear explanations about the application of the independence criteria in the AFEP/MEDEF code, especially the criterion on business relations: “not to be a customer, supplier, investment banker or commercial banker that is material for the corporation or its group, or for a significant part of whose business the corporation or its group accounts”. Indeed this is an area where Manifest has been disappointed by the quality of disclosures and any improvements in 2010 annual reports would certainly be welcome.

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