Specifically, one marine, Guy Wyser-Pratte to be exact.

As we reported back in March, Guy was determined to leave no stone unturned to find out why the votes on his proposals to shake up the governance at French media conglomerate Lagardère didn’t tally. While Guy admits there were some issues with his prime broker votes not going through as instructed, there are still sufficient discrepancies between pledged votes from other supportive shareholders and the results disclosed to the meeting. However, after writing to the French regulator, AMF, it looks like his requests for an investigation have hit the buffers. In a letter sent to Guy’s lawyers, it is clear that the regulator is washing its hands of the issue on the basis that the mistakes weren’t on the French side.

Here’s what the AMF has to say: Lettre AMF 11 05 2011 >> (reproduced with full permission of Guy)

And for those whose French isn’t quite so fluent, here is the translation:

Sir,

Your letter of the 2nd March has received my full attention. For what it’s worth, I can but confirm what I have already said in my previous correspondence and our meeting, in that the difficulties encountered by your client and other American shareholders at the last AGM of Lagardère, if they were inhibiting, would have occurred outside France.

If it is the case that, according to you, two resolutions would have been rejected were it not for faults in the identification of the voting rights of certain shareholders, it follows that you are in a position to attest to the exact number of instructions sent by your client, so that it would be possible to compare that with the number of rights actually cast the same way.

If it transpired that in effect the votes hadn’t been transmitted or were transmitted erroneously, it falls upon the shareholders concerned to engage those responsible in the chain of instructions.

It goes without saying, on the other hand, that if practices came to light that led to suspicion of breaches committed by professionals under the purview of the AMF, the AMF would not hesitate to bring to bear all appropriate consequences.

There may indeed have been plumbing problems outside of French territory but it was a French sub-custodian which was the last link in the chain before the votes were transmitted to the vote tabulator, Arlis, the former Lagardère subsidiary which was sold to BNP Paribas Securities Services in December 2009.

The AMF’s starting assumption that the problems fall outside French jurisdiction is disingenuous. Had Guy’s assets all been domiciled in France establishing the audit trail at its most detailed level probably wouldn’t be a problem as they would be in individual securities accounts. Cross border investors are not so lucky and end up being lumped in pooled accounts which makes the discovery process something of a challenge.

Guy is not what you might term “popular” with the French corporate establishment. Back in 1999 he told Forbesmagazine of his suspicions that he was persona non grata after he and his wife were singled out for special treatment at Paris’ Charles de Gaulle airport. His style of so-called corporate raiding certainly shook up companies in the past because it was so rare. Now it is called stewardship and active engagement – almost routine business as more shareholders realise they can use the ballot box to assert their rights as owners. 

The AMF’s response is only likely to heighten concerns that there is one rule for domestic shareholders and another for feather-ruffling foreigners stuck in pooled nominees with no transparency and no recourse to regulatory protection. While pension funds have recourse to the EU’s Courts of Justice over France’s witholding tax discrimination, frustrated voters are left fuming.

The European Commission has made it clear that it is concerned about the role of proxy advisors in the European Corporate Governance Framework. Perhaps the Commission should be widening the scope of the the term “Proxy Advisor” and investigating the full cast of actors in the proxy space so that shareholders can get a better understanding of what is really being done with their assets.

Last Updated: 20 May 2011