SAFRAN opposes the majority of its AGM and maintains illegally the golden parachute for Jean-Paul Herteman

As long as the French State does not respect shareholders, it will not find investors and investments, it will not create jobs. If this sounds tough it is only logical and demonstrated as the last twenty years show that left or right wing French governments and their civil servants despise investors, whether individual or institutional.

First the regulation of companies, banks and markets, has stepped back constantly on the rights of shareholders at despite great expense of laws, market regulations, codes of transparency and multiple reports: a vivid example is given by the 2012 Poupart Lafarge AMF report, which volens nolens prepared new assaults against companies integrity.
French authorities also prefer to abandon to their losses the millions of individuals spoiled by the French financial scams including Vivendi Universal, Natixis, Dexia and even Madoff, to name only the best known cases. Like his predecessor of the right, this socialist Government, under the influence of the banking system and multinational companies excludes to allow serious court class actions to compensate victims; thereby it renounces to protect investors...

Finally the French Government commonly admits multiple small doubtful schizophrenic arrangements, where its officials fearing possible career retaliation of big brass, as was recently witnessed in the EADS and Lagard?re cases or last year at Renault and Air France, or today at Safran. The general meeting of May 28 does not even comply with the rules of the related parties? regulation and maintains for its CEO a nice illegal golden parachute.

The State, which saved the Safran company by merging it with SNECMA, swallowed his responsible shareholder hat to offer a golden parachute of nearly three million to one of its former top officials now Chairman & CEO, Jean-Paul Herteman. This schizophrenic State tolerates to see the Board not only neglecting its negative vote as influent shareholder but also against the veto of the majority of investors when they are asked to vote on pay.

This severance indemnity proposed by the Board had been rejected at the AGM 2012 by 55% of the voices as the State, number one shareholder of the company, had publicly opposed to the two years of full pay golden parachute or ? 2.9 million for a CEO who earns each year ? 1.4 million, or 77 times the French legal minimum wage, obviously not enough.

While the company clearly acknowledges that this was not approved by the general meeting of shareholders, the Board, which could have and should have made at least one symbolic change too generous and unproductive parachute, similar to Air France -KLM, shamelessly maintains it against the decision of the General Assembly and of its principal shareholder.

Everyone knows that traditional regulated agreements approved or rejected by the AGM, this is the article L225-41 "keep their effect in relation to third parties, except when they are canceled in the event of fraud. ?In short, the Board of Directors or supervisory board is free to squander money as he wants of society, especially if you consider the CEO as a third party...

But since the 2006 TEPA law this type of executive compensation deferred commitments are no longer ordinary regulated agreement. Since the Article L225-42-1 of the Commercial Code imposes, according to ECGS, a "needed approval" of the AGM. Indeed, the text requires the approval; these are "subject to the approval of the general meeting pursuant to Article L. 225-40 and subject of a specific resolution for each beneficiary. This approval is required at each renewal of the mandate exercised by the persons mentioned in the first paragraph."

Thus, according to ECGS, the rejection of the 5th resolution of the general meeting of 31 May 2012 canceled the award for Jean-Paul Herteman, and the Board of Safran maintains it illegally.
Unfortunately, the AMF here has apparently an interpretation of the text opposite to the sovereignty of shareholders. Within its new "Guide to individual shareholders for the AGM? the AMF tells us, among other unfortunate confusion that "severance and other compensation that the company intends to pay to its chairman of the Board (or the Executive) or CEOs, upon termination or change of function, must follow the regulated agreements procedure. [...] The shareholders must vote on them. As regulated agreements however, "these benefits can be maintained in the event that the AGM disapproved."

In countries with good governance, management obeys the Board and does not ignore from the views of the majority of its shareholders. Since even the AMF tends to markets to protect directors and officers against possible censorship of their severance and pensions, there remains only one appeal, the Parliament.
Representatives and Senators should in their future law on governance, restore the veto of the General Assembly on the post-employment compensation as any transaction rejected by the majority of shareholders, this definitely repealing the Article L225-41 of the Commercial Code, which provides that AGM disapproved transactions and contracts continue to produce their effects toward the managers and officers.
Finally professional investors and their organizations should understand and seize this basic problem of the economic engine efficiency, so that value creation pays for the risk taken by all shareholders and not only insiders.

Paris, May 9, 2013