A possible armistice between the directors of Mittal Steel and Arcelor will not eliminate the need to clarify European rules on corporate governance and globalisation in financial, stock market and industrial terms (see this column of yesterday). For those of you who may be particularly interested in the Mittal/Arcelor affair, here is a brief run-down of the events so far. The directors of Mittal Steel (a company of which 80% belongs to members of the Mittal family) have responded to criticisms by saying: we are a European company; if we buy factories, it is not with the intention of closing them; we have drawn up an “industrial programme” for the future; we are willing to discuss with Arcelor the possibility of setting up a joint management; the headquarters of the new, merged company could be Luxembourg. We see the tone; Ms Anne Méaux, considered to be France's finest “communications advisor” has been involved. This has been countered in particular by reference to the fact that Arcelor is technologically much more advanced than Mittal Steel, that it produces more sophisticated steel products, and that it is inferior to Mittal only in the tonnage produced. The value of its shares in more stable and higher than that of Mittal Steel, but the latter could consume it anyway, thanks to the impressive availability of cash (it has offered Arcelor shareholders 18.6 billion euros), not forgetting that the EBRD (the Bank created at the EU's initiative to finance investment in Eastern Europe and former Soviet states) has co-financed several of the Mittal empire's investments in Eastern Europe (notably in Romania) and East Asia.
In favour of corporate ethics. What makes Arcelor's position so difficult is the fact that its shares are mainly held by pension funds (particularly American ones) and equivalent bodies, which do not have industrial aims or regional or political responsibilities, but rather aim simply to obtain the highest possible return on their investments. Also, Mittal Steel cannot be attacked with a counter-takeover bid because the majority of its capital belongs to the family, whereas the biggest Arcelor shareholder, Luxembourg, only holds 5% of shares. All of this has relaunched the major debate which had already been kindled in European circles when there was discussion of the takeover directive proposed by Frits Bolkestein. Above and beyond the legal details, the debate centred on the respective powers of shareholders on one hand and managers on the other. The fierce discussions on the possibility for the management of a company under attack to take defensive measures without going through a shareholders' meeting (or on the basis of a mandate from it) were based on ethical considerations, stressing that the management should have direct relations with workers' unions, that it should be sensitive to regional traditions and demands, etc. The response to this was that the shareholders are nonetheless the owners. The debate was based on a large number of studies, including some carried out by famous Nobel laureates (who also had differing opinions).
Disappointing experiences. Since then, the situation has considerably worsened: owners as well as managers have been the protagonists in abuses and scandals which have shaken the business world, and the law has had to intervene on several occasions, in the USA as well as in Europe. The behaviour of some managers has demonstrated mind-boggling selfishness and the indifference of some shareholders (or their representatives) with regard to corporate social responsibility and to industrial programmes has on occasion been very disappointing. It is true that there has also be dignified and responsible behaviour, and that since then owners and managers have been at greater pains to stress corporate ethics. But several politicians and observers have grown in the conviction that we cannot trust the ethical sensibilities of either party: what is needed are binding rules and heavy penalties. The USA has made a lot of progress in this direction and Europe has made efforts. The Commission has proposed numerous measures on “corporate governance”, shareholders' rights, the behaviour of “rating agencies”, multiple voting rights, banning delocalisation for companies which benefit from European subsidies, etc. But the EU is still a long way off a complete and balanced governance scheme, and the “globalisation” aspect has been left entirely in the shade. This is why every opportunity should be taken to deepen the debate, and every time cases arise which excite media attention and public opinion, we must progress in our reflections and discuss precautions which could help avoid abuses in the future (even if certain circles would prefer to snuff out such discussion).
(F.R.)