The judgment of the former protagonists. In the governance of capitalism, as in any human enterprise, there is progress and there are shortcomings. The business world has the right for the former to be recognised and the duty to act knowledge the latter. The Arcelor/Mittal Steel case threw both into relief (see recent editions of this column). The positive aspects are implicit in , for example, the concerns of both parties within this hostile takeover bid to stress the economic and social interests of their project, to take account (verbally, for the time being) of the interests of the workers, their ambitions for stability and the development of the industrial instrument. And both sides are trying to convince the political authorities of this and, at the same time, to convince the press and public opinion.
Today, the shortcomings are being criticised, beyond the political divides, by individuals who have held top-flight jobs within the business world. Jean Peyrelevade has held such posts as Chairman of the financial company Suez and then of Crédit Lyonnais. His essay "Total Capitalism" is based on his experience, and he summed up the result of it in a splendid interview. He spoke of the "Rhinish" model, in which the head of a company was a salaried employee and had the responsibility of guaranteeing "the perpetuity of the company, to ensure its growth and find a balance between the interests of the capital on the one hand, and of the employees on the other". Via the system of stock options, which made managers into shareholders, "the objective of making the shareholders rich becomes dominant over the spirit of entrepreneurship (...). There is no longer anybody to represent the general interest and, more importantly, the interest of the employees, already harmed by the dwindling influence of unions". The result is that "the company has the choice between making its shareholders rich rather than investing". But the standards of profitability which the shareholders seek to impose are "unrealistic". Assets created by the company's activities are absorbed by paying the shareholders, who are no longer necessarily the big capitalists of traditional caricature but, increasingly, pensioners, particularly in the United States, and who, quite logically, have no direct interest in the economic, social and technological development of the company; the correct "asset management" is what works best to enrich the "millions of small savers who have placed their trust in the company".
But who are they, these "asset managers", who are only bothered about immediate profit and upon whom the results of a hostile takeover bid, and therefore the ownership of a company which, in some cases, may be central to the future of a region or an entire small State, depend? Alain Minc paints a far from shining picture of them. The author of many essays, he advised De Benedetti in its assault upon the Société Générale of Belgium. Alain Minc has just published "Le crépuscule des petits dieux" (which, as far as I can make out, is still only available in French), in which he has this to say about such managers: (our translation): "an anonymous and professional bureaucracy with young deacons of capitalism, faithfully serving the mass of 'Value creation' (...). The population of funds managers, analysts, those who specialise in arbitration, shine neither by their culture, their understanding of global phenomena, nor their vision of economic development".
The imbalance to be corrected. This pessimism on the part of men of action who have become essayists seems to indicate a certain nostalgia for the "Rhinish" model and, more particularly, sympathy for producers of goods rather than magicians of finance, disappointed by "the young people who go to New York or London to learn how finance works, but none of whom ever go to the Ruhr to see how an industry works..." (Gianni Romiti). Jacques Delors spoke out against the absurdity of this desire to keep the net profit of the own funds of a company at 15% over a period of several years, adding: "and if they manage it, at whose expense will it be?". According to the aforementioned Mr Peyrelevade, this will happen "just as soon as it becomes obligatory to reduce the gap in the distribution of income between capital and work". Mr Peyrelevade lists, provisionally, a few possible remedies, at least partial remedies, for the current imbalance: "we could get rid of stock options, in order to free the managers up a bit from the demands of the stock exchange. We can also ban the sale of stocks" whereby the company would be making its shareholders rich instead of investing. To say nothing of the indispensable transparency, and the severity of penalties.
From all sides, the requirement for simple and effective European rules is emphasised. The Arcelor/Mittal Steel case is a dream opportunity to relaunch the debate and the reflection in order to add to, improve and apply the rules of the game. (F.R.)