The case of Danone shows pretty well how shareholders are the driving force of short-term oriented company decisions. Having increased its distributions every year for twenty-five years, the company became a “dividend aristocrat" in 2020.

However, Artisan Partners, an American investment company holding only 3% of the capital, achieved the dismissal of former CEO Emmanuel Faber and the eventual sell of the Chinese subsidiary Mengniu. In other terms, around €850 million will now be distributed to shareholders via share buybacks.

Short-term gain is always the real motivation of this type of actor. The 2019 Pact law even strengthened the ability of shareholders to control the decisions of directors from a distance. They appoint them and can dismiss them freely.

There is a strong need to counterbalance this strategy – and it must come by employee representation and participation. Employees should have the possibility to nominate enough board members to hold directors accountable of their responsibilities: not to defend the interests of the shareholders alone, but to act in the interests of the company.

Long-term development of the company is very important. Employee representatives on the board of directors are the only possible counterweight to activists who are agitating for their short-term gain.

Article by Jean-Baptiste Barfety, Olivier Favereau and Christophe Clerc

https://www.lemonde.fr/idees/article/2021/03/19/les-representants-des-salaries-sont-le-seul-contre-pouvoir-face-aux-fonds-activistes_6073743_3232.html