Scandal That Could Ripple Wider Than EADS
By Paul Betts
Published: October 9 2007 20:06 | Last updated: October 9 2007 20:06
As if the alleged insider trading scandal at EADS were not enough, France is embroiled in another unseemly affair with perhaps even broader repercussions.
The country’s powerful metal industries federation, UIMM, is caught up in a controversy about missing funds that threatens to complicate crucial negotiations about labour reforms between French employers and unions. This is because the man at the centre of the row is Denis Gautier-Sauvagnac, the suave head of UIMM, who is also leading the talks on behalf of the French employers confederation, Medef, with labour leaders.
The reforms are part of President Nicolas Sarkozy’s attempt to make France more competitive by reforming, among other things, the current cumbersome system of employment contracts.
Although the focus of the preliminary investigation is on the UIMM president, this affair is also casting a dark cloud over the credibility of the union leadership. According to reports, as much as €15m may have been withdrawn in cash, and the obvious question is, where did the money go? The unions have denied allegations that the missing money may have been misused.
Mr Gautier-Sauvagnac has also vigorously denied any involvement in the disappearance of the funds. He continues to be supported by Medef’s president, Laurence Parisot, even though this week there have been signs that Ms Parisot is starting to put some distance between Medef and the metal industries federation.
Combined with the EADS scandal – which raises all sorts of questions over the behaviour of company executives, the state and the Caisse des Dјpфts et Consignations, the so-called “armed wing” of the French treasury – the affair of the missing funds at UIMM does little to reassure a nation traditionally suspicious of capitalism, especially in its more extreme modern manifestations.
Meanwhile, in response to the union and public dismay over the latest scandal shaking EADS, the group’s chief executive Louis Gallois is now planning to abolish stock options at EADS.
Instead he is proposing a free share scheme for employees that could also include the obligation for certain executives to hold on to shares until they leave the company.
Such a proposal may well have the benefit of making executive compensation at EADS more transparent. But it hardly addresses the deeper governance issues still facing the group – above all its tangled and arcane relationship with its French state shareholder. Sadly, the reputational damage to the company has already been done.
What is even more alarming is that this French school for scandal risks undermining the efforts of Mr Sarkozy’s government to push through the liberal reforms so crucial to France’s longer-term growth prospects and prosperity.
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