FRANCE´S BACK SEAT ECONOMIC DRIVER / THE WALL STREET JOURNAL REVIEW & OUTLOOK

Opinion

Review & Outlook

France’s Backseat Economic Driver

April 30, 2015


French Economy Minister Emmanuel Macron is one of the most promising reformers to emerge from his country in years—or so we’ve been hoping. His campaign to bolster government control over Renault at the auto maker’s annual meeting Thursday gives us reason to doubt.

At issue is the Florange Law, which Paris passed in 2014. The law allows shareholders who have owned their stock for at least two years to exercise double voting rights starting next year unless shareholders vote an exemption from the rule. Mr. Macron earlier this month spent €1.2 billion in taxpayer money buying Renault shares to boost the French state’s voting stake to nearly 20% so that he can block a one-share-one-vote resolution at the car maker’s annual meeting.

The government doesn’t lack for influence at Renault already, since it’s the largest shareholder and appoints two board members. But Paris is eager to show it’s implementing the Florange Law, which is explicitly intended to avert plant closures and other acts of business necessity.

The double-voting rule is one of several clauses designed to deter takeover attempts and discourage activist investors. The voting rule especially favors the state and the unions that control employee pension investments.

That makes Mr. Macron’s defense of this measure a puzzle. His biggest achievement to date is the Macron Law, a reform he and Prime Minister Manuel Valls pushed through a reluctant National Assembly in February. That plan liberalizes rules on Sunday opening hours, deregulates some white-collar professions, and shows that Mr. Macron understands the role of the private economy in job creation and growth.

Mr. Macron writes on a nearby page that enforcing double voting rights gives “patient and stable investors” more power to set strategy in boardrooms. And in the best case it could pave the way for the government to reduce its stakes in companies such as Renault or GDF Suez, GSZ -2.83 % where Paris has defeated a similar one-share-one-vote proposal. Paris could stick to the promise Mr. Macron made last year to sell between €5 billion and €10 billion in state shares while retaining the level of economic control cherished by the political establishment.

But that misses the point of privatization, which is about corporate control as much as ownership. France Inc. needs a strong dose of entrepreneurship and managerial innovation to have any hope of cutting chronically high unemployment, boosting growth and putting the government budget on a sustainable track. Government votes inevitably undermine such market forces.

Perhaps Mr. Macron felt the left wouldn’t accept any more reform so soon after the Macron Law. But Renault still is a major missed opportunity for a reformer to have let the market work by not actively boosting the government stake to stymie the will of other shareholders.

This episode is a warning to investors of the political limits imposed on even the most reform-minded of French politicians.