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Proxy Spotlight on France - The Responsible Dividend: What is it?

Posted: February 12, 2014   By: Hugues Létourneau Category: Proxy Voting,

Proxy spotlight is a special blog series that will inform CWC members of salient issues in proxy voting in various countries ahead of the 2014 AGM season. If you are interested in having a “Proxy spotlight” on key issues in your country, get in touch with us.


Most trustees will be familiar with proxy voting on director nominees, executive compensation, consolidated financial statements but what about voting on a “responsible dividend”?

In France, where shareholders vote on the appropriation of profits at a company’s annual general meeting, the Comité Intersyndical sur l’épargne salarial (CIES) and French public service additional pension scheme (ERAFP) began evaluating how to vote in favour of a “responsible dividend” at AGMs in 2013.

The reasoning is that dividends paid to shareholders by listed companies have soared in recent years as a result of pressure from financial markets to maximize short-term results. This may come at the expense of a company’s ability to invest in its employees and in new technologies, machinery or equipment; investments that will enable a company to grow in the long-term. Thus, when a company increases dividends paid to please investors in the short-term, prospects for future profits, a corporation’s sustainability and the interests of long-term investors are at the losing end. Long-term owners along with companies and their workforce have an interest in inverting the trend of dividend payouts based on these short-term calculations.

In 2013, for the first time, the CIES and the ERAFP recommended negative votes on the payout of dividends that didn’t meet a set of conditions tied to long-term value. In the case of the ERAFP, proxies were voted against the dividends proposed by companies in specific instances, based on a case-by-case analysis when:

  • The company declared a net income loss;
  • Shareholder remuneration (using dividends per share as a proxy) increased more than 50% faster than employee remuneration over a three year minimum period;
  • Dividend payout was abnormally high relative to sector average;
  • A company’s ability to make investments is uncertain as a result of a high debt-equity ratio;
  • Payouts were abnormally high at a time when the company was undergoing restructuring activities leading to layoffs or site closures.

Out of 40 companies that were followed by the ERAFP for a “responsible dividend” in 2013, 17 negative votes were cast based on the above criteria. For example, you can click here to access the CWC’s Global Proxy Review resolution database and see why the CIES recommended voting against the dividends proposed by French pharmaceutical company Sanofi in 2013.    

In 2014, the CIES and the ERAFP will screen companies based on their “responsible dividend” for the second year in a row. The campaign in favour of “responsible dividends” that foster long-term value is notably relevant for CWC members and union trustees whose funds have equity holdings in France as we approach the 2014 proxy season.


Navigating Complexity in Active Ownership: Limits in the E-S-G Framework

Posted: October 30, 2012   By: Catherine Smith Category: ESG , Proxy Voting,

Catherine Smith is a Senior Research Analyst at SHARE (Shareholder Association for Research & Education). She is responsible for all phases of proxy voting at SHARE. The post is co-authored…

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