The Role of Corporate Law in the Adaptation of French Enterprises
James A. Fanto
Brooklyn Law School - Gerald Baylin Professor of Law & Co-Director of the Center for the Study of Business Law & Regulation
The paper studies how French corporate law helps large French corporations adapt to current economic circumstances. The paper first describes how France responded to the economic challenges in the post-war years by State ownership and control of large enterprises. At the same time, French corporate law developed a Statist character, which furthered the State's influence in businesses but which discouraged capital market financing. The paper next describes how State ownership and control, with its characteristic hierarchies, rigidities and freedom from market pressures do not produce businesses flexible enough to compete in global product and capital markets and to accomplish necessary restructuring. The French State responded to these circumstances by privatizing enterprises and by encouraging capital market financing, but it continues to favor ownership structures that undermine this financing. The paper argues that, for at least the past two decades, French corporate law has been modified to create a legal environment less Statist and more favorable to capital raising from dispersed investors. In making these changes, legal policy makers have often borrowed legal technology from the Anglo-American context. The paper reviews some of these changes, which primarily involve securities law. Finally, the paper critically examines how well a recent proposal to reform French corporate law, the Marini Report, advances capital market financing. The paper focuses on several recommendations of the Report, particularly those designed to improve the board of directors and to enhance direct shareholder monitoring of management.
JEL Classification: G31, G32, G38, K22
Date posted: March 14, 1997
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