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Monday 20 November 2017

Frank Bournois: The European company, a challenge?

You are an expert in corporate governance and European management. How would you define European business? Does it have its own identity?  

The term European company refers to several realities: first of all, there are companies which are nationals of a Member State of the European Union but have managed to establish themselves in several European countries. Some companies were then able to set up a subsidiary in another European country. There are also subsidiaries which are run by nationals of another EU member state. The ultimate stage is that of companies run by non-citizens. 

But is there a European identity of corporate governance? The characteristic shared by many European companies is their humanistic dimension, i. e. the tendency to favour human beings. One of the features of this humanistic conception is that in Europe more than elsewhere, employees often have a long career in the same company.

Europe has a wide variety of corporate governance models. Can we imagine a harmonisation of these national specificities? 

In theory, yes, we can imagine a harmonisation of the different governance models. However, this harmonisation would be difficult to achieve in practical terms, as there are several dominant corporate governance cultures. For example, the French model accepts that power is concentrated in the hands of the CEO: the CEO can also be chairman of the board of directors. In the Anglo-Saxon countries, this "intersection" is inconceivable, and one would immediately call it a conflict of interest. Thus, there are fundamental differences of corporate culture, and I therefore do not believe that practical harmonisation is possible. The European management model seems to be a challenge for the time being.

What are the main challenges for companies wishing to position themselves on a European scale? 

There are two obstacles to the “Europeanisation” of businesses: the lack of tax harmonisation and the lack of social convergence. Tax systems vary considerably from one country to another. On the social level, there are several models of relations with trade unions in Europe. The first one is the Anglo-Saxon model known as "voluntarism": companies and trade unions meet on an ad hoc basis to discuss specific subjects, trade unions strive for progress on their working conditions, but they do not try to impose a general labour law policy. Then there is a French-style model based on consultation, i. e. companies make decisions after consulting union partners. However, the company retains its flexibility. Finally, there is the German model of co-management in which unions have real power in the decisions taken by the company, since they can veto certain decisions. 

Until these different models converge, it will be difficult for companies to envisage Europeanisation.

Despite the size of its internal market, Europe has not yet seen the emergence of companies able to compete with the American giants. Is the European company maladjusted? 

It is indeed a striking paradox: whether ante or post Brexit, the European internal market is bigger than the American market, even including Canada. Europe has considerable advantages: in terms of intercultural management, for example, we are far more efficient than the Americans, who deploy their processes in a uniform way. European companies are more open to the world and they tend to adopt a "chameleon" attitude by adapting to the markets in which they are established, but they finally go unnoticed, while American companies succeed in conquering world markets by imposing their identity. The wind is blowing from the United States. 

Because of their political and cultural differences, Europeans have not been able to create European giants, despite certain experiences such as EADS or Siemens-Alstom, which could be imitated in sectors such as digital, automotive and agri-food. The problem remains unresolved.

What do you think the EU's top priorities should be in order to ensure the international competitiveness of European companies?

This is a very political issue. The European system is a system which protects the rights of employees, a system which upholds humanist values. It is the result of centuries of social struggles during which people have won guarantees and rights. But this system also has a considerable cost. One solution would be to model the European social standard on that of a member country with fewer social guarantees, but this change would totally undermine European values. 

On the other hand, what is certain is that we must invest massively in talent, in education and in innovation (which will not be easy either, because there are many disparities between European countries in terms of social investment). In order to defend our competitiveness, we also need fairer trade rules and a fight against social, environmental and fiscal dumping: this is the role of public authorities, particularly at the European level. 

Indeed, the solution is at the European level. Through its programmes which take place on several European campuses, ESCP Europe's policy is to train young European generations to ensure the future of Europe. Our students truly embody the European profiles that our continent is so lacking. The success of companies such as Saint-Gobain, which has a truly European presence, is also to be commended. Finally, the fact that Europe is a linguistic and cultural mosaic is a challenge, but also an asset that companies must learn to make their own.

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