| BUSINESSWEEK ONLINE : OCTOBER 18, 1999 ISSUE | ||||||||
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| INTERNATIONAL BUSINESS
Commentary: Liberte, Egalite--and Equities? When French tire maker Michelin announced plans to cut 7,500 jobs, Prime Minister Lionel Jospin blamed greedy shareholders. Michelin asserted that it was merely trying to regain its edge--and avoid bigger layoffs. Clearly, France is not the U.S., where restructurings are routine. But the uproar underscores another difference: The U.S. is a nation of shareholders, and France is not. Until that changes, restructuring in France will carry a political charge. Half of American households own stocks directly, millions more through pensions. They benefit from restructurings that boost stock prices. In France, there are no private pensions, and the percentage of households owning equities is something like 12% to 15%. France is the only major democracy with more bureaucrats than shareholders. Individual share ownership actually fell during the 1990s--even as markets across Europe drew millions of first-timers. France should join the crowd. Yes, buying stock means more risk. But now's the time for new thinking. The Bourse's CAC 40 index has tripled since 1996, as companies trimmed costs. It's up more than 18% this year. And who's cashing in? Not the cautious French. The winners are foreign investors, who now own 45% of the market, vs. 35% three years ago. More French shareholders would mean French companies would have to be more open and also pay executives based on performance. Companies are more likely to make such changes if shareholders who have the ear of French politicians want them. Most French favor Jospin's plans for a 35-hour workweek, which executives just protested in a mass rally. Fewer would favor the limit on hours if they held stock in companies trying to comply. Why don't the French buy shares? ''It's mostly cultural,'' says a Bourse official. The French find stocks hard to understand and buy, he adds. The Bourse is spending $3.2 million this fall to convince the French that buying stocks is easy. Change can happen fast. It wasn't long ago that stock ownership in the U.S. was as narrow as in France. The number of individual shareholders in Germany has doubled in the past three years. But the real push must come from government. Capital-gains taxes need to come down: The rate for equities is now about 50%. The government says it will propose legislation allowing private pension funds next year. It's an important step. U.S. investors often get their first exposure to equities through pensions. Getting the French into stocks would end the stale talk of greedy shareholders. But the real gains are larger. An equity culture would change the way France thinks--and grows. By Carol Matlack _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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