On June 29, 2023, the National Assembly adopted at first reading, with modifications, the bill relating to value sharing within the company. The latter plans, among other measures, to extend schemes such as profit-sharing, participation or value-sharing bonuses (PPV or “Macron bonus”) to all companies with more than 11 employees. This bill transposes the national inter-professional agreement (ANI) on the sharing of value in business, concluded in February 2023 between unions and employers. In short, this agreement aims to better associate employees with the performance of companies, particularly in VSE/SMEs.
To what extent is this bill relating to value sharing within the company a promising proposal? Is this a real step forward in transforming the way companies operate and distribute their profits? How does he plan to ensure that employees directly benefit from the company’s financial performance? What are the limits of this bill? What are the other avenues to explore to create a fair and responsible governance model?
Yes, this bill is good news
To begin with, let us note that this agreement is the initiative of the management unions and the employee unions. Everyone therefore seems to agree on the benefits of this text and see an interest in it. And such an alignment is necessarily good news!
Let us then look at the foundations of this bill. They are based on a vision that goes beyond simply maximizing profits for shareholders. They seek to recognize the crucial role of workers and other stakeholders in creating asset value within the company. The goal is to ensure that this value is distributed more equitably, thereby providing better compensation to employees, reinforcing the overall commitment to the growth and success of the company. By strengthening the link between company performance and the well-being of its employees, the bill improves productivity, stimulates innovation and creates greater social cohesion within companies. So many promises that we can only rejoice in!
Not to mention the timing, which is more than favorable. With the significant influence of the Big Quiet, concerns related to employer branding have intensified. Companies are looking for levers to activate to recruit and, above all, retain employees. By increasing the value of human capital, the bill directly addresses the current challenges that managers face in terms of recruiting and retaining their workforce.
Good for theory and beautiful values… But concretely, how does this agreement intend to boost the sharing of value in business? In reality, how will things work out?
The cornerstones of the bill
This bill has 15 articles divided into four axes:
- Strengthen social dialogue on job classifications;
- Facilitate the generalization of value sharing schemes;
- Simplify the implementation of sharing systems;
- Develop employee shareholding.
Focus on the new “company valuation sharing plan”
This optional system will be put in place by agreement and must benefit all employees with at least one year of seniority. In the event of an increase in the value of the company during the three-year duration of the plan, employees will be able to benefit from a “company valuation sharing bonus”. This bonus can be placed in an employee savings plan. In other words, employees will have the possibility of allocating the value sharing bonus (PPV) to an employee savings plan or a retirement savings plan, with a possible contribution from the employer in the same way as profit-sharing. , participation or voluntary payments.
The limits of the bill relating to value sharing within the company
Yes, but there you go. Of course the foundations and values underlying this project are laudable. But in practice, when you dig deeper, things are more complex than they seem. This bill is still too limited because the solutions it proposes only concern too few companies and employees.
To begin, let’s take a look at the company’s new valuation sharing plan. It provides for a value sharing bonus (PPV) for employees in the event of an increase in the value of the company during the three years of the plan. But who will pay and pay these bonuses to employees? Well yes, it’s the companies. These expenses will therefore irremediably weigh on their cash flow. It is also necessary to distinguish between business value and profits; a company can increase in value without increasing its profits. It is therefore an additional burden which can prevent the manager from carrying out other projects. A company’s profits should be redistributed to shareholders so that they can invest them in growth projects only and only if the company no longer has industrial projects to finalize.
Secondly, encouraging employees to place their PPV in a company employee savings plan (PEE) and thinking that this will motivate them to become more involved in the success of THEIR own company is an illusion. For the simple reason that it is rare for a PEE to focus on the performance of his own company. For what ? Because it costs too much to maintain. A management company typically takes 1% fees on the outstanding amount and is not interested in less than 40,000 euros per year for the management of the employee savings fund. You therefore need 4 million euros outstanding in the fund earmarked for a company to be able to offer it in a PEE. Do you know many of the companies that make this investment? We neither. Virtually no SMEs and less than half of French mid-sized companies put this type of investment in place; Which is a pity. In other words, 40% of French employees cannot invest in their own company and be truly active in the growth of their assets placed in their PEE. And if employees of SMEs cannot invest in their company (as do those of large groups who have PEE earmarked for their company), they will not receive the fruits of their work. In other words, the value sharing system does not keep its promises and deprives a large number of entrepreneurs of the very substance of this great motivation and retention tool.
What option then remains for companies that cannot make a PEE targeted to their company? Answer: the fourth axis of the bill, namely employee shareholding with the free allocation of shares (AGA) for eligible companies. But this device poses a problem for other reasons. Employee shareholding in fact implies that the sharing of value is associated with a sharing of the governance of the company (often with voting rights) and a right of access to confidential information, because employees become shareholders. Certainly, the implementation of an employee shareholding plan does not have a negative impact on the company’s cash flow, but sharing governance with employees is not necessarily desired by managers. This is all the more true within unlisted SMEs/ETIs where each shareholder plays a very specific role.
It would therefore be desirable to be able to dissociate governance from value sharing as the bill does by addressing the governance part in the paragraphs describing the participatory governance provisions.
Last but not least, company time does not always coincide with employee time. Employee stock ownership plans often end when the company is sold. This is when employees cash in their investments, as we recently saw with La Redoute. Obviously, these great stories are reassuring and every employee is delighted at the idea of receiving €100,000 during a sale. Unfortunately, the reality is different and employees more often need regular help to be supported during key stages of their life (purchasing an apartment, financing their children’s studies, etc.). However, employee shareholding as it is proposed today does not meet these challenges. Indeed, the investment in shares of his company is illiquid, in particular due to the governance attached to this share holding.
Employee shareholding: fortunately other solutions exist
Faced with these limits, it is reassuring to know that there are alternative employee shareholding schemes which allow value to be shared without sharing governance and that they are inexpensive, like Futurz. It is also essential to fight against preconceived ideas: no, it is not necessary to generate profits to share the heritage value of your company. Some leaders are already doing this with great success. The law must give pride of place to these hybrid, more modern and more flexible incentive plans.
Proposing these new measures also means putting more trust in French leaders. The latter are entirely capable of making the best choices for their company and for their employees because they are well aware that their destinies are linked. In order to allow the best possible arbitration, they must be able to choose from several incentive schemes for the increase in company value and not be limited to two options (PEE or AGA). However, the bill only highlights certain solutions which each have their advantages but also their constraints. Other options exist.
Finally, let’s stop taking the French for welfare where everything free takes precedence. To make an employee efficient, you must not give them shares or any other value-sharing device but allow them to buy them. All the nuance is there. It is at this price that the employee intensifies his efforts in order to make his investment bear fruit, thus aligning his interests with those of the company. This is also what Private Equity investment funds systematically do: key employees must buy shares and then they work efficiently to make their investment grow through the success of the company’s project.
In conclusion, perhaps it would be relevant to include in the law a proposal allowing employees of SMEs to invest in structured products pointing towards the performance of their own company, without becoming a shareholder and entering into its governance. This is how the employee will take his responsibilities and work to grow his investment. In addition, he will benefit from a much more liquid investment which he can use according to his personal needs without a direct link to the company’s schedule.
In conclusion, the bill relating to value sharing within the company represents progress towards a more equitable, responsible, inclusive and sustainable economic model. The desire to rebalance relationships between the different stakeholders and recognition of the essential contribution of workers to the creation of company heritage value is essential to the emergence of our SMEs as champions of the economy. This bill has the merit of opening the way to interesting discussions. We still need to take the time to explore all possible avenues in terms of employee incentives so that it does not become, contrary to its primary purpose, a new thread in the grip of companies.
