In a context of increasing inequality in the world, fairer shared value is essential to move towards a greater social justice and a better distribution of wealth.

According to the latest World Inequality Lab report, inequality in income and wealth is on the rise worldwide (Chart 1). Today, 10 % of the richest people hold 76% of the world's wealth, while the 50% of the poorest have only 2%. The economic and social consequences of the pandemic and the current geopolitical conflicts reinforce this trend. In this context, companies have a role to play in implementing and promoting shared value schemes.

Chart 1. Income and wealth inequality worldwide, 2021

Source: World Inequality Lab (In French only)
The above chart shows that the lowest 50% of revenues capture 8% of total revenues measured at Purchasing Power Parity (PPP).

Shared value refers to the distribution of the value added produced by a company between the labour factor and the capital factor. The decision to allocate it between the company's various stakeholders (employees, shareholders, executives) is a matter of its own choice.

If in France discussions are underway in the Senate on the need to simplify, extend or even establish an employee dividend, the already existing shared value schemes can be used by companies.

Among these schemes, profit sharing (legal and mandatory within companies with 50 employees and up) is a mandatory redistribution of a share of the profits to which employees have contributed. Incentive plan is optional - it allows a company to reward employees’ accomplishment of specific economic or financial performance objectives, based on freely chosen and measurable criteria. Participation in the capital, often referred to as employee shareholding, aims to bring employees of a company, listed or unlisted, into its capital on a long term basis. It is a relatively old system of alignment of interests between shareholders and employees.

In addition to these existing mechanisms, France enacted the PACTE Law (Action Plan for Business Growth and Transformation) in 2019. This law aims at a better shared value within companies and a better apprehension of social and environmental topics within their strategy. Currently, approximately 9 million employees are covered by a value sharing scheme.

These different arrangements exist in all European countries but differ in their form or implementation. As the chart below shows, with nearly 40% of companies offering various compensations in line with their performance, France is one of the best performers in Europe.

Chart 2. Dissemination of shared value schemes in Europe in 2019

Source: Treasury Department (In French only)

Shared value is struggling to find its place at CAC 40 general assemblies

According to the Institute of Responsible Capitalism, 15 general assemblies have addressed shared value through the redistribution of financial flows to the main stakeholders: employees, shareholders, states, etc. However, only five of them have presented complete and formal information on this subject. Introduced in France in 2019 by the Pacte law, the equity ratios that make it possible to assess the difference between the remuneration of executives and that of their employees are always discreet at general assemblies. Only six companies presented them in 2022, compared to seven a year ago.

However CAC 40 companies were generous in 2021 with their shareholders, redistributing almost 70 billion euros in the form of dividends and share buybacks. Among the good examples, Legrand provided the average distribution of value added between employees (around 50%), development investments (around 25%), shareholders and lenders (14%) and governments (11%) out of 2010-2021. Engie presented the breakdown of its 2021 value creation in absolute terms between shareholders (dividends), employees (€ 7.7 billion), companies (€ 38.8 billion) and governments and local authorities (€ 3.2 billion).

As an investor and shareholder, we will continue to encourage companies to be more transparent about the equity ratio, its scope of calculation and the compensation policy for both executives and employees and the average distribution of value added among the various stakeholders.

As the shortage of talent is increasing and the quest for meaning, a true societal trend, has never been so central among employees and young graduates, existing shared value schemes need to be strengthened and put forward by companies to move towards a fairer and more equitable model.

Sources:

2022 General Assemblies Report by the Institute of Responsible Capitalism. The report is available on the Boursorama website (in French only, accessed on 3 August 2022).

Corporate Shared Value, an essential mechanism to strengthen

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