CORPORATE SOCIAL RESPONSIBILITY IN GENERAL
Capitalism, which may be defined as ‘the free determination of prices by the market and the private ownership of the means of production’, has emerged triumphant since the collapse of the Soviet bloc, and offered a clear illustration of the two movements that have always sustained it: interventionism and liberalism.
The interventionist movement was first propounded in France in the 18th century by mercantilists like Montchrestien, and later by the physiocrats, whose ideas were implemented by Colbert. They believed that it is the state’s role to encourage an increase in the nation’s wealth by stimulating competition, establishing infrastructure and assisting enterprises whose activities are in the national interest. This school of thought can be seen in American New Deal policies and in the Keynesian-inspired, post-war European social democratic regimes, especially those of France and Germany, defined by Michel Albert in his book Capitalism against Capitalism as ‘Rhenish capitalism’. Albert argues that these countries have a tendency to prioritise long-term investment over immediate profitability, a consideration imposed by the law of the market and lauded by the liberal school. In France, the fundamental post-1945 policies fostering regional development, long-term planning, social welfare, employee incentives and involvement in corporate management were undoubtedly the product of this school of economic thought. The objectives pursued by these policies were harmonious growth and, to some extent, sustainable development and consideration of the various stakeholders (especially employees) in business development. These are also key elements in the concept of CSR.
However, a more in-depth analysis of the precepts on which CSR is based shows that its roots lie in the liberal movement. The European Commission, which is seeking to promote CSR into Europe, defines it as “a concept whereby companies integrate social and environmental concerns into their business operations and in their interaction with their stakeholders on a voluntary basis”. Economic players are pivotal to CSR and provide it with its driving force. Accordingly, the inspiration for CSR lies in the liberal school of economic thought founded by Adam Smith, whose book, The Wealth of Nations, was a manifesto against the mercantilists. He considered the individual, and not the state, to be the cornerstone of economic wealth and the market to be the most efficient collective regulatory mechanism: the ‘unseen hand’ that reigns like Providence. This philosophy was pursued by 20th century economists such as Hayek and Milton Friedman, who inspired the politics of Margaret Thatcher in Britain and Ronald Reagan in the US.
CSR encompasses a wide variety of issues such as adopting ethics in corporate life (respecting human rights and resisting corruption), protecting the environment, corporate governance, relationships with the company’s various stakeholders (primarily the employees) but also the various communities with which the company has contact. The French resource centre, Novetic, defines CSR as “the contribution of the business community to the three pillars – economic, social and environmental – of sustainable development”.
For those who doubt that the state may be the sole driving force to protect the public interest may accept that it is better placed than businesses to promote the general good by means of ethical codes and standards freely accepted by businesses themselves, without recourse to mandatory legislation. This soft law approach is, for its promoters, mostly adapted to our swiftly changing environment rather than the imposition of rigid sets of laws and regulations. But in countries with a Rhenish capitalism approach, such as France, importance is attributed to the state’s role, and the state is encouraged to adopt legislation to promote CSR in the way that it has done throughout the 20th century – although there are signs that a soft law approach is now emerging in France in various legal areas.
The paths taken to advance CSR, therefore, vary according to national cultures. In France, the prevalent view is that companies, and by extension business undertakings, are not created in the sole interests of their shareholders or owners. They are legal personalities whose objectives are different from those to which their shareholders or owners individually aspire, and who take the interests of various stakeholders, especially employees, into consideration. On the other hand, companies have expressed some reservations about CSR: they do not want it to allow the state to rid itself of its responsibilities and discharge them onto the business community, without reducing the taxes and contributions it receives, and which amount to almost 50 per cent of French GDP. In sum, the adoption of CSR in France is a combination of state intervention and action by NGOs looking to promote a consensus on how various aspects of CSR should be developed.
1. CSR values and practices, including levels of support from government, business and the general public
In furtherance of the appeal to the business community in 1993 by the then President of the European Commission, Jacques Delors, and the action taken by the European Community at the Lisbon Summit in March 2000, the French authorities acknowledged the importance of CSR by creating a high level group in 2002 to monitor CSR issues and creating the portfolio for a Secretary of State for sustainable development in the government. At the end of 2002, the Prime Minister organised a government seminar for ministers to co-ordinate the integration of sustainable development into government policy. This was immediately followed by the creation of the Interministerial Committee for Sustainable Development at the beginning of 2003. The ministers then established a National Sustainable Development Strategy, with 64 action priorities under six subject headings: Economic Activities; Territories and Sustainable Development; Prudence, Prevention and Policing; Public Information, Awareness, Education and Participation; the State: Setting an Example; International Action.
Various government bodies were able to achieve 80 per cent of the objectives laid down in the National Sustainable Development Strategy through a series of concrete measures (a national social integration plan; experimentation in teaching methods in schools; introducing environmental criteria into the Public Procurement Contracts Code; etc). A general reflection on the CSR thematic was undertaken, and a number of specific reports were produced (Trade and Ethics, published by the Secretary of State for Foreign Trade; ‘Report on CSR’ published by the inter-departmental committee of the Ministry of Employment, Labour and Social Cohesion in March 2004). At the same time, France expressed its views through the consultation set in motion by the European Commission’s Green Paper of July 2001. Finally, a number of flagship measures have been implemented inspired by CSR and a higher authorit has been created to fight discrimination and encourage equality.
Government political action has also been furthered through various laws (the New Economic Regulations Act of 15 May 2001; the Financial Security Act; preparation of a social cohesion plan) which take CSR values and practices into account. We will review this legislation in section 2 below.
The government action on CSR not only satisfies the Commission’s recommendations to EU member states, but also responds to public aspirations, as demonstrated in a report for CSR Europe by MORI, entitled European Attitudes Towards CSR, which testifies to the public’s increasing interest in CSR. According to this report, two thirds of French citizens consider that the social commitment of a company may influence whether they buy its products or use its services. A quarter would recommend a company based on its reputation on social or ethical issues.
Although CSR is widely accepted in civil society, the positions taken in this regard are extremely varied. Some companies are enthusiastically advancing the cause of CSR by taking part in specialised forums, joining associations that help to further discussion of it and to share their experiences, or by adopting ethical codes based on a philosophy of sustainable development. The companies’ motives are very diverse: some are building on a corporate culture that already reflects some CSR values, while others see it as a means of improving their risk policy or promoting or restoring their image. Some have adopted the role of banner-bearers for the movement and make public statements on the subject – and by doing so, leave themselves open to a new form of criticism, because some see the use of CSR as a sales pitch. Others, however, are concerned about the development of CSR which will unquestionably have a cost. Furthermore, although CSR may have found enthusiasts among large companies, it is more difficult for small- and medium-sized businesses to integrate it into their corporate policy. Although the public may be favourable to CSR, some groups of intellectuals have been upset by the fact that CSR is a profoundly liberal concept: they are afraid that if private companies take general interest objectives on board within a predominantly soft law framework, this may lead to privatising the law.
2. Laws, statutes, government publications or other significant framework documents
Aspects of CSR have been incorporated into laws and regulations across a wide range of legal disciplines. This proliferation of laws and regulations is a departure from the central philosophy of CSR, according to which it is supposed to be undertaken on the voluntary initiative of individual companies, and not imposed by the state. It is difficult to distinguish between those provisions that aim to promote CSR and those that are the result of the state exercising its sovereign power in the ordinary way, as guardian of the public interest. Nevertheless, CSR can be seen as the inspiration for recent legislation in areas including company law, labour and employment law, environmental law and public law.
In French company law, CSR values, such as the prevention of conflicts of interest and greater transparency, have long since been incorporated into the body of legal rules and regulations. For example, stock option schemes have required the approval of the shareholders in extraordinary general meetings since the early 1970s. From even earlier, companies’ financial statements have had to be certified by an independent auditor, appointed for a term of six years. More recently, following research in Paris into corporate governance, the legislature passed two important laws aimed at increasing transparency and maintaining a balance of power: the New Economic Regulations Act of 15 May 2001 and the Financial Security Act of 1 August 2003, which are discussed further in sections 7 and 8 below.
In employment law, the Employee Savings Act of 19 February 2001 laid down new rules governing investments under a company savings scheme: where the scheme is negotiated, the company and employees’ representatives may, where appropriate, issue guidelines on social, environmental or ethical issues that the company running the scheme is required to follow when buying and selling securities or when exercising any rights attached to those securities. In terms of certain provisions of this law, companies are obliged to have employees’ representatives on the board of directors when employees hold together more than three per cent of the share of the companies. Previously, such designation was optional.
As an alternative approach, the Ministry of Employment and Solidarity organised meetings between scientists, businesses, and management and labour representatives to examine new trends in areas such as professional training, the appraisal of professional skills and experience and the age range of employees in companies. These meetings resulted in the signature of a national agreement between management and labour in September 2003, establishing an individual right to training. This agreement was enacted by Parliament in almost identical form a few months later (Act of 4 May 2004 on life-long professional education and training and social dialogue). The New Economic Regulations Act of 15 May 2001 granted to the Works Council additional powers, especially in the context of takeover, by giving it the right to request the CEO of the bidder to make some explanations. A company’s duty to report includes a disclosure of its assessment of the social and environmental impact of its activity, and this report must first be submitted to the Works Council, which is then entitled to communicate its observations to shareholders. The company has wide discretion to decide what it includes in the report, and there are no sanctions if the report has shortcomings.
In environmental law, the government issued a supplementary order on 30 April 2002 regarding discharges into the air, water and soil having a severe negative impact on the environment. And in public law, the state goes further than merely requiring companies to behave in a socially responsible manner: under the Act of 17 July 2001, public pension fund investment policy is also required to consider ethical, social and environmental issues. A similar approach has been followed for public procurement contracts, where rules have been modified by the Act of 7 March 2001, as discussed in section 13.
3. International treaties, conventions or standards
The concept of sustainable development first emerged in an international context, in the UN. CSR is the natural extension of this concept in its application to companies. International attention was attracted to environmental issues by the 1972 UN Conference in Stockholm, and government and public awareness of key sustainable development issues raised by the Earth Summit in Rio in 1992. The Rio Declaration set out a general global strategy for sustainable development, emphasising the need for co-operation between states. The states committed themselves to hold regular meetings on the subject with a view to implementing specific action programmes – and at one of these meetings, in Kyoto in 1997, the developed countries agreed specific targets for cutting greenhouse gas emissions. Acknowledging the lack of initiatives by those states that signed the Rio Declaration, the 2002 Johannesburg Summit was organised with a more modest aim of encouraging states to reiterate political commitment to sustainable development and to promote increased cooperation between the North and South. France took an active part in this whole process, through the committed involvement of its two most recent heads of state in these meetings and its commitment to achieving the stated targets. Sustainable development is one of the key guiding principles of its development policy.
Despite this success, and undoubtedly aware of the lack of achievement at international level in sustainable development, especially CSR, France decided to prioritise its action within European forums. Thus, France supported the drafting of the OECD Guidelines for Multinational Enterprises, revised in 2000, which set out recommendations in conjunction with implementation procedures. One of the most interesting aspects of this process was the setting up of national contact points responsible for supplying companies with information about CSR that they should implement, and promoting compliance with the guidelines, thus taking the process to a higher plane than a mere declaration of good intentions.
At a European Community level, in the lead up to the European Summit in Lisbon in 2000, France took an active part in drafting the Green Paper promoting a European framework for CSR, which resulted in a Communication from the Commission of 2 July 2002. This Communication was widely distributed by France and provided a starting point for a more active consideration of CSR issues at government level.
4. Non-statutory sources of liability for companies
One of the greatest achievements of the French Civil Code at the end of the 18th century was to unify all case law, moving away from a multiplicity of individual cases to general rules embracing them all. Notably, the principles of individual liability are defined into two sets of articles concerning liability of tort (Articles 1382 et seq.) and in case of breach of a contract (Article 1147 et seq. of the Civil Code). On the basis of these principles, French law was able to develop in a highly adaptable manner, applying the principles of tort and contractual liability to new situations. For example, at the end of the 19th century, when no specific law existed for the protection of employees, the courts applied Article 1384 of the Civil Code (concerning liability for property) to hold companies liable to their employees for accidents at work on the basis of the risks to which they were exposed, even where no wrongdoing or negligence on behalf of the employer could be proved. The same general civil liability rules have also been applied, for example, to defeat contractual clauses limiting liability in the event of gross negligence, such as negligence deemed proven in the case of breach of a fundamental contractual term (see Court of Appeal, Paris, 17 November 1994, Chronopost case). These principles apply where no specific rules on liability have been laid down; the specific cases accumulate over time, eg product liability since the implementation of the Community directive, air transport, accidents at work or workplace injury caused by asbestos. Case law has sometimes attempted to find a balance in terms of corporate liability by taking into account development risks inherent in developing new processes and products, for example in the pharmaceutical industry.
The responsibility of company directors is based on general principles of liability, although these rules have been incorporated into company legislation since 1966. Accordingly, a company director may be held liable, pursuant to action taken by other company officers or shareholders, for any proven mismanagement, legal violation or breach of the company’s memorandum and articles of association. Such liability (contractual in nature) does not rule out tort liability towards third parties on the part of company directors (pursuant to Article 1382 of the Civil Code) for any proven wrongdoing. However, this implies personal wrongdoing outside the scope of the director’s duties, ie “intentional and serious grave wrongdoing incompatible with the normal exercise of corporate duties” (signing any unauthorised or unlawful instrument granting a guarantee or surety in the name of the company; personally committing acts of infringement; placing an order with a supplier knowing that the company will be unable to pay). In judicial reorganisation and bankruptcy proceedings, the liability of company directors for mismanagement resulting in a deficiency of assets may be grounds for them to have to pay off the company’s liabilities, based on a general provision in the French Commercial Code.
On the basis of the general rules mentioned, the value of CSR codes of conduct adopted by some companies should be carefully considered with regard to the potential liability which may result from the breach of such codes. Whether they are incorporated into the company’s memorandum and articles of association or into its internal rules and regulations, the key question is whether shareholders can rely on these provisions as a basis for legal action in liability against directors. In relationships with third parties, such a document would make it easier to adduce evidence of a company’s wrongdoing. It would be difficult for a company to argue that its code of good conduct was merely a commitment in principle. The question of the application of a code of conduct in a company’s relations with its employees is even more complex. It should at least be borne in mind that most provisions of a code of conduct must be integrated into a company’s internal rules and regulations, which implies an information and consultation process with the Works Council. Voluntary commitment to CSR therefore forms part of a system in which, even in the absence of specific legislation, freedom of action is tempered by the principle of responsibility.
5. Principal institutions, government agencies and/or major non-governmental organisations (NGOs)
CSR principles are gradually forging themselves a place in civil society as a result of the momentum created by the European Community, echoed by the French government. Companies and professionals responsible for social issues have set up associations and think tanks which are sometimes highly critical of companies. These bodies have established a continuous dialogue with the European Commission and its European corporate information exchange network, CSR Europe, and with the government. Among the numerous French associations, the best known is probably Novethic, founded in 2001 as a subsidiary of Caisse des Dépôts, a state-owned financial institution with a public interest mandate and aimed at promoting CSR in the French financial community. Through its website, Novethic reaches a wide public among businessmen, local authorities, universities, researchers and other stakeholders. The French companies most committed to CSR are members of three associations: ORSE (CSR Observatory), AERES (Association of Companies for the Reduction of Greenhouse Gas Emissions) and EPE (Entreprise for the Environment). It should be noted that under Articles 2 to 2-21 of the French Code of Criminal Procedure, NGOs whose statutory object is of public interest (eg the fight against racism, protection of the environment or assistance to disabled persons) are entitled to claim damages before the criminal courts.
SPECIFIC AREAS OF CORPORATE SOCIAL RESPONSIBILITY
6. Human rights
The Declaration of the Rights of Man and Citizen is referred to in the preamble to the French constitution of 4 October 1958 and forms an integral part of the body of constitutional rules. It binds the legislature and regulatory authorities, offering citizens safeguards in their relationships with the authorities and ensuring compliance with the republic’s founding principles. In December 1948 France adopted the Universal Declaration of Human Rights enacted by the UN General Assembly, and in May 1974 ratified the European Convention on Human Rights and Fundamental Freedoms. The principles laid down by these declarations are binding on the legislative and regulatory authorities under domestic law, contribute to the hierarchy of legal norms and impact on company duties. Accordingly, there is less room for a voluntary implementation of CSR by companies in this area. While it was initially intended that the development of CSR should be spontaneous, it is now increasingly enforced by an arsenal of binding laws and regulations. Finally, special instruments of legislative force have been adopted, for example, in employment anti-discrimination law, discussed below.
7. Corruption
Under French law, corruption is fully covered by two distinct and separate offences: active corruption (committed by a person offering any reward to an official for carrying out or abstaining from carrying out any act pertaining to his office) and passive corruption (committed by an official who accepts a bribe to carry out or abstain from carrying out an act pertaining to his office) defined in Articles 433-1, 432-11 et seq. of the New Penal Code, as amended by Act No. 2000-595 of 30 June 2000. Corruption implies misappropriating or misusing power and obtaining an undue advantage.
France is also taking an active part in efforts by the international community to stamp out corruption. Since the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 17 December 1997 came into force in France, on 29 September 2000, undeclared commissions paid to foreign public officials are no longer deductible for tax purposes (Finance (Amendment) Act No. 97-1239 of 29 December 1997). The provisions of this Convention relating to international bribery have been introduced in the French Penal Code under Articles 435-1 to 435-6. Money laundering, the aim of which is to reintroduce money obtained through illegal activities into the mainstream financial system, is a criminal offence pursuant to Articles 324-1 et seq. of the New Penal Code (Act No. 96-392 of 13 May 1996).
Since 1990, France has had a comprehensive legislative and regulatory arsenal to wage war effectively on corruption and money laundering. The Financial Security Act, No. 2003-76, of 1 August 2003, has widened the scope of the duty to declare suspicion defined in Article L. 562-1 of the Financial and Monetary Code (declarations to be made to TRACFIN, a customs crime prevention service attached to the Ministry of the Economy, created in 1990). Act No. 2004-130 of 11 February 2004 has under certain circumstances extended this duty to declare to several branches of the legal profession, including lawyers. The so-called Perben II Act of 9 March 2004 has made significant amendments to French criminal procedure, creating a specific procedure (Article 706-73 of the Criminal Procedure Code) to be applied to certain cases of money laundering, and generally to organised crime. This Act also makes it possible to enforce a European warrant without verifying that the suspect has not been exposed to double jeopardy (Article 695-23 of the Criminal Procedure Code). The Banking and Finance Regulatory Committee regulations, which establish a duty to be vigilant to spot cases of money laundering (Regulations 91-07 and 2002-01, as amended), codes of conduct and compliance programmes are all key elements for credit institutions and investment companies in the fight against corruption and money laundering.
Article L. 242-6 of the Commercial Code on misuse of corporate assets is also an effective tool. It provides the means to punish acts of corruption or money laundering that may have escaped all other punishment due to the strict interpretation of other misdemeanours; it is supported by a French Supreme Court decision, in the 1997 Carignon case, that the commission of a criminal offence, such as bribery, is intrinsically contrary to a company’s interests despite any short-term benefit it might procure. This offence is defined as use of a company’s assets or credit by its officers in a manner they know to be contrary to the company’s interests, for personal purposes, even if their personal interest is only moral. Finally, France is an active member of the Group of States against Corruption, founded in 1999 by the Council of Europe, and the Financial Action Task Force on Money Laundering, which completed its review of its 40 recommendations in June 2003.
8. Corporate governance and business ethics
Although France has a written law tradition in which legal rules are defined by legislation such as the Civil Code, as discussed above in section 4, a number of reports have recommended improvements in corporate governance. As a consequence, France has moved towards adopting soft law principles on corporate governance. Reports have been issued by business associations (ANSA in 1993 and MEDEF and AFEP in 1995), by commissions headed by two successive chairmen of Société Générale bank (Marc Viénot in 1995 and 1999 and Daniel Bouton in 2002) and by a government commission headed by Senator Philippe Marini in 2001. More recently, in 2003, the Institut Montaigne issued a report entitled Better Corporate Governance, and the Financial Markets Authority (Autorité des Marchés Financiers, then COB) issued recommendations on corporate governance (rather than regulations) to be included in company annual reports (recent developments, future prospects, pro-forma financial information, etc). Following recent international financial scandals (Enron and Worldcom in the US and Parmalat in Italy), and the crisis affecting major French companies after the explosion of the internet speculative bubble (Vivendi Universal and France Telecom), a need was felt for the legislature to take action. It passed the New Economic Regulations Act of 15 May 2001 and the Financial Security Act of 1 August 2003, which took further steps forward on accounting and financial transparency. French positive law in this area is a combination of soft law and mandatory regulations.
Transparency
French law has made substantial progress on disclosure of information to shareholders and the auditing of financial statements. In addition to standard financial information on a company’s consolidated and individual accounts, which includes directors’ remuneration (wages, stock-options, etc), the law requires listed companies to communicate social and environmental data and information about territorial impact in their disclosures in their annual reports, making France the first country to adopt a system of triple bottom line reporting. Statutory auditors are required to certify that the information supplied is true and accurate. The company itself is responsible for submitting this part of the report for critical review by an independent third party. There has also been a modernisation of the auditing process and the profession is subject to more stringent monitoring. A Statutory Auditors’ High Council has been set up, to ensure that the profession remains independent and that the auditing and advisory branches of the profession are kept strictly separate. This same legislation also provides for company chairman to prepare a new form of annual report relating to the company’s internal monitoring procedures. It is no longer possible to renew the statutory auditors’ mandate beyond their six-year term.
Separating management and control
Within a public limited liability company (société anonyme), the New Economic Regulations Act has redistributed the powers of the board of directors between the board and the company’s executive management. As part of this new division, the board of directors is now vested with the power to decide policy and has a supervisory function to ensure that this policy is implemented. The Act also strengthens the board’s role in the management of conflicts of interest, by extending the scope of the procedure imposing prior approval of any agreement between the company and directors or shareholders holding more than ten per cent of the share capital of the company. The law maintains the requirement that the board must give prior authorisation to the granting of any guarantee or other security interest in the name of the company. It also dissociates the role of chairman from that of managing director, which was previously only applicable to public limited companies with a management board and supervisory board structure, inspired by the German two-tier model (Aktiengesellschaft). Under French law, the chairman’s role is to co-ordinate the work carried out by the company’s executive bodies; the chairman may be a non-executive director. The board of directors is vested with the power to decide the company’s strategy and its implementation. Members of the board are now subject to stricter rules on holding multiple directorships or seats on supervisory boards at the same time.
Board committees
The above-mentioned reports from the French financial community recommend that special committees be set up on a voluntary basis within companies to handle more sensitive issues (financial information and audit, remuneration and appointments of board members) and to assist the board of directors, which should comprise a majority of independent directors. The board’s mode of operation should be defined in internal rules and regulations. These recommendations go hand in hand with the legal ratification of directors’ right to receive information. Finally, the board of directors is encouraged to review and assess its own mode of operation.
Shareholders’ rights
French law is also moving to reinforce shareholders’ rights through two types of measures to promote shareholder participation in the life of the company and to increase the information disclosed to shareholders. To promote shareholder participation, provisions subordinating shareholder participation in general meetings to ownership of a specific number of shares have been repealed, and legislation amended to allow shareholders to participate in the collective decision-making process via video conference or electronic media. Thresholds for the number of shares that shareholders are required to own in order to take action to verify how the company is being managed (by engaging outside experts to review management, submitting written questions, asking the court to nominate an agent to summon a general meeting, etc) have been lowered or abolished. Shareholders have been provided with other means to check on corporate officers’ activity, eg objections to the statutory auditor, asking for compulsory winding-up, or commencing a civil action against a corporate officer on the company’s behalf. To increase the information disclosed to shareholders, boards of directors are required to produce a special annual report for each general meeting, giving environmental information and a report on internal inspection procedures as well as financial information.
9. Corporate responsibility to employees
The guiding principle of French employment law is that the relationship between employer and employee is not a relationship of equals, and the law is therefore required to protect the party deemed to be weaker. As a result, CSR issues have for a long time been at the heart of numerous areas of employment law, eg equality at work and access to employment, freedom at work, working hours and employee protection.
On the issue of non-discrimination in access to employment, Article L. 122-45 of the Labour Code provides that no-one may be refused a job, job experience or professional training based on his or her origin, gender, customs, sexual orientation, age, genetic characteristics or belonging to an ethnic group, nation or race, or due to his or her political opinions, trade union activities, religious convictions, physical appearance, name, etc. In addition to this general principle of non-discrimination, championed in a large number of contemporary legal systems, French law also imposes special duties that could be likened to positive discrimination, especially as regards the hiring of disabled employees. The law also lays down strict rules on the use of so-called ‘precarious’ employment contracts (fixed-term contracts, part-time contracts and temporary work contracts); failure to comply with these provisions may lead to severe penalties and to a redefinition of the employment contract into a standard employment contract for an indefinite term.
The above-mentioned cases of discrimination in access to employment listed in Article L. 122-45 of the Labour Code also apply to equality at work. It is unlawful to discriminate against an employee on the grounds mentioned in this provision, in terms of salary, grade, professional mobility or training. The Labour Code also contains special provisions guaranteeing equal treatment for men and women. Other than in cases where being of one gender is a fundamental requirement of the job, it is unlawful to mention gender in any job offer. In addition to the duties that the law imposes on employers on equality, the courts have also laid down the rule of equal pay for employees in objectively identical situations. This is better known as the ‘equal work, equal pay’ rule (Delzongle v. Ponsolle [1996] No. 4133).
CSR also involves issues of freedom at work. Although employees’ freedom naturally has some restrictions in the workplace, the scope of the restrictions that may be imposed by an employer is strictly defined in Article L. 120-2 of the Labour Code: it is unlawful to impose restrictions on personal rights, or individual or collective freedoms that are not justified by the nature of the job or are disproportionate to any stated objective. Applying this provision to fundamental freedoms such as the confidentiality of correspondence and the right to privacy, the courts held that an employer was not entitled to read emails sent or received by an employee via a computer provided for his use at work even if the employer had prohibited personal use of that computer (Nikon France v. Onof [2001] No. 4164). However, there are limits to this protection: the courts have held that the freedom to dress as the employee pleases is not one of the fundamental freedoms protected by Article L. 120-2 of the Labour Code, and that an employer had every right to dismiss an employee who refused to wear anything other than Bermuda shorts at work (Monribot v. Sagem [2003] No. 1507).
On the issue of working hours, the reduction in the legal working week and the increase in paid holidays are two historic trends: from a 40 hour working week with two weeks paid holiday, established by the Matignon Agreements of 1936, the working week was reduced to 39 hours in 1982 and then 35 hours in 2000. The number of weeks of paid holiday increased gradually to reach a standard entitlement of five weeks in 1982. More recently, the law has afforded employees new forms of leave for social or family purposes. Since 2002, fathers have been entitled to take 11 consecutive days of paternity leave within the four months following the birth of a child. Social security accepts liability to pay the fathers’ salary (up to a ceiling limit). Also, since 2003, any employee whose parents, children or a person sharing their home are suffering from a life-threatening illness or condition is entitled to take a maximum of three months’ leave, albeit unpaid.
In addition to compensation for any accident suffered at work, legislation and case law are granting employees increased protection against any physical or psychological injury suffered while performing duties under an employment contract. Also, in addition to penalties laid down in the Penal Code for those guilty of sexual or moral harassment, the Labour Code now provides comprehensive protection for employees who have suffered or testified about such misconduct. Finally, since 2003, the maximum penalties for employees, and their employers, engaging in undeclared work are three years’ imprisonment and a fine of €45,000 (€225,000 for corporate entities). Furthermore, to avoid workforce trading and violations of employees’ rights likely to result from such practices, it has, since 1974, been an offence to lend employees for profit, other than within the very strictly regulated framework of agency temporary work contracts.
10. Corporate responsibility towards the environment
The beginnings of French environmental law date back to the early 19th century and rose to greater importance with the industrial revolution and the advent of manufacturing society. European regulations and directives comprise almost 90 per cent of a highly complex and rigorous regulatory framework. Companies’ ever-greater duty to disclose information is the first indication of the progressive integration of CSR values and practices int environmental law. This information relates to operational matters in industry (Article 17-2 of Decree No. 77-1133 of 21 September 1977), and to the financial matters that must be dealt with in the environmental report to shareholders, discussed above in section 8 (Article L. 225-102-1 of the Commercial Code). More recently, a duty has been imposed on companies carrying on activity on sites deemed to be highly dangerous to appraise and inform their shareholders on the foreseeable impact of an industrial disaster on third parties and their ability to withstand the financial burden of such an event (Article L. 225102-2 of the Commercial Code introduced by Act No. 2003-699 of 30 July 2003). The possibility of a corporate entity (and not only natural persons) being held criminally liable and sentenced to a fine for an offence against environmental law is a second indication of the integration of CSR values and practices into law. This provision of the Penal Code was introduced about ten years ago in response to public opinion, and especially to pressure by environmental organisations. It is also interesting to note the increase in the amount of fines imposed for environmental offences over the last few years.
Most complaints filed by environmentalist organisations against corporate entities refer to pollution (among numerous others, Articles L. 218-10 et seq. and L. 432-2 et seq. of the French Environmental Code), abandonment of waste (Article L. 541-46, 4° et seq. of the French Environmental Code), operating an installation classified for the protection of environment without authorisation (Article L. 514-9 et seq. of the French Environmental Code) and/or risks caused to other persons (Articles 223-1 and 223-2 of the French Penal Code).
Numerous incentives have been incorporated in fiscal policy as a means of promoting sustainable development and the environment. All sectors of taxation have been used to assist in sustaining and developing initiatives and to encourage companies to adopt CSR values. For example, favourable tax treatment of environmentally friendly investments may be depreciated and thus deducted from taxable income; local business tax measures providing for a reduction in the rateable leasehold value of anti-pollution installations, adopted by the French Parliament in the context of the national anti-greenhouse effect campaign for the period 2000 – 2010; and proposals in a White Paper of July 1999 by the Ministry of the Economy and Finance to extend the General Tax on Polluting Activities to intermediate energy consumption. This White Paper stresses that taxation can play an effective role in the continued fight against the greenhouse effect as a complement to other tools and methods. As the reduction in the greenhouse effect is closely linked to a cut in corporate energy consumption, it has been decided to tax consumption and to apply the receipts to the state budget.
11. Corporate responsibility to communities
A distinction can be drawn between two types of CSR policies towards local communities: those relating to the development of geographical areas in difficulty, and those designed to assist categories of the population deemed to require additional protection.
Territorial development
Territorial development policy takes the form of tax breaks and exemptions applicable in geographical priority areas defined by law. This is merely the fiscal aspect of a longstanding tradition on the part of successive French governments of promoting more balanced social and economic development in a country where there is a disproportion in the capital expenditure between the regions. In a similar vein, other measures have been taken to maintain local public services (post offices, social security offices, etc) to sustain activity in rural areas.
Communities
In the specific area of children’s rights, on 7 August 1990, France ratified the International Convention on the Rights of the Child of 20 November 1989, and legislation was passed to incorporate the terms of the convention into domestic law. This legislation includes the Act of 8 January 1993 amending the provisions of the Civil Code on civil status, the family and children’s rights and setting up a family court; the Act of 17 June 1998 on the prevention and punishment of sexual offences and the protection of minors, which allows for children to testify by audiovisual recording during the criminal investigation; and the Act of 6 March 2000 reinforcing the role of schools in the prevention and detection of child abuse. Finally, Act No. 2000-196 of 6 March 2000 created a Children’s Defender responsible for defending and promoting the rights of children, as provided by law or by an international commitment duly ratified and approved by France.
Also, a more severe arsenal of legislation has been introduced to fight racism, homophobia and all forms of discrimination in general. As stated above, these provisions naturally have an important application at work. An independent government authority called the Senior Authority to Fight Discrimination and to Promote Equality intended to offer advice to both the public and private sectors, is being set up following the Stasi Report published on 16 February 2004.
12. Corporate responsibility for overseas activities
As far as criminal law is concerned, French law is applicable to all offences committed on the territory of the French Republic. An offence is deemed to have been committed on that territory where one of its constituent elements was committed on that territory (Article 1132 of the French Penal Code). Thus, French criminal law may be applied to some offences that have occurred abroad. Furthermore, French criminal law is applicable to any felony [crimes] committed by a French national outside the territory of the French Republic. It is also applicable to misdemeanours [délits] committed by French nationals outside the territory of the French Republic if the conduct is punishable under the laws of the country in which it was committed (Article 113-6 of the French Penal Code). Finally, French criminal law applies to any felony, as well as to any misdemeanour, punished by imprisonment, committed by a French or foreign national outside the territory of the French Republic, where the victim is a French national at the time the offence took place (Article 113-6 of the French Penal Code). As a consequence, proceedings can be filed in France on the grounds of offences committed abroad by employees and/or executives of French corporate entities. Similarly, and under certain conditions, French courts could have jurisdiction over offences committed abroad by the subsidiary of French corporations. Controversies sometimes arise in France when NGOs denounce the involvement of a company in a foreign country where decent working conditions are flouted, or where a company shows itself committed to a totalitarian regime. It is interesting to note that, nowadays, such companies often attempt to counter this finger-pointing by means of targetted communication campaigns or undertakings to comply with the code of good conduct and good relationships with sub-contractors.
13. Procurement
The Act of 7 March 2001 amended the Public Procurement Contracts Code to allow provisions concerning social or environmental issues to be included in public procurement contracts. The provisions of this code were readjusted by a decree dated 7 January 2004. One of the objectives of the decree is to achieve greater transparency, a key CSR value.
14. CSR reporting and socially responsible investment
Corporate reporting on CSR performance remains voluntary. Some observers are concerned that companies’ CSR practices may not be appraised objectively and worry that CSR may be misused, and adopted as a sales tactic that will be abandoned in times of economic strain. A number of independent rating agencies, such as VIGEO, headed by Nicole Notat, former secretary-general to the CFDT trade union confederation, have been created in response to these fears.
