Conference-speaking time
It's a conference speaker's nightmare. Five o'clock on a Friday afternoon and the audience is dwindling fast. But those who bothered to stay at this year's Pirc (Pensions Investment Research Consultants) conference on corporate governance in London were treated to a fact-filled introduction to the state of play in France. Well aware of the impending train and plane departures preying on her listeners' minds, Sophie L'Helias's 15 minute discourse on the arrival of le gouvernement d'entreprise allowed little time for either herself or her listeners to catch breath.
This ability to talk speedily and coherently about her subject matter is something which should serve L'Helias well. There's a lot to be said on the corporate governance front in France at the moment, with Alcatel and the fallout from Credit Lyonnais hitting the headlines. And since founding her Paris-based corporate governance consultancy, Franklin Global Investor Services, in October last year, L'Helias has been inundated with calls from concerned directors of leading French companies anxious to know more about this new phenomenon. More recently she concluded a strategic alliance with Institutional Shareholder Services in the US, confirming her position as France's leading expert in the field.
A French national who spent a large part of her childhood in the States, L'Helias believes her work benefits from a deep understanding of what makes both the Anglo-Saxon and French corporate cultures tick. After graduating from law school at the University of Pennsylvania, the University of Panthon-Sorbonne in Paris and the European Institute of Comparative Law in Germany she did a two year stint with Latham & Watkins in New York, where she was admitted to the New York Bar, and specialised in acquisition financing and mergers and acquisitions.
Moving back to Europe in 1989, L'Helias took up an appointment at Shearman & Sterling in Paris for another two years before opting to take an MBA at Insead, which she completed in 1992. Around this time she decided that investment banking offered better prospects than the law but after a short spell with Merrill Lynch she switched towards her current field of expertise, following an offer from Belgian shareholder activist firm, Deminor, to open up a Paris office. 'At 29 your resum is over and you've got to start accomplishing something,' says L'Helias. 'Deminor offered me the best chance of combining my legal and financial background with a new challenge. I was starting from scratch with just a computer, fax and telephone.'
However, L'Helias was well aware that working with Deminor also had its downside. It had previously gained notoriety by successfully suing Accor over the Wagons-Lits takeover and had expanded into France on the back of this, seeing the French market as an ideal place in which to grow its operations, because of its shared cultural and linguistic background. But this meant that L'Helias wasn't using her competitive advantage of Anglo-Saxon knowledge and language. Further, the culture at Deminor was linked to the idea of going to court in order to get results. ' Most investors generally want to stay away from the courts and the associated attention,' she says.
With these doubts in mind, L'Helias quit Deminor in August of last year to take an extended holiday and think about her own business plans for the future. She was fairly sure that she wanted to work with institutional investors - although not necessarily from an activist stance - providing an interface with large French listed companies.
It helped that she was aware that the US Department of Labor was putting together its plans to require US Erisa pension funds to vote on their foreign holdings. L'Helias recalls that she was in the offices of the US shareholder activist fund managers Lens Inc when the news came through that the Department of Labor had released its interpretive bulletin. The requirement that pension funds not only had to vote on foreign holdings, but had to do so with due consideration, was big news for the services L'Helias could offer and she got on the phone there and then to ISS to suggest a link-up.
With ISS needing information on 166 French companies, foreign pension and hedge funds retaining her services in connection with under-performing assets and ongoing work for French investors, L'Helias was in a position to launch FGIS. She provides voting execution services for both foreign and French institutional investors as well as making statements to companies, voting physically at meetings, holding meetings with management on behalf of her clients and providing other corporate governance related services.
Perhaps the major turning point for FGIS and the acceptance of le gouvernement d'entreprise into the French language came in February, when L'Helias was interviewed by a journalist from Le Monde following the formalisation of her alliance with ISS. She says that one day she was having a cup of coffee with the journalist casually describing the likely effects of the Department of Labor ruling; the next, an article appeared on the front page and the calls started flooding in.
A great deal of L'Helias's time is now spent in meetings with managements of French companies to advise them on her clients' position prior to voting. 'They know who I am and I always get a meeting,' she says. 'I can listen to arguments but I can also get fed up with management. I won't leave until I get a response as I've got nothing to lose - not being the final investor.' Likewise she points out that she is not afraid to advise her clients that they are wrong on a specific issue, or that they will not achieve anything with a particular approach.
In these situations L'Helias often finds herself working with the investor's locally-retained counsel and her legal background is obviously advantageous in much of her work. However, she has recently asked to be omitted from membership of the French Bar as she believes that being a locally registered lawyer can send the wrong signals to management. Many French companies quake when they are approached by someone representing the interests of American investors, automatically presuming that they are about to be sued, and this fear is doubled if they know the representative is a lawyer. 'I want to appear more as a consultant. Psychologically I think that works in my favour,' she says.
The lack of understanding of the needs of foreign institutional investors is something which continues to astound L'Helias. With 30 per cent of the Paris Bourse now in foreign hands, however, companies are beginning to realise that their stock price is increasingly a reflection of the international market and that there is a real need to listen to foreign investors. Because of the diverse range of other interests in the French market, foreign shareholders have traditionally been lumped together, assumed all to have the same investment strategy.
But, with the aid of L'Helias, that idea is changing. 'Foreign investors were all put in the same basket,' she says. 'Now companies are beginning to realise that even within the foreign investment group there are differences. Each country and type of fund may hold a different philosophy.' And the demands of those different philosophies mean that, for the first time, companies are being forced to justify a certain strategy, rather than provide the straight financial information which has been the norm in the past. L'Helias is also busy informing companies that the old adage, 'If you're not happy then sell your stock,' simply won't wash as a means of rebuffing the demands of foreign investors. Today, of course, many are locked into investments that form part of an indexed fund.
Aside from the hectic schedule of meetings which dominates her work, L'Helias somehow manages to find the time to write a half-page weekly corporate governance column for L'Agefi, the French financial daily. She also advises on reforms to French company law - on issues like the protection of beneficiaries, for example - and fits in a number of conference commitments in Europe and North America as well.
So what else does the future hold for L'Helias and FGIS? Crucially, her alliance with ISS does not preclude any other link-ups with similar organisations in other countries and she cites representation of investors from the UK, Germany and the Netherlands as being the most likely candidates for expansion of her work. The prospect of the development of a domestic pension fund industry also holds promise for the coming years, although L'Helias warns that development in that field is 'not going to be a volcanic eruption but more of a tremble.'
One lingering question is why her consultancy is called Franklin Global Investor Services. L'Helias laughs. 'It's not very original. I had 24 hours before I had to file the papers for the company and I had to think of something quickly,' she says. 'My address is on Avenue Franklin D Roosevelt and I admire Benjamin Franklin as well. It's got a personal side to it.'