Mr President,

"The status quo is no longer" an option for the distribution of added value and of profits. In your televised speech delivered at the end of the Elysée social summit, you were clear on the issue. But the only solution proposed so far – a distribution rule imposed by the law – is both unworkable and widely rejected.

We should not be afraid of taking a route that is radically new, and yet realistic, because it will create the only possible obligation, the obligation to negotiate a distribution of added value (rather than profit), from the perspective of giving the working community what it truly deserves and favouring the evolution of companies towards a better balance with all stakeholders.

This is the route I have been exploring continuously over the last fifteen years, first as national president of the Centre for Young Business Leaders (CJD) and its European equivalent, and then on behalf of the Planning Commission, with two eminent figures, Jacques Barthélémy, a specialist in employment law, and Lucien Pfeiffer, the inventor of the lease agreement. I have reformulated it in several publications, including the book "Reconciling business with society".

You have finally created an opportunity for this question to emerge from the shadows and enter the public debate, leading to a major transformation in the way we see business and capitalism. No-one has so far dared take the issue on politically. Your speech leads me to suppose that the time has come; hence the slightly solemn tone I have immodestly given my contribution.

Here then is the route I suggest you take. It changes many of our reference points, and may seem disconcerting. But, like Columbus' egg, its necessity then becomes obvious.

Distinguishing a Business from a Joint-Stock Company

The element that will trigger negotiation between capital providers and employees is to give the business legal existence, or at least legal substance as a contractual project between the stakeholders.

In legal terms, the business does not exist – nowhere in the world! What do exist are joint-stock companies, limited companies, public limited companies etc. In concrete terms, this means there is no business accounting that represents added value, the only measurable product of the efforts of shareholders, employees and suppliers, but only joint-stock company accounting, which since the 19th century has listed employees under the third-party accounts. The accountants are right, in legal and accounting terms – employees have never been part of the "business" when it is confused with the joint-stock company.

This was perfectly normal in the 19th century, when the only assets were material and financial; the people behind the machines were interchangeable and the value they added as individuals to the production process was low. But throughout the 20th century, the value of the business has moved away from the material, and is now based on patents, research and development, quality of service, commercial relationships, human resources policy, the quality and reliability of production methods... all of which depend on the staff and thus make them a major owner of the value of the business, beyond the value share they receive in the form of salaries.

And when this community of staff becomes one of the major owners of the value of the business, we can no longer continue to confuse the business and the joint-stock company.
Seeking to transform employees into shareholders is just a source of further confusion and disappointment. It would make more sense to leave the working community as it is, outside the joint-stock company, create a legal basis for the business, recognise the value of shareholders and the importance of their contribution and bring these two communities into existence and negotiation within the business, which is after all their common purpose.

So, specifically, what will this involve?

1. To enable added value to be shared simply, we must recognise the proportion of the business' assets owned by the working community through a forgotten tool that still exists in law, the "apport en industrie" or contribution in labour.
2. The contribution in labour of each working community varies from one business to another, which is why we should not legislate an imposed distribution, but instead impose a negotiated distribution contract.
3. Give legal substance to the Business as the project contract between stakeholders, which could be referred to as the business contract, and which should be renegotiated every three years or whenever a major event affects the company's economic model.

The advantages of the business contract

This distinction between a Business and a Joint-Stock Company clarifies the issue of goals. It will be possible to admit without today's taboos or false modesty that the goal of a joint-stock company is profit, while that of a business is the creation of value, added value...for all stakeholders.

Depending on the nature of the business, whether it is a clean or polluting industry, trade, services etc., the business contract, once the sharing of added value has been negotiated, can be extended to include other stakeholders who are affected positively or negatively by the business project. This will provide a good framework for discussions among the stakeholders, in the broadest sense, which develop more and more from a perspective of sustainable development.

The business contract will thus become the founding agreement which will finally give legal force to the all-too-ambiguous concept of corporate social responsibility.

The business contract has another advantage – it favours multilateral negotiation. It avoids the use of regulation, which is too restrictive in an area where the players' inventiveness needs to be encouraged, and of bilateral contracts, which are often unfair due to one party being in a position to impose its point of view on the other. Finally, the business contract clarifies the relationship between the business and its local context and stimulates the social relationships that truly need it.

Mr President, you have dared to live up to your role, without fear of special interests, by saying in familiar terms that "something is missing" between employees and shareholders. I sincerely hope you will have the courage to lay the foundations for a business law for the 21st century, which I believe is the only way to fill the gap.

Creating a new business law and a business contract negotiated between the stakeholders would achieve what politicians on all sides have been seeking to do for years – reinforce the trust between Business and Society.

20 February 2009

Didier LIVIO

President of Synergence

Former president of the Centre for Young Business Leaders (CJD) and the European Confederation of Young Entrepreneurs

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