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Restructurings in France
9 July 2012
A precedent that will further change the face of French restructurings is being played out in the French criminal courts as the former head of France Telecom, Didier Lombard, was released on police bail this week over charges of "Moral and institutional harassment".
Between 2008 and 2009 35 employees took their own lives following the announcement of a restructuring plan promoted by Lombard. The suicide rate is apparently not far out of line with the national average but it was enough to halt the restructuring plan and to get the CEO arrested following a critical report by government labour inspectors. Around 22,000 job losses were proposed with a further move of 10,000 into different positions with performance criteria introduced for the 170,000 workforce. Whilst the method of implementation may have been insensitive I am sure that the intention had firm roots in what was right for the company.
Regardless of the outcome the case will have wide ranging implications for investors looking to France as a restructuring opportunity. The report by French government labor inspectors warned that the management techniques imposed during the restructuring had a "pathological effect" on employees' morale and undermined their "physical and mental health".
We have extensive French restructuring experience but this is a new one for us. I have personally worked in situations where management has been locked in and in situations where employees have received large pay offs to leave, such that the company has been brought to its knees. We have won awards for difficult restructuring work in France but I have never worked in a restructuring where management has been brought before the courts for doing what they felt was in the best interests of the company.
France Telecom is a large employer driven by political considerations that may well outweigh commercial considerations. That said, management, stripped of the right to manage, become ineffectual and impotent. That cannot be right.
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