The challenges of European industrial business
Dominique Damon is an independent director of several major industrial groups and the Institut Français des Administrateurs.
You have been the head of several industrial companies in Europe. What is the position of European industry in globalisation? What are the recurring challenges facing European companies?
The large corporate groups I led in Europe were all international and most were listed on several financial markets around the world.
European industry largely remains active within the European Union, even though it has an essential position in world trade. This position vary according to the countries in Europe: Germany and the Nordic countries are still moving ahead in world trade, which is not the case for France or the United Kingdom, and even less for Spain and Italy; the margin rate of these countries' industries is lower than that of the northern European countries. However, industrial competitiveness remains an essential factor in global development.
Competitiveness and innovation are key to enabling European industry to maintain its position as the world's leading industrial power, with nearly 40% of world trade. The size of the European internal market is, of course, an advantage, but the global market share is essential to maintain the profitability and competitiveness of European companies. It is also a prerequisite for supporting the development of services.
Some sectors such as textiles, extractive industries and certain commodities have suffered greatly from Chinese competition. While European industry remains highly specialised in traditional sectors: automotive, pharmaceuticals, aeronautics, agri-food, chemicals, global growth is increasing faster in new technologies.
Developing in the face of international competition requires a favourable institutional and macroeconomic environment. But it is the ability to evolve and adapt to business strategic challenges, as well as taking account of changes in the economic, social and financial environment, that will give credibility to the governance system of European companies. These strategic, financial, societal and environmental efforts will be crucial in convincing investors, employees and other stakeholders to support the growth of European companies.
From your international experience, do you think that European companies have specific characteristics, or that there is a European corporate identity?
I do not believe there is a European corporate identity, because despite the efforts at harmonisation, European states are still very diverse, including in the area of corporate governance. Despite the European Commission's efforts to harmonise legislation, European companies are still exposed to a very heterogeneous economic, fiscal and administrative environment.
To illustrate these disparities, I will take the example of financial communication gaps within French companies and other European companies. Typically, German "co-management" has the major advantage of facilitating dialogue with well-trained staff representatives. All northern European countries usually report on the company's financial performance and efforts to maintain profitability and competitiveness. This is based on a culture and financial training that the employee representative bodies in France are still far from having acquired. The recent employee representation on French boards of directors cannot compensate for the fact that corporate finance training is neglected in the French school system.
And yet, the synergy between European countries could favour the economic power of Europe. The diversity of political, economic and fiscal contexts contradicts this potential. The EU’s efforts cannot be a substitute for country-level efforts.
You have successfully broken through in industries dominated by men. What obstacles stand in the way of women's advancement in European business?
Throughout my career, I have been able to evolve in very masculine worlds. From the very beginning of my career I was the only woman in a management position in the company, and in the companies I led, I was once again the first and most often the only woman in management positions. Being a woman didn't stop me from pursuing an exciting career. I think that the company is the field of a human experience in which we are constantly confronted with contradictory expectations, frequent competition and opposing opinions. Faced with these challenges, it is necessary to develop a human capital of courage, self-confidence, but also trust in others. For men and women alike, it is only this human capital that makes it possible to succeed.
How do French companies position themselves in terms of competitiveness?
France could improve its global competitive position because it has several advantages: its central geographical location, its demographic dynamism, the quality of its workforce and the quality of its infrastructure and public services.
One of the obstacles to French competitiveness is that the credit conditions fixed by major banking institutions at the regional level, particularly at the level of medium-sized companies, are often not very competitive compared to those available to comparable German companies. Substantial efforts still need to be made to finance productive investment without forgetting essential digital resources, and to achieve productivity gains to offset the rising labour costs. Too many French companies are now trying to compensate for their lack of price competitiveness by cutting back on their margins. The low margins limit their self-financing capacity and, as a result, their capacity for investment and global growth.
Another limitation of the French system is that French industrial culture has a long history of State control. Today, French companies are still dominated by a concentrated ownership structure (control by the State or by private or family investors). This situation has delayed the implementation of planning and accounting systems adapted to the international accounting rules currently in force and to the communication (internal and external) of the company's performance. It is interesting to note that today, companies whose capital is essentially family-owned or owned are progressing very fast in this field and their performance attests to this.
What is your overall assessment of the action taken by European public policy makers in favour of industry? Are industries sufficiently supported at EU level?
Despite the cultural and structural specificities of each country, the European institutions have favoured the development of governance rules with a view to harmonisation and to making companies more attractive to investors.
The European Commission still prohibits EU member states from subsidising their companies, a position that is strongly contradicted by current political developments in the world. European logic remains rooted in the harmonisation of policies. That said, in the absence of a common European industrial policy (with the exception of a few major sectors), many of the aid granted by Europe to European countries has contradicted the intentions of equal treatment. Southern and Eastern Europe countries have benefited from investment aid in certain sectors (agri-food, packaging, etc.), to the detriment of possible competition from other countries.
However, European authorities are making remarkable efforts in certain areas: by requiring the harmonisation of listed companies’ financial reporting through the application of international accounting standards, the European Union has improved the reliability and transparency of companies' accounts. It is a major asset to facilitate financing operations and international competitiveness.