Here is a book whose timely publication, in a social climate still weighed down by the debate on “superprofits”, puts the church of shareholders back in the middle of the capitalist village. Christophe Bonnet, professor of finance at Grenoble Ecole de Management and former investment director at Permira, methodically dismantles the received ideas, and perennials, on the shareholders. No, the shareholder does not get rich by sleeping. It is he who bears the financial risk of the company. If the risk is not remunerated, investors will stop financing risky projects, which are often more innovative and create added value. It is said.
Does this mean that the shareholder must demand an exorbitant return of 15%? No, since he never requires it… This standard is contrary to financial theory, does not appear in any textbook and is almost never observed. Are shareholders at least eager to reap dividends, to the detriment of jobs and growth? No, since it is the profits, not the dividends, that enrich the shareholders. The profit paid in the form of a dividend in the pocket of the shareholder is as much less in the shareholders’ equity and therefore on the value of the action. But aren’t the dividends distributed to the detriment of investment and growth, in a purely short-term logic? There are of course vulture shareholders, but they are only a minority, assures Christophe Bonnet.
Research in finance shows that dividend distribution decisions and investment decisions by companies are independent. Better: the horizon of investors seems to be lengthening. In the United States, the proportion of listed shares held by shareholders who hold their shares for more than three years has increased since 1990 to reach 60%. And the share of those who record losses is significantly higher today than in the 1970s. Proof that the financial markets do not necessarily penalize companies that are not very profitable in the short term.
Where does the persistence of these clichés come from? The book gives several reasons. The experts stay away from the debate, out of reluctance, no doubt, out of discouragement, certainly. The story of profitability at 15%, which the French media love, unlike their Anglo-Saxon colleagues, is simple and attractive. Managers sometimes have an interest in giving shareholders the wrong role to limit their power. As for financial liberalisation, it has incontestably nourished the Marxist substrate, reactivated by certain ecological currents.
It’s the fault of the shareholders!
By Christophe Bonnet. PUF, 272 pages, €22.
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