Monday, March 11, 2013

Where is John Galt going?

Top executives join France exodus

New evidence of top French executives leaving the country has emerged as President François Hollande battles a stalling economy and tumbling approval ratings.
Two senior executives at Moët Hennessy, the champagne and cognac arm of the LVMH luxury group, are moving to London from Paris and the head of Dassault Systèmes, the software arm of Dassault Aviation, said some senior managers of his company had left and he was considering following suit.

LVMH, headed and controlled by Bernard Arnault – Europe’s richest man – told the Financial Times that the moves by Gilles Hennessy, an LVMH director who is also executive vice-president of commercial at Moët Hennessy, and Christophe Navarre, chief executive of Moët Hennessy and a member of LVMH’s executive committee, were not because of tax reasons.
But Bernard Charlès, chief executive of Dassault Systèmes, was sharply critical of the high tax policies of Mr Hollande’s Socialist government, telling Le Monde newspaper in an interview: “Residing in France has become a big handicap. Very largely, our hiring of top managers will have to be done elsewhere than in France.”
The news follows Mr Arnault’s own application for Belgian citizenship, leaked last September, which poured fuel on a fiery debate in France about entrepreneurship, patriotism and high taxes.
Figures released on Monday showing a worse-than-expected 1.2 per cent fall in industrial production in January over December underlined the grim outlook facing Mr Hollande, whose approval ratings have fallen this month to as low as 30 per cent.
The economy went into reverse in the last quarter of 2012, unemployment has hit 10 per cent of the workforce and the government is battling to formulate painful spending cuts as it seeks to contain a budget deficit overshoot this year.
The government is looking to industry to help relaunch the economy. But Mr Charlès said the tax regime had put “all the digital sector in danger”. He criticised increases in taxes on capital, stock options and share awards, saying that in a €28m disposal of shares he made in December he had to sell “more shares than I had acquired” to pay a tax bill on some maturing stock.
He said he was considering “in all its aspects” a proposal by his chairman for him to leave the country. Asked if some of the company’s other leaders had already left, he replied: “Yes.”
The government has denied claims of a tax exodus and denounced as “French bashing” criticism such as the declaration last month by Maurice Taylor, head of tyremaker Titan International, that he would be “stupid” to buy a French factory.
But its moves to improve competitiveness by cutting high employment costs and easing labour regulation have only partially blunted criticism of big tax increases.
LVMH said Mr Navarre, a Belgian national whose family base is in London, “pays, and will continue to pay, his taxes in France, where he has has a residence – as he does in London and Miami”.
A company spokesman disclosed that 63-year old Mr Hennessy – a descendant of Richard Hennessy, who founded the cognac house in 1765 - plans to retire from Moët Hennessy management later this year.
One person familiar with the matter said other members of the executive board were moving to Singapore and Switzerland.
Mr Hennessy did not return a call for comment.
LVMH said there was no question of shifting the corporate centre: “The executive committee and the headquarters of Moët Hennessy are, and will remain, based in Paris.”
Mr Arnault has said he will remain fiscally domiciled in France and seeks dual nationality for business reasons but has made no secret in private of what he regards as an anti-entrepreneurial climate in France.

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