By David Stolin

On March 31, 2005, Lehman Brothers chairman and CEO Dick Fuld was re-elected to the company’s board with 87.3% investor support. Four years later Mr. Fuld was ranked as “the worst CEO of all time” by Portfolio magazine, and widely described as having professional and personal qualities that contributed to Lehman’s collapse – and, due to Lehman’s position at the heart of the financial sector, to the international financial crisis.

We do not know how every Lehman shareholder voted in that election, much less the reasons for how they voted. We do know that around two-thirds of Lehman’s stock was held by other prominent financial institutions, the top ten being Citigroup, State Street, Barclays, Morgan Stanley Dean Witter, Vanguard, AXA, Fisher Investments, MFS, Mellon Bank, and Merrill Lynch. Most of these firms and their managers would be expected to have repeated dealings with Lehman and its management. As a result, we would expect these firms to be particularly well-informed about Mr. Fuld’s shortcomings and to have voiced concerns about his ongoing concentration of power.
On the other hand, the combination of Mr. Fuld’s shortcomings and his power made him a formidable enemy. He is on record as saying “I want to reach in, rip out their heart, and eat it, before they die” about his professional adversaries.

It is a stimulating thought exercise to visualize Mr. Fuld’s reaction upon learning that, say, Citigroup or Merrill Lynch had voted against his re-election to Lehman’s board. We note that at Lehman, like at the vast majority of U.S. firms, voting was not confidential. This means that Lehman’s management could find out how each of the company’s shareholders voted. And this would raise a problem for Lehman’s institutional investors: even if they disagree with the management, is it worth incurring the management’s wrath by voting against it?

Of course, it is natural for managers to be unhappy with shareholders who vote against them. But for at least three reasons, such feelings matter more when the investee company is in the financial sector.

• The first reason is the “old boys’ network”. Decision-makers at the investing firm are especially likely to be connected to their counterparts at the investee if both have finance backgrounds: they are more likely to have received the same education, to be active in the same professional organizations, to have worked at the same companies in their past careers, and to expect to do so in the future. This increases the potential for retaliation (or reciprocation) at the individual level.

• The second reason is firm-level interaction. Financial firms are more likely to have competitor or supplier/client relationships with their investors than do non-financial firms. This means that retaliation and reciprocation can be channeled through such relationships as well.

• The third reason is cross-holdings of shares. A financial firm may hold shares in its own institutional shareholder, which gives the firm another potential means of retaliating for any anti-management votes by that shareholder, namely, voting against the shareholder’s own management. Conversely, investor and investee may reciprocate by supporting each other through voting.

How can we examine if our suspicions are founded? The only group of institutions systematically required to disclose their votes is U.S. mutual funds, and accordingly we focus our study on mutual fund companies. Our empirical tests suggest that all three types of conflicts of interest listed above do matter. Social ties between the voting and target firms increase the voting firm’s support for the target’s management. In addition, voting appears to be influenced by the fear of retaliation, both in the form of being voted against in the future and of being aggressively competed against in the future. Our results suggest that there is “clubbiness” in the way fund companies vote on each other. We then go on to examine the implications of this clubbiness. We show that directors elected in fund companies with greater own-industry support, monitor senior management significantly less.

To generalize our findings, we then use aggregate voting outcomes to assess whether financial companies as a group vote more favorably when it comes to their financial sector peers and we find that this is the case as well.

In short, the financial sector’s inevitable and extensive investment in itself has a deleterious effect on its governance. What can be done about it? We believe that our work has at least two important policy implications.

First, the notion of conflicts of interest which institutional investors address in their voting policies should be explicitly defined to include not only client/supplier relationships, but also conflicts of interest through product market competition and reciprocal investments. Such recognition would help take voting out of the hands of individuals most inclined to vote in a conflicted manner, or at least constrain these individuals’ discretion.

Second, proxy voting should be required to be confidential at firms in the financial sector; i.e. investee firms should not be able to discover how different shareholders voted. This would mitigate a key reason for conflicted voting, which is potential retaliation/reciprocation by the investee’s management.

It would be naïve to think that decision-making in business can ever be rid of conflicts of interest. But in the case of proxy voting in financial firms, the problem is important enough to deserve a close look from regulators.

Méthodologie

Afin d’enquêter sur les conflits d’intérêts entre les gestionnaires d’actifs, les auteurs ont étudié la procuration de votes des fonds communs de placement sur des propositions de gestion d’actifs. L’étude couvre la période 2004-2013 et les variables explicatives étaient les fonds, la société et la relation fonds-société. Ils ont également analysé les résultats des votes rattachés. L’étude a été publié en Mars 2017 en la version papier du Management Science Journal.

By Sylvie Borau and Jean-François Bonnefon

The new mayor of London is planning to ban commercials that depict female models who are too thin or whose bodies are not realistic, but the question of how effective “natural” models are in advertising remains open. Even though an increasing number of publicity campaigns show models with fuller, more realistic figures, these remain few and far between. Why would this be the case?

While commercials for cosmetic products intended for women traditionally feature models with ideal beauty, some brands, like Dove for instance, have started to adjust their communication strategy by presenting more realistic women with fuller figures and less artificial editing of the image.

Choosing a model for a commercial: an ethical and economic issue

Presenting models, whether ideal or natural, poses two significant problems: the first is ethical and the second economic. On the one hand, idealized images of female beauty impose an unreachable standard and can have negative effects on the psychological wellbeing of women, for example in terms of body image anxiety. On the other, selecting an ideal model or a natural one also poses the question of the commercial’s economic impact.

From the perspective of the advertiser, like the creative agency, the choice of relying less on stereotypical, edited images, or even abandoning them completely, will be based mainly on commercial effectiveness criteria and probably less on issues surrounding social responsibility. As a result, it is essential to evaluate more precisely how women react to these natural models and their commercial effectiveness. While many studies have looked into the ability of an idealized model to generate anxiety, less attention has been paid to the ability of a natural model to also trigger negative emotions. However, if the reference point for female consumers is models representing ideal beauty, natural-looking models may be considered out-of-place in the media environment and thus elicit repulsion, unpleasant surprise, or even disgust.

Body anxiety and repulsion

The aim of this study was to compare the reactions of women to magazine advertisements containing either an ideal model or a natural model, both in terms of affective reactions, such as body anxiety and repulsion, and in terms of commercial impact, including their impressions of the advertisement, attitude to the brand, and interest in buying. Half of the sample subjects were shown the traditional ideal model used in commercials for cosmetic products, while the other half was presented with a natural model: a woman with a more realistic body, non-stereotypical physical traits, and no editing of the image.
By focusing more specifically on two negative emotions, anxiety regarding the appearance of one’s body and the repulsion generated by the models, we put forward two hypotheses: first, that natural models reduce body anxiety among readers, particularly those with a high body mass index (BMI), and that this has a positive effect on the commercial’s impact, and second that natural models increase the feeling of repulsion that women feel, with a negative effect on the campaign’s effectiveness.

Surprising results

Concerning the effect of exposure to different models in terms of negative emotions, it was found that the natural model did not decrease body anxiety among the women. This result could be explained by the fact that the respondents already reported a very high level of anxiety; it would be difficult for this level to be affected further by exposure to the images. However, the natural model generated repulsion, even more so among the women with high BMIs. These women who are very unsatisfied with their appearance probably project the feeling of repulsion that they feel towards their own body onto the natural model.
Concerning the effect of these negative emotions, the results showed that body anxiety increased the effectiveness of the commercial; in other words, the more a woman is anxious about her appearance, the more she will tend to like the advertisement and the brand, and the more likely she will be to want to buy the product. This positive effect of anxiety on the commercial’s impact is rather counter-intuitive, since negative emotions generally have a negative effect on advertising performance. The other result is more logical, showing that repulsion had a negative outcome on effectiveness.

Reconciling ethics and commercial impact

In short, these results are not too encouraging if we consider the divide that exists between public policies that aim to encourage the use of natural models and advertising professionals who are more concerned with the economic effectiveness of this type of strategy, and who are therefore interested in advertising with ideal models.
What would we need to do to counter this contradiction and reconcile ethical considerations with economics? If the aim is both to be effective and not generate negative emotions that may either increase effectiveness through anxiety, or decrease effectiveness through repulsion, an alternative could be to dispense with model images, whether idealized or natural. A number of brands have adopted this third approach, particularly in the area of drugstore products. This type of strategy, which is more respectful of the consumer’s wellbeing, requires the development of advertising discourse that is more informative, shifting the message from emotion more to rationale.
Further studies could help to refine these conclusions, for example by looking at categories of products other than cosmetics, by presenting other types of models, or by calling on other reactions rather than emotions, such as the credibility that the readers assign to the model and to the advertisement.

Methodology

A survey was carried out including 400 French women aged between 18 and 35 years, representative of the population of France in terms of BMI, education level, socio-professional category, and marital status. The responders were asked to look at a women’s magazine online, in which there was an advertisement for a cosmetic product illustrated either with an ideal model or a natural model. They were then asked to complete a questionnaire.

Sylvie Borau has been a professor in marketing at Toulouse Business School since 2013. Before that, she worked for 8 years in various research institutes, particularly in Canada. Her thesis, as part of her doctorate obtained from the IAE of Toulouse in 2013, led her to win the 2014 Sphinx thesis award and to be a finalist for the AFM-FNEGE prize of the French National Marketing Association and the Foundation for Management Education. Her research work focuses on consumer behavior and more specifically on physical attractiveness in advertising.

In 2016, she published an article in the International Journal of Advertising, entitled: “The advertising performance of non-ideal female models as a function of viewers’ body mass index: a moderated mediation analysis of two competing affective pathways” in collaboration with Jean-François Bonnefon, CNRS Director of Research at the Toulouse School of Economics.

By Victor Dos Santos Paulino

Any company faced with a radical innovation in its sector of activity will hesitate between indifference and reaction, because of the impossibility of foreseeing whether the innovation is a radical breakthrough or a product that is doomed to fail. To resolve this dilemma, the solution might be to identify potentially disruptive innovations and assess their risk for established stakeholders, as illustrated by the case of the satellite industry.

The miniaturisation of satellites has affected space industry markets over the last 20 years. On the offer side, new manufacturers have emerged, marketing small satellites at a lower cost; on the demand side, there are new clients that see this innovation as an opportunity. Quite logically, the well-established manufacturers, positioned in the segment of traditional large-size satellites, are wondering whether they should consider these radically new technological choices as a threat?

Disruptive innovation is difficult to observe until it’s happened

Our research, conducted in the framework of the Sirius chair (http://chaire-sirius.eu), aims to answer this question, which first involves clarifying the concept of ‘disruptive innovation’. This is necessary because the expression, which is widely used and sometimes mistakenly, makes established players in the sector anxious, while fascinating and intriguing them, without it being entirely clear what exactly we are talking about.
A disruptive innovation is a particular case of radical innovation which modifies the structure of an industrial sector and whose effects may lead to existing companies being replaced by new competitors. The difficulty is that it is only possible to be certain that it is a disruptive innovation in the long run, a posteriori, once it has staked out its place or even driven out the oldest technologies and the companies that marketed them. In the short term it appears rather to be a less efficient product or service, aimed at a marginal clientele, an immature technology proposed by small companies with limited resources, less know-how and less knowledge of the market.
Because of these characteristics, it is very difficult to distinguish between a real disruptive innovation which has just been introduced and so requires that existing companies react, and an innovation destined to fail, that they can comfortably ignore. This creates uncertainty about what they should do, which is known as the innovator’s dilemma, since existing companies should promptly assess the danger and possibly invest in the new market while the disruptive innovation is not yet a threat, if they are to limit the consequences. If they wait too long, it might be too late.

A classification for anticipating the threat

What matters to company executives is to be able to anticipate trends and thus, if possible, to be able to use forecasting tools. Since it is not possible to affirm at an early stage that an innovation is disruptive, the solution is to try and determine in the short term whether it has the typical characteristics, in other words whether it is a potentially disruptive innovation and if so what type of threat it is likely to pose to well established stakeholders.

Not all disruptive innovations have the same consequences: some lead to complete substitution of the old technology by the new one and thus pose an extreme threat, the typical case being that of silver-based, emulsion film photography wiped out by digital photography; other innovations do not entirely replace the initial products. This is the case in air transport, for which low-cost companies have captured only some of the clientele of traditional companies, and in telephony, where landline technology continues to coexist with mobile technology. These examples are characteristic of three types of disruptive innovation for which only the first is associated with a high risk of the pre-existing market disappearing. In the two other cases, the threat appears to be lower for established companies.

Small satellites, a limited threat

What then is the situation for the space industry? Given this conceptual framework, how should well established stakeholders react to the development of small satellites? According to the parameters chosen for our theoretical model, small satellites have most of the characteristics of potentially disruptive innovation: lower technological performance with respect to the requirements of the traditional main customers; they are less complex; they either cost less or on the contrary cost much more, for instance in the case of constellations of small satellites; they offer the perspective of introducing new performance criteria such as the possibility of designing, building and launching a new satellite in a very short time or again the improvements offered by constellations in low Earth orbit.

However, an analysis of the demand for these new satellites shows that they are intended mainly for new customers, which means that we can exclude the hypothesis of a disruptive innovation affecting an existing market, which is really the main risk case for manufacturers. Those who buy them can be divided into institutional customers from emerging countries, which do not have sufficient resources to launch conventional satellites, and private top-of-the-market customers with new needs for low orbit constellations, which conventional satellites do not meet.

Thus, small satellites are indeed a potentially disruptive innovation but they only pose a slight threat to well established stakeholders. Despite the structural changes they might lead to for this industry, there is not much risk that they will entirely replace conventional satellites. This in no way determines either their ultimate success or failure.

Methodology

This study was conducted by Victor dos Santos Paulino (TBS) and Gaël Le Hir (TBS) in the framework of the Sirius chair, on a topic proposed by the chair’s industrial partners. For the theoretical part, the authors reviewed the existing literature on the theory of disruptive innovation, which enabled them to draw up a table classifying the characteristics of potentially disruptive innovations. They then applied this model to the satellite industry while referring to several sources of information (information published by manufacturers, sectoral information, interviews with experts, databases). The study was published in the Journal of Innovation Economics & Management in February 2016 under the title “Industry structure and disruptive innovations: the satellite industry”.

By Servane Delanoë-Gueguen

When looking at business creation, people tend to take more interest in the project than in the entrepreneur behind it. However, starting a business has strong personal implications. Assessments of personalized support programs would be more relevant if they paid greater attention to gauging how entrepreneurs feel about their ability to see their project through to completion, particularly as regards the strategic and financial aspects.

What drives someone to want to start a company? Obviously there is the initial project, which may or may not result in the creation of a start-up, but above all there is the individual behind the project, the budding entrepreneur, who will end up transformed by the experience, whatever the result. The process is a form of apprenticeship, during which the business creator acquires new skills, develops new ways of looking at things, and builds networks. If the individuals manage to create their business, this personal transformation will provide them with valuable skills for the company’s development. If not, they will be able to draw on these newly-acquired skills to prepare an entrepreneurial project later in life, or to use their new knowledge working for someone else.

Taking greater interest in the perceived abilities rather than the number of creations

People with new business projects do not have to go through the process alone. They are even encouraged to participate in support programs, which may have a profound impact on the project as well as the person behind it. Unfortunately, when assessing such programs, this personal dimension is rarely taken into account: to evaluate their effectiveness, we tend to focus on the participants’ satisfaction with the program or the fact that they managed to create their business, but not on the effects that the programs have had on the budding entrepreneurs. Our study looked at people participating in a support program set up by Brittany Chambers of Commerce and Industry (CCI). The aim of the study was specifically to analyze this personal impact. Rather than focusing on the project leader’s actual skills, we studied their perceived entrepreneurial self-efficacy , i.e. how the individuals perceived their ability to create a business.

This perceived entrepreneurial self-efficacy – originally developed in the field of psychology – is a key determining factor in the process of creating a company, because not feeling capable can be a major obstacle. If properly evaluated, it can even foster the entrepreneur’s tenacity in the face of difficulties. However, this remains a perceived ability, which is not necessarily representative of the actual ability; indeed, certain individuals have a tendency to underestimate their abilities whereas others overestimate them. Finally, the perception can change, according to four major influences: personal experience, observation of others, verbal persuasion by third parties and emotional state.

The shock of reality

The study sought to measure the change in the perceived self-efficacy of budding entrepreneurs who took part in a support program by interviewing them at the beginning of the project, and then a year later. While we might expect participation in a personalized support program to have a positive effect on entrepreneurial self-efficacy (that is to say, the project leaders feel more capable of creating their company), the results of the study actually show an overall decrease in self-efficacy. If we look in more detail, the only positive impact was on entrepreneurial administrative self-efficacy – concerning the planning of the project and formalities – whereas perceptions related to strategy and finance tended to deteriorate.

These results can be explained by what we could term a “reality check”. At the start of the process, many budding entrepreneurs think that the administrative side is highly complex and focus on this aspect; then they realize that this is not actually the most complicated aspect, particularly since a number of measures have simplified business-start-up procedures over recent years. At the same time, they start to realize how difficult it is to find customers and funding, that there are competitors in the market, and that they never have enough time to do everything. All these aspects are often under-estimated when they build their project.
However surprising it may be, this result shows the value of having an objective assessment of start-up support programs, by focusing on the personal impacts: the aim of support programs is to help people with start-up projects set up viable businesses and understand the realities of the market, not to simply ensure that the majority of the individuals actually start their businesses. With this in mind, it is not necessarily a bad thing for prospective business creators to feel less capable at the end of the process than at the beginning. Participants who ultimately decide not to start their business, after appreciating the importance of having a customer base and a network, have the opportunity to ask themselves the right questions, to readjust their perceived ability, and sometimes realize they are simply not made to be entrepreneurs. They will be better equipped for the next project, or at least thy will have more realistic perceptions.

A practical tool for improving programs

This evaluation method is a valuable tool for improving support programs, with practical uses that can be taken advantage of almost immediately. For example, it may be interesting to adopt a differentiated approach depending on whether the people at the start of the program underestimate or overestimate their ability to create a company, in order to help them reach a more realistic self-perception. In relation to the case analyzed in this study, the support programs could focus more on strategic issues and funding.
These results are a step towards achieving an objective assessment of support mechanisms for budding entrepreneurs. Now, it would be useful to fine-tune the results with a more representative sample group of budding entrepreneurs and extend the research to different types of support initiatives.

Servane Delanoë-Gueguen is a research professor in entrepreneurship and business strategy in Toulouse Business School. She is responsible for the TBSeeds incubator and is joint Head of the “entrepreneur” vocational option. She has a PhD in emerging entrepreneurship from the Open University (UK). Her research focuses on budding entrepreneurs, entrepreneurial ecosystems, business-creation support programs, entrepreneurial desire and business incubation. This publication is a summary of the article “Aide à la création d’entreprise et auto-efficacité entrepreneuriale” (Support for business creation and entrepreneurial self-efficacy”) published in 2015 in theRevue de l’entrepreneuriat.

Methodology

Within the framework of her research, Servane Delanoë-Gueguen conducted a longitudinal study. Based on a literature review, she developed a theoretical model with 3 research hypotheses concerning the evolution of entrepreneurial self-efficacy over the course of one year concerning individuals with business start-up projects involved in a support program, who had ultimately created their business or not, with gender differentiation. The model was then tested with a group of budding entrepreneurs. In the first year, a total of 506 people answered a questionnaire to assess their perception of their entrepreneurial abilities. The following year, she managed to re-contact 394 of the people concerned, of whom 325 had a genuine start-up project in progress. Out of this group, 193 people answered the questionnaire again.

By Kévin Carillo

The rapid development of collaborative communication technology as an alternative to e-mails provides companies with a possibility of fundamental transformation but will require supporting measures to usher in a genuine culture of knowledge sharing.

The upsurge in businesses of collaborative communication technology from web 2.0 has been both rapid and widespread. Internal social networks, video-conferences, blogs, micro-blogs, wikis, document sharing—the number of those adopting these linked tools never ceases to increase, in the hope of improving productivity and performance; tools that open up vistas of profound change within their companies and in the working habits of their staff. Little by little the traditional ‘silo’ model whereby the various departments, roles and hierarchies are compartmentalized in a kind of internal competition, is being replaced by the new and more open Enterprise 2.0 model based on increased staff collaboration that breaks down this rigid structure and on sharing information through a kind of forum which itself creates knowledge.

Alongside this organizational revolution, collaborative tools may also be an efficient solution to the increasing problem of e-mail proliferation. E-mails were revolutionary when they first appeared and were unanimously adopted in the workplace but they are now a victim of their own success to the point where their overuse becomes a serious obstacle to productivity: staff members get scores of emails each day, spend hours reading them, don’t open all of them, lose them and their in-boxes get filled up. Finally, communication is hindered and collaboration handicapped. Certain types of interaction currently done by e-mail would be much more efficient with collaborative communication techniques and this is certainly the case, for example, for conversations, sharing of expertise or brainstorming within a group or community.

This said, cooperation and knowledge sharing cannot simply be imposed by decree. Although it is extremely important to give staff access to alternative tools and systems, it is equally important to ensure they adopt them in a productive way. More so in that they are disruptive technologies that radically modify work habits and ways of relating.

The essential role of habit

Our research has focussed precisely on determining just how far the habitual use of collaborative tools—their day-to-day and automatic, routine use—influences the inclination of staff to share their knowledge when they no longer have access to e-mail. The theoretical model we developed identified three perceived advantages to using collaborative communication systems: the relative advantage they offer (it’s useful for my job), compatibility (it corresponds to my needs, the tasks I have to accomplish at work and to the nature of my job) and ease of use. We hypothesize that these advantages have a direct effect on user habits and on knowledge sharing. We also postulate that user habit has a catalyzing effect on each of the perceived advantages in relation to knowledge sharing.

To measure the validity of these hypotheses, we undertook a field study in an information technology (IT) services and consulting firm and obtained the following results: if users see an advantage in using collaborative tools they are more likely to make a habit of it and to share knowledge; likewise user friendliness also leads to habit-forming. On the other hand, we were unable to establish a direct link between user friendliness and knowledge sharing. Nor was the study able to establish the immediate effect of compatibility on knowledge-sharing habits. Concerning the central focus of the study, the part played by habit, the results show that it is extremely important in that it strengthens the impact of the relative advantage and of compatibility on skill sharing.

Technological evolution and the human factor

The study confirms that access to these technologies, no matter how efficient they are, is not enough to change behavior. Their use must become a habit. The more at ease staff are with collaborative tools, the more naturally they will share knowledge and the more easily they will adopt the codes and methods of Enterprise 2.0.

Consequently, what management has to do is to encourage these habits, and the study shows that there are two important arguments that can help bring this about: lead staff to understand that using a collaborative system is not only extremely useful but also easy. This implies introducing a number of measures, some of which are very simple: communication, incentives, games and competitions, sharing the experiences of advanced users, targeted pedagogical programs, and so on.

At the end of the day, this study underlines the classic problem when studying information systems: the importance of the human factor. Simply deploying a collaborative system is not suficient for an enterprise to become 2.0. A collaborative culture must created before the tools are implemented.

Kévin Carillo and the article “Email-free collaboration: An exploratory study on the formation of new work habits among knowledge workers”, Jean-Charles Pillet et Kévin Carillo, International Journal of Information Management, Novembre 2015.

Methodology

In their research, Jean-Charles Pillet and Kévin Carillo carried out a quantitative case study. Starting with a review of the research literature at the time they constructed a theoretical model based on the idea that ingrained habits diminish the relationship between the perceived advantage of using a collaborative system and the ability of staff to share knowledge. To measure the validity of the 9 hypotheses they drew up a questionnaire with 21 items, each one having a 5-point response scale from “totally disagree” to “fully agree”. The study was carried out in August 2014 in an IT services and consulting firm with a workforce of more than 80,000 people spread over forty-odd countries. Several years beforehand, its executives had launched a global policy of dropping e-mails in favor of a collaborative system comprising three main tools: videoconferencing, an internal social network and a system for document sharing. The study focused on a single particular department in the company, the one responsible for handling the suspension of client IT services as soon as possible. Sixty-six valid responses (55%) were collected from 120 people divided into 5 teams in France and in Poland and an analysis of these confirmed some of the hypotheses made.

By Gilles Lafforgue 

Climate change issues are increasingly the focus of international negotiations these days. Could carbon capture and storage (CCS) be a more promising solution for reducing emissions without reducing the consumption of fossil fuels?

Today fossil fuels account for almost 80% of the world consumption of primary energy, since their relatively low cost makes them more competitive than renewable forms such as that solar, wind or biomass energy. Their massive use alone contributes 65% of the greenhouse gases, mainly CO₂, which accumulate in the atmosphere and contribute to global warming.

Is CO₂ capture and storage a viable alternative?

In the expectation of a transition to a more sustainable energy strategy, Carbon Capture and Storage (CCS) appears to be a viable medium-term alternative for limiting emissions without restricting the consumption of fossil fuels. Developed during the 1970s to improve extraction efficiency from oil wells, CCS involves capturing carbon emissions at source before their release into the atmosphere, then injecting them into natural reservoirs (e.g. saline aquifers, geological formations containing brine unfit for consumption), into former mines or even back into hydrocarbon deposits (still being exploited or else exhausted). CCS would appear to be effective since it can remove 80 to 90% of emissions from gas or coal power stations.

The cost of using such a process remains to be determined. Implementation of CCS becomes cost-effective if the rate of carbon taxationreaches between 30 to 45 dollars/metric ton for coal-fired thermal power stations and 60-65 dollars/metric ton for gas-fired power stations (given that this price ought to fall as a consequence of technological change). However, CCS can only be implemented at a reasonable cost for those sectors that produce the greatest volume and the most concentrated emissions: heavy industries such as cement or steel works, or conventional electrical power stations (coal especially). This technology is, however, inappropriate for diffuse waste gases of low concentration such as are emitted by transport or agriculture.

What strategy must therefore be adopted to optimize the sequestration of CO₂?

CCS deployment strategies

To answer this question, and to determine a meaningful association between the exploitation of fossil resources and CO₂ sequestration, we have developed a dynamic model. This model enables the optimum pace of CCS deployment to be defined, and takes three essential parameters into account: the availability of fossil resources, the accumulation of carbon in the atmosphere (and its partial absorption by the biosphere and oceans), and the limited capacity of storage sites. Using the model we show that the optimal sequestration of the greatest possible percentage of CO₂ released by industrial activity occurs when the CCS process starts. CO₂ sequestration then gradually falls until the site is completely filled. Note that as long as the CO₂ can be sequestered, consumption of fossil fuels remains strong. Consumption slows down once the reservoir has become saturated and all the CO₂ released has been subject to payment of the carbon tax. This is where renewable energies come in.

In another research project we sought to determine the optimum policies for capturing CO₂ emissions by comparing two sectors. Sector 1with heavy industries such as steel and cement works, or conventional thermal power stations with concentrated emissions, has access to CCS and can therefore reduce its emissions at a reasonable cost. Sector 2, the transport sector for example, whose emissions are more diffuse, only has access to a more costly CO₂ capture technology (e.g. atmospheric capture, a technique which involves recovering the CO₂ from the atmosphere using a chemical process to isolate the polluting molecules). Considering these two “heterogeneous” sectors, we have been able to show that the optimal strategy is to start by capturing the emissions from Sector 1 before the permissible pollution ceiling is reached. The capture of emissions from Sector 2 starts once the pollution ceiling has been reached, and is only partial. As far as carbon tax is concerned, our research shows that this has to increase during the pre-ceiling phase. Once the ceiling has been reached, the tax must fall in stages to zero.

Carbon tax: the optimal cost for CCS competitiveness

It seems clear in a market economy that the only way to persuade industry to capture and store CO₂ is to put a price on carbon, by taxing it, for example. Reasoning in terms of “cost-effectiveness”, industrial firms will compare the cost of sequestering a metric ton of carbon with the amount of tax they would need to pay if that same metric ton were released into the atmosphere. This tax must be unique and applied to all sectors, regardless of their number and nature. What level of tax would guarantee that CCS would be competitive and thus ensure its development? According to the IPCC (Intergovernmental Panel on Climate Change), if we are to limit the global temperature rise to 2°C then atmospheric pollution ceiling must not exceed 450 ppm (parts per million). This equates to a carbon tax of around 40 dollars/metric ton of CO₂ in 2015, reaching 190 dollars/metric ton of CO₂ in 2055 (the date at which the threshold is reached) which would widely stimulate the development of CCS.

However, it is essential to note that carbon capture is merely a transient solution for relieving the atmosphere of carbon emissions, while continuing to benefit from energy that is relatively cheap compared with renewable energy sources. Between now and 2030 policies should implement strategies for implementing a sustainable transition to sources of clean energy.

^[1] Primary energy: energy available in nature before any transformation (natural gas, oil, etc.)

^[2] Carbon tax: officially known in France as the Contribution Climat Energie [Climate Energy Contribution] (CCE), the carbon tax is added to the sale price of products or services depending on the amount of greenhouse gases (e.g. CO₂) emitted during their use. This came into being in January 2015 and has risen to 7 euros/metric ton of carbon. This recommended ceiling in the concentration of atmospheric CO₂ was established with the objective of limiting the rise in temperature to some desired value (e.g. the infamous +2°C).

Gilles Lafforgue, and articles “Lutte contre le réchauffement climatique : quelle stratégie de séquestration du CO2?” (Combating global warming: what CO2 sequestration strategy?) published in Tbsearch magazine, “Optimal Carbon Capture and Storage Policies” (2013), published in Environmental Modelling and Assessment, co-authored by Alain Ayong le Kama (EconomiX, Université Paris Ouest, Nanterre), Mouez Fodha (Paris School of Economics) and Gilles Lafforgue, and “Optimal Timing of CCS Policies with Heterogeneous Energy Consumption Sectors” (2014), published in Environmental and Resource Economics, co-authored by Jean‐Pierre Amigues (TSE), Gilles Lafforgue and Michel Moreaux (TSE).

Practical applications

The macroeconomic models that have been developed provide insight into how CO2 sequestration can be implemented so as to make an effective contribution to global warming while maximizing the advantages of exploiting fossil fuels. Expressed as a rate of CO₂ emissions to be reduced, the theoretical results cast a pragmatic light, enabling governments to encourage industrialists to sequester CO₂ rather than pay the carbon tax.

Methodology

In the first study, a dynamic model was developed for the optimum management of energy resources, taking account of interactions between the economy and the climate. Carbon was assigned a value that penalized economic activity directly.
For the second model we adopted a “cost-effectiveness” approach. Assuming a maximum threshold of emissions which cannot be exceeded (from the Kyoto protocol), the scale at which CCS had to be deployed was determined and we then ascribed a financial value to carbon.

By Gregory Voss

How likely is it that the reforms launched in 2012 by the European Union (EU), with the aim of ensuring a high level of personal data protection for the citizens of its 28 member states, will become applicable in 2017? It is possible, but the European Parliament, the Council of Ministers and the European Commission have yet to reach an agreement: informal three-way discussions are taking place.

Since June 2015, these three EU institutions have been jointly drafting a text for the General Data Protection Regulation (GDPR). There are still a few points on which the parliament and the council disagree, in particular with regard to obtaining an individual’s consent for the processing of personal data, the rights and responsibilities of those collecting data, and the amounts of fines for non-compliance.

A commission proposal for new legislation on personal data protection was made back in 2012. But the draft regulation, passed by the parliament on March 12, 2014, is now awaiting validation by the Council. These reforms will help protect European citizens and their personal data even with respect to international companies whose headquarters are outside the EU, but who nevertheless process data online. While the degree of personal data protection in Europe is generally quite high, the financial penalties are too low, in contrast to those enforced in the United States.

When the three EU bodies have agreed on the final draft text, it can then be adopted only after two consecutive readings of the same text by the parliament, whose members are directly elected by EU citizens and after approval by the council, which represents the governments of the 28 member states. Once adopted (most likely in 2016, though some were pushing for adoption at the end of 2015), the regulation will become applicable in the two years that follow.

This GDPR will harmonize European law and may deliver an additional benefit by triggering a broader process that leads to the standardization of international legislation on protection of personal data. Moreover, the reduction of the administrative burden arising from this single piece of legislation will enable savings of €2.3 billion per year, according to the Commission’s calculations.

The process may seem to be taking a long time, but it has to be borne in mind that it took five years to finalize the 1995 European directive on personal data protection. The GDPR is essentially at the three and a half-year mark, so there is still time for this.

The GDPR has been subject to intense lobbying efforts by the representatives of those who process data. While they may slow down the legislative process, these actors can play a legitimate role in informing legislators about the practical realities faced by the companies who collect data.

Following the Snowden revelations, efforts to reform the legislation have experienced numerous upheavals. In June 2013, Edward Snowden, a former CIA consultant and a member of the National Security Agency (NSA), revealed that the US government had collected personal data concerning individuals living outside the US from nine of the biggest American technology companies, particularly as part of an electronic monitoring program known as PRISM. On October 21, 2013, the European Parliament proposed a text in which it was stipulated that the company responsible for data processing, or its subcontractor, would have to inform the data subject about any communication of their personal data to the public authorities in the previous twelve months. This provision is clearly influenced by the PRISM case.

In general, revelations such as this one, relating to data protection, help stimulate the debate about privacy in Europe, even if they have weakened trust between the EU and the United States. On October 6, 2015, as a result of the transfer of data on an Austrian citizen to the United States, by the European subsidiary of Facebook, the Court of Justice of the European Union (CJEU) ruled against the validity of the Safe Harbor Privacy Principles, which had been used to justify the transfer and which stipulate that in the event of threats to US security, a clause allows the US authorities to access the personal data of European citizens. The CJEU’s decision, in turn, followed the conclusions of the Advocate General, , and invalidated the Safe Harbor, which according to Vossm “is a problem for more than 4,000 US and European companies that depend on the Safe Harbour Privacy Principles for the transfer of personal data to the United States.” It remains to be seen what actions the institutions and European and US companies will take following this decision.

On the other hand, even in the absence of a GDPR, the Google Privacy Policy case shows that EU member states have the tools to oblige the operator of a search engine to respect privacy and personal data protection laws. In this vein, a number of cases have led to the data protection authorities in Germany, Spain, France, Italy, the Netherlands and the United Kingdom imposing penalties on Google, including fines amounting to hundreds of thousands of euros. While the size of these fines is relatively small compared with Google’s annual turnover (€59 billion in 2014), they are examples of the more severe enforcement actions, based on the turnover of the companies sanctioned, which are foreseen in the European legislative proposals.

In France, the Commission Nationale de l’Informatique et des Libertés (CNIL – the French data protection authority) disagrees with Google about de-listing following the Google Spain decision by the CJEU. Since the court recognized this right in 2014, any person may request that the operator of a search engine erase the search results that appear in relation to their name. As a result, Google has received tens of thousands of requests from French citizens. It then proceeded to de-list results on its European search engine domains (.fr, .es, .co.uk, etc.). But it did not extend the de-listing to other geographic domains or to google.com, which any user can search. In May 2015, the CNIL requested that Google proceed with de-listing from all its geographic domains. Google, however, argues that this decision constitutes an infringement of the public’s right to information and is, therefore, a form of censorship. A CNIL rapporteur (the official who manages the case) will no doubt be appointed to resolve this issue.

While the EU is working hard to hammer out a jointly-agreed regulation on protection of personal data, its member states, such as France, continue to strengthen their legislative arsenals. On September 26, 2015, the government presented a draft document on the subject of a “digital republic”, comprising some thirty articles on the confidentiality of electronic correspondence, portability of files and open access to public data, for public consultation. Public consultation on the development of this document is an interesting approach, the effects of which deserve to be monitored.

This article, written by Gregory Voss, along with the articles “European Union Data Privacy Law Developments”, published in The Business Lawyer (Volume 70, Number 1, Winter 2014-2015); “Looking at European Union Data Protection Law Reform Through a Different Prism: the Proposed EU General Data Protection Regulation Two Years Later”, published in Journal of Internet Law (Volume 17, Number 9, March 2014); and “Privacy, E-Commerce and Data Security”, published in “The Year in Review”, an annual publication of ABA/ Section of International Law (Spring 2014), co-authored with Katherine Woodock, Don Corbet, Chris Bollard, Jennifer L. Mozwecz, and João Luis Traça.

Practical applications

The effect of GDPR on businesses will depend on the final text adopted by the EU. It is a certainty that greater accountability will be imposed on companies that manage personal data. Some companies will probably have to create new data protection officer posts (DPO) defined on a similar model to the “correspondant informatique et libertés” (CIL) in France. Companies specializing in conducting privacy impact assessments will also emerge. The author, therefore, advises business leaders to closely monitor developments in legislation protecting personal data, in order to be able to comply with new legislation as soon as it comes into force. He proposes raising the awareness of employees through training on data protection. Finally, companies will have to implement adequate procedures to comply with the legislation on personal data protection, including those that enable the data breach notifications that will be required by the GDPR.

Methodology

To produce these articles about data-protection legislation, the author has analysed many legal documents and “hundreds of pages of proposals, amendments and opinions”, especially those resulting from the work carried out by WP29, the independent EU working group on the handling of personal data. In his articles, he puts the proposals of European authorities to adopt a GDPR into perspective and offers practical advice for businesses. He has also examined the changes in opinion of various European bodies, the European Commission, Parliament and Council, and has studied the reactions of legislators to Edward Snowden’s revelations on electronic surveillance.

By Alain Klarsfeld

Between 2010 and 2012, three key Acts were promulgated, requiring businesses and administrations to make significant progress in terms of gender equality. The Act of 2011 focused particularly on gender balance on the administrative and supervisory boards of companies and public administrations. Here is an overview of the impact of this Act by the research professor Alain Klarsfeld.

Professional equality and the fight against discrimination: a mixed record for overall progress

Despite the laws and affirmative action in favor of employment equality and the fight against discrimination, only minor advances have been made in many areas. Companies have certainly gotten close to the legal quota of 6% required concerning employment for the disabled, whereas the proportion was barely 4% ten years ago, but this is still far from satisfactory. Regarding older workers, companies have also made real efforts to prolong their employment (+8% in 7 years), with a rate of 44.5% for 55-64 year-olds at the end of 2012, after a long period of stagnation during the 2000s. Among other positive developments, we should mention the creation in 2011 of an ombudsman (Défenseur des Droits), who joined the French High Authority for the Fight Against Discrimination and for Equality (HALDE) and whose role is to further the fight against discrimination by ensuring that access to one’s legal rights, now simplified and streamlined, is more effective.
However, the employment situation of young people remains a concern, and has not significantly improved. As an example, a young graduate with five years of higher education can take, on average, a year to find a first position, despite the legislative incentive known as the ” Contract between Generations*”. Similarly, the employment rate of people from immigration populations, whether first or second generation, has changed very little.

Unprecedented progress

There is nonetheless a silver lining to this rather gloomy picture: the entry of women into the governing bodies of companies and institutions: the supervisory boards. It all started with an Act of 2011 concerning the balanced representation of women and men on supervisory boards and also to professional equality, which provided for the progressive introduction of quotas as a step towards the feminization of the governing bodies of large companies. The goal was to reach 40% of women by 2017, made mandatory with financial and non-financial penalties in the event of non-compliance. This is a real cultural shift that has opened the way for women to play a major role.

The issue of quotas

Quota-based policies are not universally approved. In fact, they are frequently contested. Their implementation may even be counter-productive, as evidenced by the tensions around ethnic or caste quotas in India or Malaysia. There were no such quotas before 2008, when they were introduced by Norway, since followed by 11 other countries, but they have had an encouraging effect in favoring equality on supervisory boards. It might have been supposed that the women in these positions would be seen as lacking legitimacy. However, studies show that the operation and work of boards of directors are improved. Women who are genuinely recruited for their skills appear to be less conformist, ask more questions and make these bodies more dynamic.

This legal obligation has also had the effect of putting a stop to a damaging system of cooptation. The boards of directors tended to exist in isolation, coopting new members from among their acquaintances. The imposition of quotas has opened new horizons regarding professional recruitment processes, by head-hunters for example, who are now compiling databases of highly qualified women and offering them to apply to these positions. In the future, it would be a good idea to verify that the creation of directories of qualified people has led to the recruitment of more professional administrators overall, and not necessarily just women.

Positive trickle-down effect

Thanks to this Act, which imposes a “positive obligation”, offers have emerged for training as administrators, helping to make the role genuinely professional. In the years to come, it will be necessary to verify that the presence of women on boards of directors supports or provides leverage for parity in corporate executive positions, and that no further legislation is necessary to achieve parity. Already, outside the scope of the Act, major groups, including companies listed on the French CAC 40, have set themselves goals for the recruitment of female managers and top executives. This is less of a blunt instrument than an obligation to comply with quotas, but it will again be necessary to verify that its potential trickle-down effect in companies, at every hierarchical level, produces real progress.

* A scheme introduced in 2013 to help private companies create jobs, including permanent employment contracts for young people.

From an interview with Alain Klarsfeld and the chapter “Equality and Diversity in years of crisis in France”, co-authored with Anne-Françoise Bender and Jacqueline Laufer, published in the book “International Handbook on Diversity Management at Work – Country Perspectives on Diversity and Equal Treatment (second edition)”, May 2014.

Definition

Professional equality: This means the same rights and opportunities for both men and women, in particular as regards access to employment, working conditions, training, qualifications, mobility, promotion, work-life flexibility and remuneration (equal pay).

Methodology

The chapter “Equality and diversity in years of crisis in France”, published in 2014, provides an up-to-date overview of developments in France concerning professional equality and diversity since the first edition of the book “International Handbook on Diversity Management at work – Country Perspectives on Diversity and Equal Treatment” was published in 2010. The book is the result of an analysis of changes to the European and French legislative framework and of the various reports and publications on the subject, as well as of paying attention to and monitoring the work of think-tanks, associations and businesses that deal with the fight against discrimination and the importance of diversity, in and outside of Europe.

By Gaël Gueguen

Basing itself on results for Tour de France cyclists, this study shows that cultural differences between team members have no effect on performance, an observation which may also be valid, under certain conditions, for the workplace, where of the issue of diversity remains a subject of ongoing debate.

To what extent can one transpose certain well-known management concepts (such as team work, strategy, rivalry, etc.) to a sport, e. g. cycling, so as to better understand how it works, and, by extension, further our understanding of company life? A first attempt to answer that has been made in a study by Gaël Gueguen (assessed particularly in relation to the number of nationalities involved), that questions whether the cultural diversity of teams taking part in the Tour de France has an impact on their results.

Diversity as a risk for team unity

High level sport necessarily draws on the best resources, whether human or material. A high level team will seek out the best possible athletes for a given budget and thus attempt to recruit in the world market. In the case of the Tour de France, where the internationalization of teams has intensified in recent years, there was a notable reduction in the number of exclusively national teams entered by traditional ‘cycling’ countries such as France, Italy, Spain, Belgium and the Netherlands between 1987 et 2009, and a corresponding upswing in the number of teams comprising five and more different nationalities. This trend is continuing: in 2015 for the first time, a South African team included two Eritreans. This globalization of professional sport, however, is not without risk: cultural diversity can lead to coordination problems (problems of mutual understanding, for example, when different languages are spoken within a team) and have a negative effect on racers’ team spirit (differences in values or attitudes). This question is all the more crucial in cycling, a discipline where the vital need for sponsors and the international nature of competitions sometimes requires that foreign sportsmen be recruited simply because their countries are targeted by the sponsoring brands.

Cultural diversity has no negative impact on performance in cycling

Should we take care to only include sportsmen of similar cultures in high level teams, or can we drop the idea? Wouldn’t a group focused on a specific task requiring rare complementary resources and coordination in competitive situations (exceptional climbers, sprinters, ace cyclists, highly versatile leaders and so on) be weakened by too wide a diversity among its members? It would appear not. Cultural diversity has no impact on sports results. Cycling team coaches can select a cyclist for his worth regardless of nationality without worrying about strong cultural differences. A possible explanation for this is that the professionalism of cyclists and their managers compensates for any coordination problems. . Indeed, since everyone’s efforts are supervised and synchronized by a chief coach, the roles of all team members are clearly defined, and regular training also helps transform each cyclist’s tasks into a perfectly mastered routine.

From cycling to the world of business in a single step

A company is rarely made up of homogeneous human resources as regards gender, age, experience, nationality, salary, etc. Do such significant differences increase the performance of work teams or not? Analysis of studies on diversity in the workplace show contradictory results. Diversity of team members can in some cases, for example, increase creativity and improve decision-making (since the clash of different opinions can spark good ideas). In others, however, it can negatively affect unity, trust and communication with a corresponding increase in tension and conflict. Can the observation that diversity and performance in cycling appear not to be related, help us to better understand what is happening in the corporate context? No doubt, but only under certain conditions. The Tour de France competition is somewhat particular which makes it hard to generalize, firstly in that members of professional cycling teams are extremely specialized, and then that, in this most important cycling event, teams of only the nine best riders among the thirty-odd under contract compete with each other and not the entire group (which would, however, be the case for a company).

Nonetheless, the methodology used can easily be transposed for a study of the impact of cultural diversity in teams of top managers on the performance of multinationals. This is of interest now that more and more firms are diversifying their executive boards as they expand internationally. In a multinational company such as L’Oréal, for example, the recruitment of managers from different countries is considered to be the principal factor behind successful product-launches in emerging countries. To limit a ‘Tower of Babel syndrome’*, multicultural teams are organized around a leader who, through experience in a variety of countries, knows how to handle inter-cultural tensions.**

* Coordination difficulties arising from different languages spoken within a team.
** “L’Oréal Masters Multiculturalism” de Hae-Jung Hong et Yves Doz (Harvard Business Review, juin 2013).

References

The article “Diversité culturelle et performance des équipes sportives de haut niveau : le cas du Tour de France”, by Gaël Gueguen (Management International, 2011).

Practical applications

Although cycling is a somewhat particular activity, especially given that all its participants are highly specialized, the results of this research may be applied to the workplace provided that certain conditions are met. In groups comprising team members with clearly defined roles and specific tasks it may be stated that neither cultural diversity nor other differences such as gender, origin, age or education have a negative impact on collective performance. As with cycling, a specific team culture that transcends cultural boundaries may well arise.

Methodology

I analyzed the results of 487 teams (4,375 racers) taking part in 23 Tours de France between 1987 and 2009 in order to determine whether cultural diversity harms performance. The study was based on several factors which allowed me to determine the cultural heterogeneity of the teams (based, primarily, on the number of countries represented). The aim was to compare the performance of teams of cyclists (their results) with the level of cultural diversity via a linear regression analysis intended to measure the strength of the relationship between a series of independent variables and one requiring explanation.