4.6.3 Shareholders’ meetings
Shareholders’ meetings at Rhône-Poulenc were called according to the French
law, as well as those of Aventis. Hoechst’s general meetings were called accord-
ing to the German law.
Holders of Rhône-Poulenc shares had to deposit their shares at least 5 days
prior to the general meeting to have the right to attend. Hoechst shareholders
had to deposit their shares no later than the end of the seventh day before the
meeting. Aventis has the same restrictions with Rhône-Poulenc but reduces the
term to 2 days before the meeting.
At Rhône-Poulenc, notice of the general meetings had to be published in the
French Bulletin des Annonces Légales Obligatories (BALO) and had to comply
with all the information required in the French law. The case of Hoechst was sim-
ilar but complying with German law. Aventis’ notices are more like those of Rhône-
Poulenc, but they introduce new technological ways of communicating meetings,
such as e-mail and any other telecommunication tools recently developed.
All three corporations allow proxies. Rhône-Poulenc allows also mail voting,
and Aventis introduces videoconference and telecommunication tools as means
to vote. The general rule is that each share carries one vote, but Rhône-Poulenc
and Hoechst had special multiple voting rights depending on the year in which
the shares were acquired. Aventis does not have any of multiple voting rights.
All resolutions at general meetings are passed by the simple majority rule at
Rhône-Poulenc, Hoechst, and Aventis.
Table 4.9 summarizes the requirements and procedures of the shareholder
meetings in Rhône-Poulenc, Hoechst, and Aventis. Although there are minor
differences between Rhône-Poulenc and Hoechst prior to the merger, we can
conclude that the resulting requirements at Aventis are even more stringent than
in the founding companies.
4.7 Conclusion
Extensive academic research has documented a strong association between
good investor protection and measures of financial development. In the area of
cross-border mergers, Bris and Cabolis (2004) present evidence that sharehold-
ers of a company that is acquired by a firm operating in a more protective
corporate governance environment realize substantial gains. The use of large
samples of cross-border mergers necessarily abstracts from issues of private
contracting between merging parties. Nevertheless, the design of the corporate
governance framework that the new merged entity adopts is of crucial
importance, and it is addressed in this chapter.
We explore in detail the corporate governance provisions in Rhône-Poulenc,
a French company, and Hoechst, a German firm, and the resulting structure
after the two firms merged in 1999 to create Aventis, legally a French corpora-
tion. We show that, despite the nationality of the firm, the corporate governance
96 Corporate Governance and Regulatory Impact on Mergers and Acquisitions
Corporate governance convergence through cross-border mergers: the case of Aventis 97
Table 4.9 Shareholder meetings
The table shows the shareholder meetings for the two merging companies and the resulting Aventis. We determine the most protective
system between the two merging companies. The last column compares the most protective system with the resulting characteristic in
Rhône-Poulenc Hoechst Most protective Aventis Is Aventis the most
protective system?
Deposit of shares Within 5 days before Within 7 days Within 3 days
meeting before meeting before meeting
Notice of Published in BALO Published in official Published in Published in
meetings (Bulletin des Annonces bulletin official bulletin BALO (Bulletin
Légales Obligatories) des Annonces
Légales Obligatories)
Proxy voting YES YES YES YES. Videoconference
and telecomm-
unication tools
are allowed
One-share, YES YES. Multiple YES YES
one-vote rule voting rights
depending on the
year of acquisition
of shares
Majority rule Simple majority Simple majority Simple majority Simple majority
(Source: Companies’ Bylaws, Annual Reports, and SEC Filings)
98 Corporate Governance and Regulatory Impact on Mergers and Acquisitions
Table 4.9 (Continued)
Rhône-poulenc Hoechst Most protective Aventis Is Aventis the most
protective system?
Unitary system Two-tier Two-tier Two-tier Two-tier
Members 12–18 members 20 members 12–18 members 16 members
Employees on 3 (16–25%) 10 (50%) 3 (16–25%) 4 (25%)
the board Individuals and
who can be a corporations Only individuals Only individuals Only individuals
member of the
Ownership limits At least 10 shares No limit At least 10 shares At least 1 share
to become a
member of the
Term 6 years 5 years 5 years 5 years
Age limit At most, 65 years old No restriction At most, 65 At most, 1/3 of
years old members 75
years or older
Frequency of As often as necessary At least once every As often as Once every quarter
meetings 6 weeks necessary

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