Saying No to Profits

The

usual debate among French lovers of Petit LU cookies is whether it's best to nibble the crunchy, golden corners of the wafer first or to bite immediately into the heart of the biscuit to release its buttery, vanilla-scented flavor. But these days Petit LU fans are struggling with a different dilemma: whether to boycott their beloved cookies as part of a growing French revolt against the job-reducing impacts of globalization and its emphasis on shareholder value.

Petit LU and scores of other brands produced by the French food group Danone became boycott targets after the company revealed plans on March 29 to close six factories and eliminate 1,816 jobs across Europe — 570 of them in France — despite profits last year of nearly $660 million. French outrage at seeing a robust company lay off workers was fanned further by news that British retailer Marks & Spencer would close all its Continental stores, including 18 outlets in France employing 1,700 people, to focus on its core British market. In addition to the abruptness of its announcement — delivered by e-mail to stunned staffers just five minutes before the day's opening of the London stock exchange — Marks & Spencer also shocked French sensibilities by announcing a $3 billion return to shareholders this year and by offering its chief executive a potential bonus of up to $1.15 million.

The two moves convinced many in France that globalization and its focus on efficiency, competitiveness and profitability had got out of hand. With memories still fresh of the high unemployment and economic sluggishness that dogged the nation for much of the 1980s and mid-1990s, many French reject the notion that a healthy company should be allowed to take the bread out of employees' mouths and hand it to shareholders. In a recent French poll, 85% of respondents called firings by profitable companies unjustifiable. "The logic of profit must not be exercised to the detriment of employment," scolded Socialist Prime Minister Lionel Jospin. "Yes to a market economy, but no to a market society."

As it has in the past, that position seemed to collide with what the French call the Anglo-Saxon view — held in Britain, the U.S. and much of the industrialized world — that firms should be free to maximize profits and respond to competition by shedding jobs as they see fit. Though governments everywhere still occasionally pressure employers to maintain inefficient factories and surplus workers, most developed countries outside Europe, and several within, have embraced the free-market approach to economic management. In addition, a wave of corporate "restructuring" in recent years has left many multinationals leaner, meaner and more competitively staffed than ever. "Do people think Nestlé, Unilever, or PepsiCo are really more socially attuned than Danone?" warned Danone ceo Franck Riboud of his larger, recently restructured, global competitors. "The answer is clearly no."

Riboud complained that some in France want to turn "Danone into a symbol of a globalized economy ruled by shareholder decree" — a world the French emphatically reject. Hoping to force Danone to renounce its restructuring, consumers, school districts, municipal cafeterias and private businesses across France answered calls from politicians to boycott Danone brands. Meanwhile, a French court ordered Marks & Spencer to halt its closure scheme and comply with labor laws requiring businesses to consult workers before any significant operational change. Still smarting over the defection of traditional working-class voters in local elections last month, members of France's leftist parliamentary majority even vowed to pass a law banning the firing of workers by profitable companies.

"It's as though we're again seeing a bad movie from the past," lamented Ernest-Antoine Sellière, president of France's employers' group medef, calling the reaction of workers and political leaders "an archaic reflex in an atmosphere of regression." Admitted an adviser to Finance Minister Laurent Fabius: "A business has the right to reduce its workforce, and the public has the right to judge whether that's abusive or not. A government, however, has no right to intervene in private affairs, and despite threats to the contrary, no laws will be passed allowing ours to do so."

Regardless of last week's outcry, the French response to layoffs has been inconsistent in recent years. True, tire giant Michelin provoked a storm in 1999 when it reported enormous profits along with news it would drop 7,000 people from its payroll, most of them in France. But hardly a word of alarm was muttered when plant closures by Renault in 1998 eliminated 3,097 jobs, perhaps because they were all in Belgium. Nor did protest arise after Renault took a 36.8% stake in Japanese carmaker Nissan in 1999 and soon cut 20,000 positions, nearly all of them in Japan.

When French communications group Alcatel decided to cut costs this month, it turned first to the U.S., announcing the elimination of 1,000 jobs there — a restructuring strategy that French automotive supplier Valeo is reportedly considering that could cost 3,000 jobs. "The French attitude toward globalization is contradictory but not illogical," says Dominique Moïsi, deputy director of the French Institute of International Relations. "Globalization is accepted for the benefits it brings but resisted when it undermines the particular French sense of social solidarity."

That approach has its adherents elsewhere in Europe. In response to the French court's interruption of Marks & Spencer's closure plans, unions in Germany and Belgium announced they may seek similar stays. Requirements to make management as accountable to employees as it is to shareholders also received backing from Anna Diamantopoulou, the European Union's employment and social affairs Commissioner, who supports E.U.-wide rules obliging companies to practice similar consultation with workers ahead of any restructuring. British Prime Minister Tony Blair has rejected that idea as meddling in the affairs of private business, and his government this year declined to stop the country's biggest industrial employer, the steelmaker Corus, from shedding 6,000 jobs in Wales. Yet last week Blair personally lobbied Motorola to preserve — at least for the time being — some of the 3,000 jobs at its Bathgate, Scotland plant targeted for downsizing.

Though businessmen, economists and officials in many countries seem baffled by France's campaign against layoffs, French officials say the country's job-protection efforts don't get in the way of economic growth. Indeed, France's economy is expected to expand by 2.9% this year, one of the highest growth rates in Europe. In spite of the inflexibility of the mandated 35-hour workweek, France still manages to attract foreign investment, becoming the fourth-largest target for inward investment after Germany, the U.S. and the U.K. And French unemployment has dropped from nearly 12.7% in 1996 to 8.7% today. A job-secure workforce is a happy, productive workforce, officials say. Even if shielding workers from the harsher effects of globalization has an economic cost, they add, the country — and profitable businesses — can afford it. The French economy has outperformed the rest of Europe for the past three years, says economist Elie Cohen. "France is embracing globalization but also protecting its social values."

Critics say France is also building a high-cost, heavily regulated, anti-entrepreneurial economy that is increasingly ill-suited to the rigors of global competition. Such sweeping statements are probably overdrawn. Though the French are clearly suspicious of globalization and what they think it means — from layoffs to McDonald's hamburgers to genetically modified food — France is in fact adapting well to the new, increasingly integrated global trading system. Exports were up 13.8% last year, Internet usage grew by 76% and French companies are acquiring foreign rivals in ever-greater numbers.

But employment has long been a sensitive issue in France. And with national elections set for next year, the Socialist-led government can be expected to be even more attentive to job protection and social welfare issues. Perhaps sensing that concern, transport workers, farmers and a host of civil servants blocked movement in parts of the nation last week to press demands for a lower retirement age and better pay. If the French choose an economic model that tries to both shield its domestic workers and compete in international markets, who can prevent them? The only question is whether, in the new global economy, they can have their cookies and eat them too.