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Economy

ORIGINAL FRENCH ARTICLE: D’avril à juin, les dividendes ont augmenté de 30 %

by Clotilde Mathieu

From April to June, Dividends Jumped 30%

Translated Tuesday 9 September 2014, by Gene Zbikowski

While the government is imploring companies to invest and to hire, companies are pocketing taxpayer’s money, the better to gratify their shareholders.

Ever since the bad figures on the French economy were published, the ministers have been taking turns occupying the media scene. After François Rebsamen and then Manuel Valls, it was Michel Sapin’s turn on August 18 to step into the limelight, in Libération newspaper, to attempt to convince the French of the “benefits” of supply side economic policy.

“Companies mainly have a profit margin problem. (…) As long as they have not regained a portion of these profit margins, and with the perspective of regaining them entirely, they will be in a very difficult situation, notably as concerns hiring.”

Let’s bear in mind that, officially, it is to compensate the loss of 40 billion euros in profit margin suffered by companies since the beginning of the crisis in 2008 that the government set up a 20-billion euro tax credit, to which it added the responsibility pact, for a total of 41 billion euros. This calculation has again been discredited, following the publication by the Financial Times of a study done by an investment fund, Henderson Global Investors. According to the data that was gathered, between April and June European companies paid out no less than 115 billion euros in dividends, a 20% hike compared to last year.

A real waste of taxpayer’s money

And the study informs us that the fattening of dividends for shareholders is mainly due to the amount paid out by French companies, which jumped by over 30%, notably thanks to the dividends paid out by banks like Société générale and Crédit agricole.

Now, 2013 had already proved to be a prosperous year for shareholders, since they pocketed some 36.8 billion euros, which already represented a 9.2% hike. The same goes for the falling profit margins, with all due respect to the government – companies seem to have made their choice: the economic growth rate is zero and unemployment is rising, but capital could not be doing better.

A study done in June by the SNB CFE-CGC trade union on the use by the banks of the tax credit for competitiveness and employment (CICE) confirms this trend. According to the trade union, which collected the plans for the use of funds from the works councils, “most (if not all) of the announced use of the CICE corresponds to plans, actions and expenditures which had already largely been launched: either in the framework of the company’s normal activities: training, renovation, and maintenance of the network of local bank branches; or else in the framework of investments that had already largely, and long since, been launched and budgeted: technological innovation, multi-channel and digital banking, and new concepts of local branches.”

The 135.5 million euros granted to the banks have hence been a pure windfall. As such, the 26 million euros received by the Société générale and the 40 million euros received by Crédit mutuel are prodigious examples of taxpayer’s money being wasted. While Crédit mutuel chose to spend the taxpayer’s money on the purchase of “tablet computers and video conferences,” for its part the Société générale decided to invest in “furnishings and real estate.” The scandal gets bigger when you know that, in the second quarter, that bank made a net profit higher that the expected 1.03 billion euros, to which are to be added the 2.2 billion euros in profits that it raked in in 2013.

Moreover, the figures published by the French statistical bureau, INSEE, on August 14 show that, while companies began receiving the CICE tax credit late in May, investment fell in the second quarter. And it isn’t by exhorting companies to “seize this opportunity (…) to invest, innovate and hire,” to use the Finance minister’s words, that they are going to change their behavior.

It is indispensable to question the CICE tax credit at a time when the cost of this mechanism is going to rocket up. Its cost is to grow by 50% (the rate growing from 4% to 6% of the total wages paid out to workers earning less than 2.5 times the minimum wage).

Besides which, the head of the MEDEF, the main bosses’ association, Pierre Gattaz, who usually is so prompt to make demands, should not, according to the daily newspaper Le Monde, present the “dozen turbo-charged measures to create jobs fast” to the MEDEF’s summer conference, as he had recently promised to do. Even though this list is just a summary of the bosses’ habitual complaints, the message, Le Monde explains, would have been “potentially inaudible for public opinion.”


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