A Business Radical Takes On The System

Super-CEO Seilliere gives Paris a deadline to reform welfare

With his tailored suits and aristocratic bearing, Ernest-Antoine Seilliere doesn't seem like the revolutionary type. But Seilliere, who heads France's association of employers, has just lobbed a bombshell into the corridors of power in Paris. On Jan. 18, he presented the government and the labor unions with an ultimatum: Agree by yearend to overhaul France's $268 billion-a-year social welfare system, or employers will stop managing it. Given France's strictly codified government-business relations, Seilliere's threat is a blunt act of defiance--and signals a new era of militancy for France's normally decorous patronat.

Seilliere means business. He has launched a crusade to free French companies from the hand of the state. He's attacking some of French business' hidebound habits, too. Seilliere, a 62-year-old exec whose business interests range from manufacturing to high technology, says he's mobilizing the patronat to save France from falling behind. That has made him a leading opposition voice to Premier Lionel Jospin's Socialists. "We will not remain prisoners of this system any longer," Seilliere vows.

The fiery rhetoric marks an abrupt change for his 700,000-member Mouvement des Entreprises de France (MEDEF). French bosses have long accepted a big role in the welfare system. Together with unions, they manage health insurance, pensions, unemployment, and other programs. The government mandates the benefits, but employers and workers pay for them. For the patronat, that means effective tax rates as high as 60%. Employers have accepted such levies partly because they have often been rewarded with subsidies and protection.

But that system is crumbling. For one thing, taxes and social charges now consume 24% of French corporate revenues; the European average is 16%. For another, the sweeteners that industry once enjoyed have dried up, thanks to European Union limits on subsidies. "There has been a change in the mentality of French businesspeople," says Jonathan Story, a professor at INSEAD, the French business school. "The government has got to start listening."

Seilliere is targeting business, too. To promote transparency in secretive enterprises, he wants listed companies to disclose execs' pay and stock options. Seilliere will disclose his at this year's annual meeting of Compagnie Generale d'Industrie et de Participations, his family's publicly traded company.

Seilliere was elected MEDEF's president in 1997, just after Jospin came to power and proposed a 35-hour workweek. A tall, imposing figure, Seilliere electrifies audiences, and gets results. After a MEDEF rally of 30,000 last fall, the government dropped plans to dip into social security funds--paid by employers--to finance the changeover to the 35-hour week. Seilliere says the government should rescue the troubled social security system by permitting private pension funds.

GOOD INSTINCTS. Can Seilliere deliver? Government and union officials bitterly oppose some of his ideas, especially his proposal for private pension plans. And if employers stop administering social programs, they must still pay for them. While Seilliere hints that he's open to compromise, his threat has rattled the government nonetheless.

It's an unlikely role for Seilliere. His family holdings date back to the 17th- century reign of Louis XIV. He was educated at the elite Ecole Nationale d'Administration and worked at the Foreign Ministry--with Jospin--before taking over his family business in 1976. Seilliere proved a canny manager, taking stakes in fast-growing information technology giant Cap Gemini and auto parts maker Valeo. "He has fabulous instincts, and he's a very good judge of people," says Valeo CEO Noel Goutard.

Seilliere shows no sign of letting up. He notes with alarm that France lags most European countries in business startups and that some bright young entrepreneurs emigrate. "We have an economy that is not moving," he says. With Seilliere at MEDEF, look for those bombs to keep dropping.