Did a Business Leader Demand Too Much, Too Soon?

It was a bold attack on the French Welfare State--and for a time, it seemed to work. Ernest-Antoine Seillière, a wealthy industrialist who heads the 700,000-member French employers' association, MEDEF, shocked the country's ruling Socialists last year by warning that member companies would stop participating in government-mandated employee benefits programs unless they were overhauled. Seillière scored a key victory last fall when the government agreed to tighten eligibility for unemployment benefits.

Now, it's Seillière who's on the defensive. Some French business leaders are distancing themselves from his aggressive tactics, arguing that he has unnecessarily antagonized labor unions and the government. At the same time, turmoil in some of Seillière's business holdings has made him a target for protests in France. In recent weeks, he has been denounced at labor rallies and criticized by Transport Minister Jean-Claude Gayssot for refusing to bail out two floundering regional carriers, AOM and Air Liberte, in which his family company, Marine Wendel, has a major stake. He also has drawn criticism because he's a major shareholder in auto-parts maker Valeo, which is planning to close two factories. Seillière says the attacks are unfair because he doesn't control management decisions at any of the companies.

Many business leaders still say they admire Seillière. CEOs would love to rein in the $268 billion-a-year social welfare system, which keeps effective corporate tax rates as high as 60%. But several bosses thought Seillière went too far in January, when he said that unless the government agreed to far-reaching pension reforms, employers might stop contributing to supplementary pension plans that allow workers to retire as early as age 60 with full benefits. Vivendi Universal CEO Jean-Marie Messier publicly upbraided Seillière for trying to provoke a showdown. Unions--especially some moderate labor leaders who had cooperated with Seillière last year on unemployment reform--were outraged, too. Now the government has put off pension reform until after the 2002 elections.

Seillière vows to continue his fight. "We're showing the way to modernization," he says. "I have a clear mandate to continue." But as long as French bosses remain divided and Seillière's business empire is in turmoil, this once-strong voice for change is likely to be muffled.

By Carol Matlack in Paris

    Before it's here, it's on the Bloomberg Terminal.