Value Sharing and Downside Management Mechanism

The VS component defines how added value is shared between the enterprise, financial and human capital.

When the enterprise performs at or above the CEP, added value is first distributed as per the CEP, and any excess is allocated to human capital, financial capital and reserves in pre-agreed proportions.

If the Enterprise performs below plan, however without reaching a pre-defined Alert level, Management is in charge of implementing relevant improvement measures.

Should the Enterprise break the Alert level, Governance takes charge for a revision of the CEP, and as the case maybe the implementation of measures provided for in a pre-agreed Downside Management Mechanism.

In certain circumstances, Value Sharing and Downside Management Mechanisms are funded through a regeneration of the Capital Structure, rather than solely from the use of the Enterprise own generated resources. In such a case the associated net capital inflow is used to distribute part of the Enterprise Value created to human and Financial Capital. In a turnaround situation, it is used to fund the turnaround plan. See Capital Structure module.

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CONSENSUAL ENTERPRISE PROJECT

The strategic project, prepared by the management team, is discussed with the investor and the employee representatives. The adherence of the social body to the project is an essential condition. It forces stakeholders - investors, managers, employees - to develop a shared vision of the future and to put in place a business plan of reference.

CAPITAL STRUCTURE

The equity investor holds a financial instrument - "NewCode Instrument" - which replaces the ordinary shares, entitles the holder to a fixed interest and a share of the value created. The NewCode instrument presents an intermediate risk-reward profile between equities and bonds.

VALUE SHARING

Value created is shared between human and financial capital in proportions originally planned in the NewCode agreement. Value sharing occurs during the execution of the plan (bonuses, profit-sharing, dividends) and / or during refinancing operations (crystallization and distribution of value).

DOWNSIDE MANAGEMENT MECHANISM

It is the counterpart to the contracting of the investor's remuneration. The processes of adaptation of the company in case of underperformance are anticipated and documented in the NewCode agreement. This anticipation clarifies in advance the rules of the game and empowers employees to protect the operational performance of the company.

GOVERNANCE

Management representatives, investors, outside directors and employee representatives participate in the governance of the company. Well aware of the realities of the company, they participate, upstream of the decisions, in the debates on the strategic plan, sharing with the other directors their operational knowledge of the company, its markets as well as the performance factors of the organization.