This section gathers the intellectual capital elements of NewCode.

These are available to practitioners to assist them in setting up NewCode in the business. Contributions from Academy members and external personalities are welcome.


Several criteria have to be considered when assessing an investment: risks, returns, liquidity, not to mention more qualitative criteria like corporate responsibility.

The NewCode instrument offers an intermediate risk profile, between shares and bonds. Although it is placed structurally in the place of shares in creditor’s order of priority, it is less risky than shares, for various reasons:

  • The commitment made by human capital to protect this return, via mechanisms agreed upon when the structure is implemented.
  • The increased operational performance expected from NewCode, due to greater motivation of human capital.
  • A balanced and careful governance: in NewCode, governance is freed from its traditional objective of maximizing shareholders value. It has one single objective – the interests of the company – and this includes ensuring the integrity of the capital structure, rather than taking unreasonable risks.

The return expected for the NewCode instrument is attractive for this level of risk, with a high fixed rate of interest (we expect 4 to 8% depending on the company and circumstances) plus a share in the upside over and above this fixed return.

Therefore, the NewCode instrument is designed to offer an attractive risk/return profile. In addition to these intrinsic factors, if appropriate, the cursor of the initial valuation has to be considered, i.e. the value of the company which will serve as a basis to size the NewCode instrument at inception. The less an investor pays for an asset, the better the return on investment. We plan to have many circumstances in which NewCode investors can acquire assets at a good price.

Finally, NewCode will deserve high marks in terms of social responsibility.

Yes, totally.

We believe that NewCode may initiate a new asset class that is extremely attractive to pension funds and other mutual funds based in Britain and America and also in Continental Europe and Asia. Pension funds in particular are faced with an unsolvable problem due to low risk interest rates being close to zero. At the moment, there is a frantic race to find alternative strategies, that offer very high returns to make up for insufficient earnings from risk-free components. The problem with these alternative strategies is that they may prove to be very disappointing, as we saw with the sub-prime crisis for example. NewCode offers a solid alternative strategy that is not based on obscure financial engineering but on the simple idea that more value can be created by aligning the interests of capital providers with the interests of those who employ it.

We had feared this.

The solution is to anticipate difficulties and size the initial packages properly. With NewCode, it is in everyone’s interests to detect difficulties well in advance so that “soft” corrective measures can be taken earlier on, which in most cases will be sufficient. And when more has to be done, reducing payroll expenditure via voluntary redundancy or a redeployment plan for example, NewCode guarantees better conditions of departure than those usually negotiated. Not only does NewCode anticipate and minimise situations in which human capital would usually be treated as an adjustment variable, but in addition when adjustments are inevitable, they will be made under the best conditions for employees. So, compared to traditional structures, employees will benefit when business is good and will be better treated when business is bad.

The risk is taken collectively, without calling into question individual contracts or rights. NewCode is simply a balanced agreement whereby all stakeholders make a commitment. On the one hand, the financial capital undertakes to limit its return on investment for the benefit of the company and its human capital and on the other hand, the human capital undertakes to collaborate in the event of unforeseen difficulties in the implementation of previously discussed protective measures. Part of the variable pay could be presented via incentive schemes used as shock-absorbers, for example. Leverage can also be placed on working times, in the same way as it is now placed on competitiveness agreements. And as said previously, the measures taken will be more generous for outgoing human capital if that point is reached. And the compensation is significant – an active participation in governance, including the appointment and replacement of management teams, a transparent and consensual enterprise plan, a re-balanced sharing of added value in favour of human capital. These are very positive developments for human capital.

NewCode is compatible with different forms of French commercial companies, including SCOPs (workers cooperatives), but also SAs (public limited companies), SASs (simplified joint stock companies), SAPOs (Limited liability partnerships with workforce shareholding), etc.

NewCode shares the same objectives as SCOPs, i.e. improved relations between human capital and companies. However, we believe that it offers greater flexibility in terms of controlling the cost of capital, sharing value creation and organising governance. NewCode also offers optimised access to financial markets, which up until now access has been limited for SCOPs.

Employee share ownership schemes do not resolve the intrinsic discrepancies between the interests of human capital and those of financial capital. NewCode makes the interests of shareholders “disappear”. With NewCode no stakeholder simultaneously controls governance, the capital structure and his/her own pay.

Moreover, NewCode does not require employees to invest post tax savings in its employer, which is one of the weakest features of ESOPs viewed from the point of view of risk management for employees and families.

Major French trade unions are already involved (and in the future will be even more involved) in the work carried out by Académie NewCode, which is the body in charge of formulating and updating the NewCode Enterprise System. NewCode is fundamentally good for the future of trade unions. If NewCode is successful, within each company human capital will have to organise itself in such a way as to become a competent stakeholder in company governance, and to defend its interests in any occurrence when the NewCode Enterprise System is being implemented or renegotiated. For works councils and staff representatives, this will be a new sphere of influence which is definitely challenging but also very exciting. At the central level, the role of trade unions federations and confederations will also be very important, in terms of monitoring, maintaining and improving the system, and promoting it to public authorities, for example.

C’est le rôle des équipes de direction d’utiliser de la meilleure manière le puissant outil de motivation des équipes que leur donne NewCode. Si cela résulte dans une mauvaise ambiance au travail c’est que la direction n’a pas bien travaillé.

NewCode is flexible about this and can adapt to the corporate culture while providing a framework that contributes to positive development. In many companies, a large part of the profit-sharing benefits could be allocated according to collective criteria, thus limiting the risk of fierce counter-productive competition between employees. But NewCode can also be configured for companies in which a group of individuals who play an essential role in the creation of value want to be paid accordingly.

This is what many of them do already, and sometimes rather too enthusiastically, in LBOs, in which, as you know, a large proportion of the refinancing is pocketed by the previous shareholder. With NewCode, this will be carried out in a more reasonable, fair manner, and human capital will benefit from a large proportion of the value distributed.

NewCode is a great opportunity for trade unions. There are already many competent people within their ranks who are well acquainted with the realities of the company and its performance drivers, and who can use their know-how positively for the benefit of the company and its human capital.

Voting rules must be well thought out right from the start. For example, qualified majority rules for important decisions that have an impact on human capital or for those relating to the implementation of the NewCode Enterprise System. In certain cases, it will be difficult to find an agreement. In which case the proposing party will have to reformulate… NewCode is based on a consensus.

We are starting with France which offers a perfect environment for NewCode: it has a social culture; its labour laws are definitely complex but they give leverage to human capital; its trade unions would like to play a more valuable role in companies; it has investors who are very open to social responsibility and its fabric of industrial and services companies lends itself well to NewCode.

Having said this, the aim is to rapidly develop NewCode internationally, especially in the European Union. Many countries within the European Union offer excellent arrangements: Germany and its co-management culture, Italy and its web of family businesses seeking transfer solutions, and Scandinavian countries and their culture of social responsibility. In reality, we believe NewCode can function in almost any state where the rule of law prevails and which has a financial infrastructure that is at least partially open. There are obviously great differences in each country’s labour laws and financial infrastructures but, throughout the world, a man or woman who is properly motivated and compensated will work better than somebody who is not. And for investors, the aim of NewCode is to allow them to benefit from an attractive risk/return profile in each target jurisdiction.

Yes of course.

Yes of course. In principle, NewCode can adapt to any labour laws because, in social terms, none of them has more to offer than NewCode. Even regarding human capital’s commitment to protect financial capital, which is a key feature of NewCode, there is no suggestion that this should be done outside the framework of labour laws. But the existence of a labour code, even one as comprehensive and complex as ours, does not prevent a company from reaching an agreement in advance with its trade unions on the main corrective measures to take in the event of an unfavourable scenario.

Moreover, the labour code gives employees and their representatives powerful negotiating leverage that can be put to good use in NewCode negotiations, to obtain a transaction that is as favourable as possible. In this respect, the new legal provisions introduced in the 2016 Labour Law, giving priority to company-level agreements and group-level agreements, provide new room for manoeuvre in company agreement negotiations.

But, as everywhere, you can’t force an investor to invest capital in something he does not believe presents an attractive risk/reward profile, so human capital has to offer an attractive deal. In the end, what is important is reaching a win-win agreement that is more balanced than the previous situation, and NewCode can do this because it provides companies with additional added value arising from a re-motivated human capital.

Of course we will have to take account of national rules governing employees involvement in governance when implementing NewCode in each country, but a framework agreement could be discussed with multinational employee representation bodies that cover as many as possible of the geographies, when they exist.

In a more transparent manner. In France, NewCode will give more responsibilities to the elected representatives of each site. This is what is expected in return for more employee involvement in governance. In the international sphere, particularly the European sphere, NewCode can help reverse the spiral of social dumping. The flow of human capital and financial investment are at the heart of European integration and also at the centre of its current problems and NewCode is indeed connected with these two flows. NewCode opens the door to a new paradigm in management, based on the idea that human capital should not be considered simply as a resource whose cost should be minimized, but to the opposite should be considered as the main factor in the enterprise plan. With NewCode, European groups can draw up a real long-term strategy for their human capital that will not be aimed at reducing costs but at developing the company in ways that offer the best chances of employing human capital in a satisfactory manner. This means in a satisfactory manner for the company and human capital not only for the investor.

A country’s poor social policies will always play a role in a company’s decision-making process but the effect will be lessened by the reversal proposed by NewCode whose aim now is to satisfy human capital rather than exploit it. By its very construction, NewCode will always offer human capital a better deal than the market or the local labour laws. Therefore, NewCode can be a vehicle for the dissemination of social progress, precisely because it is compatible with company performance, and this is essential in a competitive world. NewCode offers trade unions and management a vast array of possibilities, together with the responsibilities this entails.

We would have talked to the elected representatives about the workload slump at the Belfort site much earlier on. We would have noted that the site’s employees, the whole company and the environment were all attached to the Belfort site, and we would have worked together to find replacement workload instead of working secretly on the closure of the site. That is the advantage of openness and transparency – we work upstream with parties who can help us find a solution. And we would probably have found something better than running high-speed trains (TGV) on normal railway lines at the tax-payers and users’ expense.

Quite the contrary. By getting employees to take part in company governance and by making the social entity responsible for maintaining a minimum level of performance, we will be able to make a diagnosis earlier on and share it; as a result, we can work upstream with involved parties to find the best compromise for the company, and ensure it is implemented in the most socially acceptable manner.

Transparency, stakeholder empowerment and good quality social dialogue, all anchored in NewCode’s DNA, are the keys to successful company transformations, even the most painful ones.

To put it clearly, NewCode makes sure there are fewer difficult decisions to take, and when they are nevertheless needed, NewCode provides they will be taken in the best possible conditions.

For managers who are skilful and good at leading people, NewCode is the ideal structure. They can be very well paid if they do a good job for the company and its human capital. NewCode is less attractive to managers whose know-how was based on cutting costs and cheating employees.


With NewCode employees make a collective commitment; it may impact pay but this means the commitment exposes the pay before tax and social security charges, rather than a net amount after tax, and this is quite effective.

The value created for human capital is distributed in the form of salaries, bonuses, and incentives and this is only normal because the aim is to reward people for the work they do. We resisted the temptation to structure it in such a way as to reward financial risk-taking because this would be against the basic principles of NewCode which is not an employee shareholding scheme.

NewCode Conseil ( is organised around a NewCode Enterprise system , which also works very well for start-ups…and we are working on a number of concrete situations so very likely 2017 will see the first several implementations of NewCode.