A Capitalist “Revolution” in France

This past summer, France took a happy step in the current march towards rethinking capitalism as a complex, interdependent system of mutual advantage.

The French National Assembly passed a law permitting companies to define for themselves their “raison d’etre” – their more transcendent meaning for the owners, customers, employees and society. This will give companies clear focus for their organizational mission and the ability to create cultures of achievement around that mission.

One commentator has written:

“Under the new law on Business Growth and Transformation (the so-called “PACTE Law”), the management of French companies must take into consideration social and environmental issues. Companies are also encouraged to incorporate social objectives into their corporate purpose.

The PACTE Law contains multiple provisions, some of which are of particular interest for those who follow business and human rights developments. Indeed, the PACTE Law provides (i) for “social and environmental issues” to be taken into account in French companies’ management alongside the corporate interests and (ii) for the possibility of enshrining the company’s “purpose” (raison d’être) in the corporate bylaws.”

More precisely, Article 169 of the PACTE Law introduces the following amendments into French law:

-Article 1833 of the French Civil Code now has a second paragraph stating that corporations must be managed in their own “corporate interests” by taking into consideration the “social and environmental issues” related to their operations.

-Article 1835 of the French Civil Code has been amended to allow corporations to specify in their bylaws a “purpose” for the corporate operations; this means that companies are encouraged to incorporate social objectives to their corporate purpose as part of their bylaws.

-Articles L. 225-35 and L. 225-64 of the French Commercial Code have been adjusted so that corporate and management boards take into consideration “social and environmental issues” as part of their respective managerial assignments.

In short, if the PACTE Law will not directly change the nature and objectives of corporations, it explicitly intends to give them the possibility to go beyond the objective of being profitable.

I find the French express of “raison d’etre” – literally a reason for being – more powerful and existentially directive than the English word “purpose.”