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The Rich and the Dead at France Telecom

The Privatization From Hell

by EVAN JONES

On 11 September 2009, A France Telecom employee threw herself out of the office window to her death. Hers was the 23rd suicide in the company since early 2008. There was another France Telecom suicide only several days previously. There were suicides before 2008; more were to come. The office window suicide marked a turning point.

On 14 September 2009, a senior manager was saved from an overdose of barbiturates, taken when she learnt that she was to be posted across the country for the third time in a year. On 28 September, another employee threw himself off a bridge, having recently been moved into a call centre in the Haute-Savoie from a backroom job across the other side of the country. That was the last straw.

On 4 July 2012, sometime France Telecom CEO/Chairman Didier Lombard was indicted for overseeing a campaign and culture of moral harassment of employees, allegedly driving over 30 staff under his watch to suicide. Lombard’s Deputy and his Human Relations Manager are also in the dock.

This is an instructive story for American watchers of corporate ‘personhood’. FT itself has been charged but FT has been unable to appear in person. Ironic that the French for legal entity is ‘personne morale’. The then CEO has been indicted as the proximate embodiment of the corporate person, the latter having displayed a decided lack of personal morality.

In late 2009, SUD, one of FT’s more radical unions, initiated action against the company. In February 2010, a report by the French Labor Inspectorate (complementing a private report) claimed that FT was culpable, and judicial proceedings were commenced in April. Lombard was forced to step down as CEO in March 2010, but stayed on as Chairman, from which position he was also forced out in January 2011. The mid-2012 indictment is part of a long process spurred by the defenestration of Suicide #23.

The saga begins in 1990. The EU issued the Telecom Services Directive and the Open Network Provision Directive which dictated full liberalization of telecommunication services and a framework for access to national public networks. France’s deadline for complying with these directives was 1 January 1998. Formally, the EU directives did not compel privatization, but privatization was in the ether, neoliberalist imperatives then rampaging across the continent.

Privatization was also on the cards in France. There was much on offer after President Mitterand’s wholesale nationalizations of 1981-83. Denationalizations began under the ‘cohabitation’ Chirac government (1986-88), but were stalled with the Socialists returning to office in 1988. Nevertheless, the Ricard government (1988-91) was in liberalizing mode. Thus in 1990 the PTT (Postes, télégraphes et telephones) was taken out of the Ministry, and split into two companies (operative 1991) – France Télécom and La Poste.

The Right was returned to office in early 1993 in a landslide. One of Prime Minister Édouard Balladur’s first actions was to initiate the privatization of France Télécom. FT remained heavily unionized, and the multiple unions were appalled at the prospect. Strikes ensue, impasse, the years pass. Alain Juppé is appointed Prime Minister in mid-1995; the Right gains the Presidency with Chirac’s election. Balladur’s initiatives are belatedly voted on in mid-1996, opening the way for partial privatization in 1997, with the state retaining majority ownership. The government gained leverage by doing a deal with a minority union (FO). Universal service would be guaranteed, and employees with public service status (fonctionnaires) would retain that status, but new hirees would be on private contract. It would be the largest privatization in French history. The two biggest unions (CGT, SUD) remained bitterly opposed. Employees themselves were targeted for share subscriptions (with concessions) to gain support for the privatization.

The Parti Socialiste in Opposition promised a halt to privatization. But the Socialists return to office in June 1997, under Lionel Jospin; a month later, it turns full circle. Jospin’s Economy/Finance Minister, a certain Dominique Strauss-Kahn, expedites the process, with the first tranche of 20% listed in October. With three tranches listed, the state’s ownership settles at 55%.

The Socialists were in a quandary – committed neither to public ownership nor privatization; reduced to pragmatism, naive on the implications of competition in telecommunications and myopic on the pain associated with the transition. The European Commission’s New Year deadline for deregulatory compliance loomed large. But all in politics were dazzled by the billions that would flow into the state’s coffers and optimistic on FT’s potential as a national champion in the global economy, seemingly buoyed by the dot.com boom. The politicians talked of ‘manna from heaven’. Indeed it was, but it was a Faustian bargain, and the souls of others were offered to the devil.

Michel Bon is appointed CEO of FT by Juppé (a friend) in late 1995 to prepare the institution for privatization. Bon had previously had an exemplary career in public service and the private sector, including banking; his immediate past appointment involved the rebuilding of the retail behemoth Carrefour. As well as passing through the elite École nationale d’administration, Bon had business degrees, including from Stanford (the recruiters at Carrefour hoped that Stanford had ‘distintoxicated’ him from his French training). Bon was the first person to be appointed head from a non-technical background (‘I am not an engineer, and there are many things that still remain a mystery to me’).

Bon joined mobile and the internet to FT’s fixed line inheritance. But, in a hurry, Bon spent lavishly on acquisitions. Bon was desperate to capture the substantial business of big business. Good companies had been bought (Orange), but also dogs (German MobilCom). FT had also gobbled up overseas telcos being privatized under pressure from the IMF.

FT went into the red in 2001; by mid-2002, it had debts of almost €70 billion. The dot.com bubble had burst in March 2000. The budding success story was now an enormous liability. The bulk of FT’s employees (part of 1.5 million small ‘investors’), having been seduced into transcending their traditional financial conservatism, were not amused at the plunging stock price.

The Socialists lose office to the Right in May 2002, and no longer had to wrestle with their conscience. Bon was replaced in October by one Thierry Breton. With both the requisite technical and managerial background, Breton had come from running, successively, Bull and Thomson Multimedia, with claims of having been decisive in ‘turning them around’.

Breton did generalize FT’s ADSL network across France, but his dominant brief was to attack the crushing debt burden. The new Raffarin government had no ideological hang-ups. December 2003 legislation abolishes FT’s monopoly on universal service provision, and opens the door to the ending of the state’s majority ownership. The government had pumped another €9 billion into FT in March 2003; now it wanted it back. More, the government wanted the FT selloff as successful precedent to privatize more public assets. The selloff begins in September 2004, with the state’s shareholding eventually reduced to the current stake of 27%. The state now hires the Chairman/CEO but is otherwise passive. Budgetary concerns were now pre-eminent; the country’s telecommunications needs would be determined by private entities.

Intensification of work and mass layoffs were a complementary priority. French weekly Marianne (19 October 2009) claimed that Breton was the man for the job. Mentored by Jean-Marie Descarpentries, ex-McKinsey ‘change management’ guru, at Bull, Breton “applied the methods of the master, with added testosterone, management by fear at best, by terror at worst, perennial plans with unattainable targets …”. Breton introduced ‘Ambition FT 2005’, to be driven by TOP (Total Operational Performance), including “€15 billion of ‘cost killing’, of which €6 billion to come from supply savings organised by 2IC Louis-Pierre Wenes; … [and] abolition of 22,000 jobs in 3 years”. Breton himself has claimed that, during his tenure, staff numbers were reduced by (only) 16,800, “in the very great majority of cases” due to retirement or voluntary departures. Some ex-employee commentators have begged to disagree on the ‘voluntary’ claim.

Wenes himself had been hired from management consultancy firm A T Kearney, ‘cost killing’ specialists. When Wenes was forced to step down in October 2009, a web article commenter claimed: “I know this man well, having rubbed shoulders with him … He doesn’t know what it is to be human. He has a head only for figures and has not hesitated to sack hundreds at a time, and even to close down the company.” At FT, Wenes continued to sub-contract Kearney, well remunerated, as consultants on cost savings.

With the selloff due to proceed in September 2004, a union official noted: “For the workers, the situation is already difficult: worsened working conditions, stress, sickness, despair, even suicides, because of the massive elimination of jobs, the incessant restructurings, the forced mobility. Total privatization will only aggravate this situation.”

Breton was called to the Finance Ministry in February 2005 to address not FT’s debts but the state’s. A Breton lieutenant, Didier Lombard, was promoted to the top job. Again, Lombard’s formal qualifications were impeccable, with classic technical training and experience. But the debt, albeit reduced, remained. Lombard embarks on a further strategic plan for 2006-08, titled NExT (New Experience in Telecom Services!). Upfront, the object is a new platform to sell customers bundled services (‘convergence’). But the complementary ambition (the ‘Crash’ programme) involves a further round of dramatic labour cost savings, especially with respect to the unsackable fonctionnaires. Thus more mass retrenchments and an escalation of harassment of those remaining. A (costly) network of 4000 cadres was built up to expedite the process.

An anonymous FT worker, 30 year veteran, noted (interview, 20 Minutes, free commuter daily, 14 September 2009): “For 5 years, it has become harder and harder. There are many job relocations or closure of services. When that happens, it is very difficult, for one has to re-learn everything. In 8 years, I have moved 4 times and changed my craft 3 times. It is easy to do this when one is 25 or 30. But it is another thing at 50 …”. The British Observer noted (20 September 2009) that a report to the Conseil d’Orientation pour l’Emploi “showed that in 2005 a quarter of French people had previously worked outside the region where they now work, against an EU average of 15%.” So much for the Anglo catechism that the French are stuck in their ways.

Thus to the suicides. On 14 July 2009, a Marseille-based engineer killed himself. The much-admired engineer’s talents and achievements were integral to FT’s technological transformation. Increasingly, he found his work rendered dysfunctional by incessant restructuring (in particular, the incorporation of Orange into the parent company under Lombard’s NExT program), and by a new breed of technically ignorant managers. His suicide note included (Mediapart, 6 October 2009): “I have killed myself because of my work at France Telecom. It is the sole cause. Endless ‘emergencies’, overwork, absence of training, total disorganization of the enterprise. Management by terror. … I’ve become a wreck. It is best that I end it.”

On 15 October 2009, an engineer employed at Lannion in Brittany hung himself. The site, a crucial FT research hub, had been a special target in 2008, with almost 100 positions earmarked for elimination. The same year, FT opened a research centre in Jordan.

Market analysts, social analysts, Anglo commentators particularly, FT spokespeople say – Stiff Cheddar. The suicide rate at FT is little different to that of the French population as a whole. The French, buffeted by the nanny state, can’t take insecurity. The changes were essential to improve efficiency and keep FT competitive. Etc.

The summer of 2006 had seen a systems breakdown debacle, for neglect of investment in infrastructure. Financial imperatives were competing with products/services maintenance and development. Rampant destabilization, driven by a management consultancy ethos, appeared to involve a sadistic element towards the fonctionnaires – their contribution ill-understood and their inherited status disdained. Thus the engineers and technicians themselves were to be attacked, and this supposedly to facilitate enhanced efficiency. Madness.

Lombard defended his record in Le Monde, 4 July. The situation was diabolical, said Lombard. Here was a company that he had devoted most of his professional life to. Survival required radical measures. No other sector had undergone such a profound transformation. There was FT’s massive debt, the demands of the European and French competition authorities, the sequential revolutions in technologies, etc. All true. But how quintessentially Marxist! Here is a chief executive claiming that ‘it’s the system that made me do it; I had no choice’. The representative bourgeois as impersonal bearer of capitalist social relations.

Lombard also claimed that the plans were oriented to minimizing the harm to the workforce and facilitating their transition into to the new digital age. The evidence indicates otherwise. The Labor Inspectorate report detailed evidence of a conscious strategy at the top to create an environment that forced employees to the edge. Perennial concerns expressed to top management by doctors, counsellors and inspectors were ignored. This behaviour constituted, prima facie, a crime under statutes passed in 2002.

So who is to blame? Certainly, Lombard and his two immediate underlings directed latter day proceedings. But they should be joined by the panoply of collaborators – the contemporary leaders of both sides of French politics; Bon and Breton; the ill-tutored eurobureaucrats and their French counterparts whose textbook competition mantra is oblivious to the specifics of telecommunications infrastructure and provision of essentially public goods; and so on.

The process of employee degradation was already in train with FT becoming a public company in the 1990s. Thus a manager who finally resigned in despair in 2000, having been brutalised continuously since declining to switch from fonctionnaire to private contract status in 1993, achieved a judgment in late 2011 (after 12 years of litigation) against FT for moral harassment (Mediapart, 26 February 2012). This judgement provides a precedent, but the Lombard indictment for a generalized culture of harassment is unpredecented.

Meanwhile, Bon’s career has continued unimpeded. Breton is feted as a giant with endless distinctions, including the Légion d’Honneur; most recently, the Les Echos 2011 Prix du Stratège. Lombard is also Légion d’Honneur, courtesy of Breton’s sponsorship. In 2008 (Wikipedia), he received the Prix de l’Innovation dans le Management de l’Innovation, and the Grand prix: manager BFM.

At worst, Lombard will be found guilty, given a minor suspended sentence, and a trivial fine, which he will pay as small change from the golden parachute he received from FT upon his less than illustrious resignation.

It’s called trickle down. Those at the bottom get to pay for all the mistakes made by those at the top, while those who made the mistakes sail on into nirvana.

For calendar year 2009, at the crest of the suicides, FT’s dividends payout exceeded its net profits. The dividend per share has been on the rise since 2002, since 2008 paid at €1.40 per share. Management’s decision to retain this rate for 2011 ignored dissent from employee shareholder representatives, but it received full support from the Finance Ministry. The dividend yield on FT shares is at least 12.6% (estimates differ), significantly above the industry average. The 2011 total payout was again higher than net profits of €3.9 billion, this in spite of a new competitor entering the domestic market, and 4th generation mobile investment looming. A union official quipped: “Of what use is a Ministry of Productivity Growth if [the state as shareholder] treats France Telecom as a milch cow?”. FT’s mobile network crashed in early July, leaving 26 million customers without connections. FT blamed another party, the supplier Alcatel-Lucent.

With aggressive purchases of foreign national telecoms, FT now has a global reach, with half of its employees based overseas. France Telecom has become a ‘national champion’. In effect, the suicides were casualties of global war by commercial means. Monuments should be erected to the fallen, especially outside FT head office, with the conventional inscription – Morts pour la France.

Yet, hot off the press (Le Canard Enchainé, 11 July), we learn that FT has run into a spot of bother in Equatorial Guinea, where it has run the telco network since 1984. A local FT operative, one Yves Garcia, witnesses some unsavoury corruption and becomes a whistleblower, but falls foul of the regime. Framed by a corrupt judge, Garcia escapes to France, only to find himself sidelined and harassed within FT, driven to depression, his computer appropriated and key files destroyed. FT moved to destroy its own principled staff member to keep the network contract, which the regime ended up giving to the Chinese anyway.

National champion indeed. It appears that the dead at France Telecom died for nothing other than the fat dividend cheques to the rentier state and Breton’s and Lombard’s Légion d’Honneur.

Evan Jones is a retired political economist at Sydney University. He can be reached at evan.jones@sydney.edu.au