Emancipated Enterprise System

NewCode™ is the enterprise system for emancipated enterprises. It was developed by Group NewCode, based on the work of the Académie NewCode, a think tank gathering personalities from very diverse horizons and active in 2016 and 2017. It was then enriched through exchanges with academic and business institutions such as the Collège des Bernardins, the Chaire “Theory of Enterprise” of Mines-ParisTech, France Invest and the Institut de l’Entreprise, through the factoring in of the evolution of the corporate legislative and regulatory framework in France, with the emergence of the status of Mission Companies, and also through the experience acquired on the first actual implementation cases.

With NewCode™, the emancipation of an enterprise starts with the identification of key stakeholders and the setting up of a purpose and a mission that will encapsulate the enterprise’s ambitions of societal value creation. NewCode™ then revisits essential functions in the enterprise system, such as governance, strategic and business planning, value sharing and downside scenario management, in order to make them fit for the pursuit of the enterprise mission. Finally, NewCode™ sets up a proper interface between the emancipated enterprise and capital providers though its financial structuring component.

SOCIETAL VALUE CREATION / PURPOSE AND MISSION

The first step in the setting up of NewCode™ is the identification of the enterprise stakeholders: human capital, investors, regional authorities, environment, and as the case maybe stakeholders that are specific to the enterprise. Then follows the agreement, between stakeholders, on a purpose and a mission for the enterprise, that will document its ambitions of “societal value” creation across the various dimensions thereof : contribution to economic prosperity through the production of goods and services, sustainability and environmental impact, the attractiveness of territories, and the human dimension for individuals involved in the enterprise project : health and safety, wellbeing at work, gender equality, diversity, remuneration and self-accomplishment.

BALANCED GOVERNANCE FOR THE ENTERPRISE

With NewCode™, the Governance body is a balanced representation of stakeholders, and is therefore the place of consensus between them. It is responsible for the setting up and monitoring of the Consensual Enterprise Project, and for managing any issues arising in its execution. It is responsible for the appointment of the management team, and ensures that actual value sharing is in line with what is documented in the legal structure. Contrary to what happens in a common share company, it is Governance, rather than shareholders, who is in charge of the evolution of the capital structure, with the objective of maximizing the interest of the enterprise through an optimal use of capital markets, e.g. financing the enterprise project and value distribution under the best possible terms. Finally in NewCode™ Governance relies on a best in class infrastructure for social dialogue, where employee representation is endowed with any means necessary to fully play its role in the enterprise system.

CONSENSUAL ENTERPRISE PROJECT

With NewCode™, consensus on the Enterprise Project, which encompasses strategic as well as business planning, is key to the seamless functioning of the whole enterprise system. The Enterprise Project, which must be in line with the company’s statutory purpose and mission, is put together by the management team and widely discussed with the employee representation and other stakeholders’ representatives. Any amendment thereto also has to be consensual, so that there is at any time a Consensual Enterprise Project in force, which in turns serves as a reference for the functioning of the other components of the enterprise system.

INCENTIVIZING VALUE SHARING

With NewCode™, the sharing of value between shareholders, managers, employees and other stakeholders is transparent and equitable: first, operational added value is shared as provided for in the Consensual Enterprise Project. Second, in case the business outperforms the plan, any excess is distributed according to mechanisms provided for in advance in the NewCode™ legal structure. Third, the creation of enterprise value, which in the traditional system would be entirely allocated to the instruments making up the financial structure, is in NewCode™ shared between investors, management and employees according to value sharing mechanisms which have been agreed upon in advance. Any mechanism in NewCode™ value sharing system is structured and documented in such a way as to guarantee full alignment of interest between the stakeholders.

TRANSPARENT AND EQUITABLE DOWNSIDE MANAGEMENT

With NewCode™ the management of issues encountered during the execution of the enterprise project is everyone’s business. It is done using adjustment mechanisms documented in the legal system, which aim at preserving the essential interests of each of the stakeholders, and at an equitable pain sharing when concessions are necessary. These mechanisms and processes organize a joint interest of all stakeholders to anticipate difficulties and swiftly address them.

OPTIMAL FINANCIAL STRUCTURE

With NewCode™ the Financial Structure, e.g. the set of financial instruments issued by the company, is designed and amended under the control of governance, rather than that of the shareholders, in order to finance the Enterprise Project and its Value Sharing mechanisms, as well as, when needed, its Downside Management component. Governance therefore constantly seeks to ensure that capital employed is adequately sized, for example by avoiding over leveraging the company through excessive value distribution to stakeholders, as might occur in the current system. In NewCode ™, the remuneration of investors, including for the most junior portion of capital, is contractual rather than residual. This principle allows the enterprise to take full advantage of the competition between capital providers, including for the junior tranche. Conversely, the contractual nature of the remuneration of equity capital makes it by definition satisfactory to capital providers, otherwise they would not contract. Indeed the modelling of financial returns under a NewCode ™ structure, using conservative assumptions in terms of operational efficiency improvement resulting from employee re-engagement, shows NewCode™ can offer equity investors a very attractive risk / reward profile.

NEWCODE™ LEGAL STRUCTURE

NewCode™ is implemented through a legal structure organizing the respective rights and future interactions of stakeholders in the enterprise system: basically shareholders, management and employees, and as the case maybe other important stakeholders: environmental bodies, regional authority, long-term strategic partner, etc.

The NewCode™ legal structure includes:

statutory provisions, for example those regarding the purpose and mission of the company, or the legal instruments making up the financial structure
an extended collective agreement involving not only the company and the trade unions, but also the shareholders. Such agreement will govern topics such as value sharing and downside management, as well as employee representation in the governance bodies
as the case maybe, a shareholders’ agreement, whereby the shareholders will agree with one another on how to secure on an ongoing basis the passing of statutory provisions when need arises for a proper functioning of NewCode™