In the summer of 1998, when it was about to float some of its stock to the public for the first time, Air France offered its pilots shares of the company in return for a salary freeze.
The pilots rejected the offer and immediately went on strike.
"Stock is all very well when the price goes up," one pilot said on French radio. "But what happens when it goes down?"
That attitude, it turns out, is widely shared in France, where culture is fine for cheese but an equity culture is something else. French investors are little interested in the stock market, even though their own has climbed as much as anyone else's. Forget day trading. The French hardly do any trading at all.
Now, French companies have decided that needs to be changed. A coalition of six large firms and the Paris stock exchange is mounting a huge publicity and education campaign to excite ordinary citizens about stock market investing.
It culminates in what the coalition has dubbed Individual Shareholders Day, Nov. 20. Companies all over France will open their doors to the public. Stock-trading training programs will operate in 20 cities. Banks will pass out literature. Executives will debate at round tables.
All to get the French to do what seems to come naturally to Americans.
"I think it's a heritage and a tradition in our country. People prefer to invest their savings in bonds at a fixed rate," said Gerard Mestrallet, chairman of Suez Lyonnaise des Eaux, one of the companies sponsoring the share drive. "We consider that is not satisfactory. A campaign is one way to create an incentive to invest."
Only 13.4 percent of adult French citizens own equities, either directly or through the French equivalent of mutual funds. In the United States, by contrast, 48 percent of adults are stock owners, and that has risen rapidly, while the French figure is virtually unchanged from five years ago--even though in the intervening years stocks have been a rewarding investment. Americans hold 28 percent of their wealth in the form of equities. The French hold 3.8 percent.
In other European countries, stock ownership is either larger than in France or rising faster. In Britain, nearly 20 percent of adults own stock. In Germany only 6.9 percent own shares but the numbers have doubled in the past year. In Italy figures are not available, but experts believe perhaps 20 percent of the population invests in stocks.
The campaign to attract French individual investors comes at a time when they should need no cajoling. The CAC-40, the country's principal stock index, just broke the 5000 mark for the first time. Its value has doubled since October 1998, at the low point of the Asian economic crisis.
"Everything should have led the French to buy stocks during this period," said Jean-Francois Theodore, president of the Paris Bourse, or stock exchange. "It's a cultural exception. In every other country, confronting the same situation, households have rushed to the stock market."
A recent report by Salomon Smith Barney Inc. noted that the Paris equity market had recently overtaken the German one to become the largest on the continent in terms of market capitalization and earnings. The report saluted better French corporate management, reduced government interference, more consolidation and less corruption.
The past few years have seen a wave of extremely successful French corporate privatizations and partial privatizations. France Telecom SA, Air France, Thomson Multimedia SA and others have sold off portions of themselves on the French and American exchanges, to overwhelmingly positive market response.
But most of the response seems to come from outside the borders of France. The swelling coffers of non-French institutional investors, particularly American pension funds, have led them to diversify heavily into French and other European shares.
By some estimates, 40 percent of the stock of French companies traded on the Paris Bourse is in the hands of foreigners--a bitter blow to France's national pride. In many cases the lion's share of those foreign-held shares, in such companies as dairy products maker Groupe Danone and oil giant Elf Aquitaine SA, is held by Americans.
Even French President Jacques Chirac decried the trend. During a television appearance on July 14, Bastille Day, he complained that "the Scottish or American widow can be owner of a French business and not a French retiree."
He was referring to a particularly French exception: Private pension funds as they are known in most of the developed world do not exist here. In fact, they are illegal. Retirement is almost entirely funded by the governmental pay-as-you-go system.
In addition, university study is free here. So the two major needs for which Americans save money in such places as the stock market are, in theory, not applicable in France.
Experts say the heavy taxation of capital gains from stock--the top rate is 40 percent--also helps explain French reluctance to invest in equities. Dividends also are heavily taxed.
Historically, most people in France have made their financial decisions in consultation with their personal bankers. The commission structure on investments made through a bank has caused personal bankers to steer people away from stocks. And French companies until recent years have done little to welcome small investors into the fold.
"In seeking responsibility there are many guilty parties," said Andre Babeau, director of the Center for Research Into Savings and Patrimony.
But broader cultural reasons are equally at play. Money is regarded with suspicion here. When it was disclosed that Philippe Jaffre of Elf Aquitaine, recently sacked after a merger with TotalFina SA, was leaving with a stock options package worth a reported $33 million, France's Socialist legislators were furious. They nearly succeeded in raising the tax on gains from stock sales from the current 40 percent to 50 percent.
"When it comes to money, and to those who make it, and to risk, there is a great suspicion," said Erik Israelewicz, editor of the Le Monde newspaper and author of the recent book "Crazy Capitalism." "It comes from being Catholic, or being Marxist, a lot of reasons. Money has a negative connotation."
Even those who invest don't stick around long. Waves of privatization have brought new investors into the stock market. Two million small investors poured money into Air France; more than 4 million bought shares in France Telecom. Then many of them sold a few months later, took their profits and put them in the bank.
The publicity campaign seeks to ease such fears. In one commercial, a little boy approaches his father, who is playing an intricate computer game.
"Papa, do you own shares?" he asks.
"No," says Papa, exasperated. "Everybody knows shares are too complicated."
In another, a young couple is enjoying a candlelight dinner when the woman asks the man whether he shouldn't invest in stock.
"You're dreaming," he responds. "When you're a pawn, nobody listens to you."
In each case, a reassuring message then comes on to contradict their statements of concern.
In the Market
Only about 13 percent of people in France have money invested in stocks or stock funds -- just about the same rate as five years ago. That's far behind the rapidly rising U.S. rate, now at about 48 percent, as well as most rates throughout Europe. Although Germany's rate is very low, it has doubled in the past year.
United States 48.0%
SOURCES: Paris Bourse, Investment Company Institute
CAPTION: MISSED OPPORTUNITY (This chart was not available)
CAPTION: In one French ad, a father playing an intricate computer game tells his son he doesn't own stock because "everybody knows shares are too complicated."
CAPTION: Foreigners hold an estimated 40 percent of the stock of French firms traded on the Paris Bourse.