Lessons from formally fair governance: Does Bollor?, the 5% shareholder, now rule the Board?

The Vivendi crisis launched by the public dissent of a 5% shareholder Vincent Bolloré confirms the limits of conglomerates and emphasizes the great interest of demergers. It also emphasizes that the split of functions between Chairman and CEO ought also to be real and not only cosmetic...as it finally weakens the Board at Vivendi.

The challenge from the start resulted from the 2000 "logical" proposal by Jean-Marie Messier to associate in one group the two businesses of communication channels or containers on the one hand (networks with SFR and Canal +, and films or CDs of Universal Music...) and content on the other (television production, film and music). Everyone agreed that a strong understanding of both the container and contents was essential for the proper management of each other. But should these be merged?

Passed the JMM cash shortage of 2001-2002, the history of Vivendi has shown that the professional excellence of CEO Jean- Bernard Levy did not ensure a successful unique lead to this group, each division was left to leading experts ultimately constrained by a central management himself under the demanding supervision of Jean -René Fourtou the former CEO of Aventis. Two floors of supervision were not helpful to unite the energies.

Jean-François Dubos, former Secretary, assured therefore acting for over a year…at the request of Jean -René Fourtou after Levy's departure, while Vivendi share is now at its lowest for 13 years.  While pieces were officially for sale, possibly for saving considerations or because of the opposition of Bolloré the dissociation of the companies was apparently not seriously considered...

Vincent Bolloré, who had appropriately merged its thematic channels in exchange for a position of 5% shareholder, publicly and successfully opposed the appointment of a new German CEO leader approached by Fourtou, Thomas Rabe, the former Bertelsmann's CEO. According to the press Bolloré wants to replace Jean-René Fourtou as soon as possible in his boots of Almighty monitoring Chairman and successfully obtained the vice-chairmanship.

For Proxinvest there were three lessons:

First, the separation of functions at the top must be real and not apparent, the strategy should be proposed by the Executive Management and not by the Supervisory Board or its Chairman.

Second, the differing business models should not be unnecessarily merged and the spin-off of assets, as the recent Accor-Edenred and Carrefour-Dia mergers demonstrated that it was inexpensive and efficient for shareholders, when the split of business is real. 

Third Bolloré takes today credit for a demerger he still opposed on Monday this week. He is clearly attempting to fully control Vivendi and abuse the company as he abuses Havas with uncontrolled related party transactions. Shareholders of Vivendi should beware. 

                                                                                                                                                                                                                     P.H. Leroy,

Paris, September 12, 2013