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Phitrust

What is going on with Vivendi’s governance?

Over the last year, Vincent Bolloré, Chairman of Vivendi’s Supervisory Board, has been all over the media and busy on the operational front, bringing about significant changes to strategy, selling off stakes, buying shares in new companies (such as Ubisoft and Telecom Italia), and getting directly involved in issues, for example at Canal Plus. Like many observers, we have a few questions about governance at Vivendi at the moment, and about operational control (although the Bolloré group is the leading shareholder, it only has a minority stake).

The company’s articles of association clearly distinguish between operational management (Board of Directors) and control (Supervisory Board). According to the legal structure validated by the general meeting of shareholders, the Chairman of the Supervisory Board should not play any operational role.
This raises questions as to the control of the company by a minority shareholder – which is not a founding shareholder and which has not made a public bid to take over the business. It also leads to some unusual cases of potential conflict of interest: for example, Vivendi came to the rescue of the Bolloré group by taking a stake in Telecom Italia, in which Bolloré is already a shareholder, presumably with the goal of taking over the company.
Last year, as Bolloré pressed on with a creeping takeover, we highlighted the risk of a conflict of interest regarding the Bolloré group’s ownership interests, most notably with Havas Advertising which, in the case of synergies or a merger, could lead to complex situations where the interests of the two parties could well diverge.
The Supervisory Board should fulfil its role before the shareholders and employees to guarantee fair operations between two companies held – for a majority or a minority stake – by the same shareholder. This is simply not possible if the Chairman of the Supervisory Board is not a recognised independent figure. This means that if Mr Bolloré wants to play an active role, he should be Chairman of the company’s Management Board. That is unless the Bolloré group makes a public bid for Vivendi to take it over officially, something that the shareholders would be called to rule on.
Some will say that this is mere legal wrangling and that Vivendi’s objective is to succeed in its strategic transformation, of which Mr Bolloré is the chief authorising party. There is no disputing that, but as Bolloré only has a minority stake, there is no reason for him not to comply with the corporate governance voted on by the shareholders more than fifteen years ago.
The sustainability of our finest companies obviously depends on the success of the strategies they implement, but also on compliance with the rules of governance that bind all stakeholders. Otherwise, the Paris marketplace would become something of a “lawless zone” where anything goes as long as no one speaks out!
Shareholders with a majority stake are entitled to demand compliance from the group’s current governance if Vincent Bolloré does not make a public bid to take over the group. But will they do so?

Olivier de Guerre
Phitrust

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