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Messier's downfall herald's a new era

Jean-Marie Messier had all the power of an American chief executive officer and the perks that go with it, from the freedom to splash out US$77 billion in acquisitions to the ability to hop the Atlantic in a Falcon 900 jet plane.

Messier enjoyed the job security of a French executive, too: A board of peers shielded him this year even as shares in his company, Vivendi Universal SA, slid 65 percent.

Now, the former Lazard LLC banker who said French companies were badly managed is paying the American price for a failed strategy. His ouster may do more to revolutionize France Inc than all his talk about corporate governance put together.

"This marks the end of the all-powerful executives who were ruling over their companies without accountability," said Jerome Forneris, who helps manage 4.3 billion euros (US$4.2 billion) at Banque Martin Maurel, including a stake in Vivendi. "This creates a precedent that links a CEO with the stock market performance of a company."

Among the chief executives who may now be exposed, he and other fund managers said, are Serge Tchuruk of phone-equipment maker Alcatel SA -- also a Vivendi board member -- and Michel Bon of France Telecom SA. Their companies, along with Vivendi, lost 481 billion euros of market value since their peak in 2000, double the size of the Swiss economy.

Messier's tenure at Vivendi offers a case study in what happens when Europeans import US-style management into nations that lack counterweights to it, investor activists and business professors said.

In the US, ownership of large publicly traded companies is usually dispersed among millions of investors, leaving chief executives unconstrained by any one big shareholder. American CEOS are disciplined instead by their boards, proxy votes, lawsuits and, above all, their stock prices.

In France, as elsewhere in Europe, ownership is more concentrated. About 40 percent of the companies in the nation's benchmark CAC 40 index have an investor who owns more than 33 percent.

Messier himself scorned this model of capitalism.

"The French are well placed to know the damage that can be caused by capital being distributed based on criteria that have nothing to do with good management," he wrote in his autobiography.
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