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| Activists` ruthless streak shakes French boardrooms |
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This has been something of a week for activist shareholders in France. On Sunday, Philippe Germond, the chief executive of computer services group Atos Origin, was sent packing and the next day it was the turn of Carrefour's youthful boss, José Luis Durán, to take the fall for the hypermarket group's underperformance.
In both cases the relationships between management and shareholders had been difficult: investment funds PAI, Centaurus and Pardus in the case of Atos and Bernard Arnault of LVMH and Colony Capital in Carrefour. Although initially the chief executives seemed to have won a certain reprieve, in the end the funds proved ruthless.
Their success in a cosy business world where the establishment often protects its own against unwelcome outsiders is raising questions about a new wave of activism at other companies where management has been under pressure.
Take Valeo, for instance. Less than two years ago the car parts maker faced pressure for a shift in strategy from Pardus, the US investment fund that took part in the Atos coup. Thierry Morin, Valeo's executive chairman, seemed to have contained the threat by garnering enough support to limit Pardus, with its 20 per cent stake, to just one board seat. Nonetheless, things are changing. A strategic committee has been set up, as was done at Atos, to review the group's direction.
Interestingly, the committee was set up last month, only after questions resurfaced about Mr Morin's management and the company's governance.
Colette Neuville, the respected minority shareholder activist, has taken Mr Morin to task for failing to tell shareholders who were voting on a pay package this summer that he already had a golden parachute dating from his time as chief executive.
Mr Morin rightly gave up entitlement to two golden parachutes after Ms Neuville raised objections. But some investors are still unhappy with the performance criteria in the current package, which would entitle him to three years base salary should he be asked to go. True, the auto industry is in dire straits, but Ms Neuville believes that, even taking this into account, performance targets remain too soft.
Nonetheless, the package is a done deal. Except that Ms Neuville does not intend to give up. There remains the question of why shareholders were not informed about the second pay package, either by Mr Morin or by the board, if they were aware of it.
Meanwhile, Pardus remains largely isolated on the board. So it is unlikely to be able to push through in the short term any of the big changes it might hope to achieve.
But that does not mean Mr Morin will have as much freedom as in the past. The fact that the remuneration committee has been strengthened to a governance committee is a clear signal that he has been put on watch.
Hyperactive Hypo
Over in Germany, Hypo Real Estate has of late been in a really hyper state. The formerly sedate German property lender nearly collapsed last month before being bailed out, at the second attempt, with €50bn ($63bn) of liquidity guarantees from the German government and a banking consortium. Since then it has shed top management, including the chairman and, this week, more than two-thirds of its supervisory board. Eight out of 11 members have stepped down.
That is a highly unusual degree of upheaval in a German boardroom and is no doubt pleasing to anyone who wants to see more responsibility for a company's poor performance fall on the people in the top positions. The notable casualties of the cull include no less a figure than Hans Tietmeyer - a renowned president of the almighty Bundesbank in pre-ECB days.
Yet, the change is probably less a harbinger of a widespread change in attitudes in Germany than a sign of how far Hypo Real Estate's rescuers are calling the shots. These board changes are part of the price for Hypo Real Estate's bail-out.
Michael Endres, expected to become chairman, used to be on Deutsche Bank's executive board, while other new members have held key positions at German banks. And three new top executives have close ties to Deutsche and Commerzbank, including Axel Wieandt, the new chief executive, who was recruited from Deutsche.
It all suggests Germany's banks are wisely doing what they can to protect their interests in Hypo Real Estate. But it will be interesting to see whether those interests chime with those of Christopher Flowers, the US financier, whose JC Flowers group led a consortium in buying almost 25 per cent of Hypo Real Estate this year.
Mr Flowers and his consortium paid far more for their stake than Hypo Real Estate is now worth. He and two colleagues will remain in the boardroom but are bound to wonder whether the task of recouping their investment just got even tougher.
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