Monday, April 29, 2013

Boardroom Tussle over Strategy

Accor SA, Europe’s largest hotel operator and owner of the Pullman, Novotel, Sofitel, Mercure and Ibis brands had sacked Chairman and CEO Denis Hennequin (left). On April 23, 2013, Accor’s Board of Directors met at Hennequin’s request with all Directors in attendance and it was unanimously decided that his position would be terminated with immediate effect – and it was all because he had disagreed with the board over strategy directions.

According to a Reuters report, there was disagreement over how quickly Hennequin was selling off assets to boost returns. Accor's top two shareholders, private equity firm Eurazeo (EURA.PA) and US investor Colony Capital, which own a combined 21.4 percent of the capital and command four board seats, want the chain to accelerate the sale of hotels it owns in favor of management contracts or franchises. Additionally, Hennequin had also resisted pressure to split its property holdings from its hotels business.

The company has plans to open 30,000 rooms a year through 2016 and by that time would operate 40 percent of its rooms under franchise agreements and 40 percent under management contracts. Accor will only own or lease 20 percent of the rooms.

Whatever the reason, a boardroom tussle over strategy that resulted in the removal of the Chairman and CEO is a very uncommon predicament.

As Don Sull, Professor of Management Practice in Strategic and International Management, the Faculty Director of Executive Education at the London Business School, and author of The Upside of Turbulence, pointed out that there are rare cases where the strategy may be putting the company at such risk that you may want to consider leaving. These are cases where there are ethical concerns or the company may fail if the strategy is pursued in its current form. If faced with a strategy that is severely flawed or that you just can't comfortably support, you may want to consider quitting (Amy Gallo’s “When you think the strategy is wrong” at blogpage http://blogs.hbr.org/hmu/2010/02/when-you-think-the-strategy-is.html, published February 04, 2010).

I am reminded that Hennequin was sacked; he didn't resign. So there's more than meets the eye on this issue. Having expressed "reservations" about the plan to speed up the implementation of the so-called strategy, he then summoned the Board. I can only deduce that he must have had grave misgivings. In any case, the information at Accor is sketchy. It is pertinent to note that his predecessor was ousted in 2010 over "strategic differences" with the board as well. I am going to keep tabs on Accor and see what happens next.

In an SPL game yesterday, three goals in 10 minutes secured a 3-1 victory for Motherwell over newly-crowned Scottish champions Celtic.

Gary Hooper opened the scoring for Celtic in the 40th minute but Henrik Ojamaa levelled five minutes later. Michael Higdon put Motherwell ahead from the penalty spot five minutes after that after Celtic defender Charlie Mulgrew was adjudged to have fouled Ojamaa just inside the box. And in the 55th minute, right-back Mikael Lustig headed Tom Hateley's cross against his own post with Celtic goalkeeper Fraser Forster seeing the ball come off him and into his own net.

No comments: