France Telecom SA’s board voted to keep Chief Executive Stephane Richard in the top job after he was charged last week with fraud linked to his time at the French finance ministry five years ago, reports Bloomberg.
President Francois Hollande yesterday said the state, the company’s biggest shareholder with a 27 percent stake and three members on the board, would vote to keep him as chief. Richard also had the support of employee shareholders of France Telecom, also known as Orange.
The charges “don’t call into question the CEO’s capacity to carry out the management of Orange fully and efficiently,” the company said in a statement today.
With the board’s ruling, France Telecom averted a third change at the helm in less than a decade at a time when the former state-owned monopoly faces price wars at home and political turmoil in some markets overseas. The 51-year-old Richard was brought in to deal with a series of employee suicides that unions linked to a reorganization under his predecessor Didier Lombard.
“As long as he can function as chief executive, he should stay,” Hollande said in an interview on M6 television yesterday. “If his legal problems one day prevent him from carrying out his functions, then the conditions will have changed.”
France Telecom, which was the worst performer on the benchmark CAC-40 index last year, rose 3.1 percent today to 7.59 euros in Paris.
“Maneuvering France Telecom-Orange is like driving a really big ship,” Benoit Maynard, a Paris-based analyst for Natixis Securities, said before the board’s vote. “Richard has managed to do quite a few things right, including developing the company abroad.”
France Telecom’s 15-person board includes three directors elected by workers and one appointed by employee shareholders. Other members include France’s first woman astronaut Claudie Haignere and former Carrefour SA (CA) Chairman Jose Luis Duran.
Questions about whether Richard would keep his job had arisen after French Industry Minister Arnaud Montebourg on June 6 - before he was heard by judges - was cited by Le Monde as saying Richard should quit his job if charged, a statement he later denied having made.
The fraud charge against Richard stems from the time when he was chief of staff for then-Finance Minister Christine Lagarde in former President Nicolas Sarkozy’s government - between 2007 and 2009.
The charge, related to a dispute that began in 1993 between a state-owned bank and French businessman Bernard Tapie, is turning into a distraction for the phone carrier as it strives to reverse falling sales. France Telecom is contending with price wars in France and political turmoil in countries like Egypt.
Tapie, who endorsed Sarkozy’s successful presidential effort in 2007 and his failed re-election bid in 2012, won a 385 million-euro ($509 million) arbitration award in 2008, ending a dispute with the government over his company’s sale of German sportswear brand Adidas AG in 1992. Tapie accused then-state-owned bank Credit Lyonnais of cheating him in the sale.
Lagarde, now managing director at the International Monetary Fund, in her role as finance minister, didn’t appeal the arbitration decision, saying “a very large majority” of the money would return to the state through the creditors’ claims.
Read more of this report from Bloomberg.