When governance best practices cause conflict: Governance conflict,

internal management and shareholders response

Konan Anderson SENY KAN
Assistant Professor
Groupe Sup de Co La Rochelle
102 rue de Coureilles Les Minimes
17024 La Rochelle Cedex 1
Tel : 0546517700
Email : senykanka@esc-larochelle.fr

Sami EL OMARI
Professor
Groupe ESC Toulouse
20 Boulevard Lascrosses
31067 Toulouse Cedex
Tel : 0561294810
Email : s.elomari@esc-toulouse.fr
Abstract
Beyond the normative approach, the analysis of corporate governance throughout its
conflict is more informative and able to give further comprehensive explanation of its
performance. In the corporate governance research, the separation of the Chairman and
Chief Executive Officer (CEO) roles is one of the major mechanisms examined to ensure a
better alignment of corporate stakeholders interests. However, this device can be also a
source of conflict within the top management. In this paper, we combine qualitative
(content analysis) and quantitative methods (event study) to analyze the way stakeholders
manage and react to a governance conflict which occurred within the Vinci Groups top
management. This paper traces this conflict and puts forward different strategies developed
by stakeholders to deal with it. Conflict management finds its expression in an internal and
external mobilization of stakeholders in order to protect them against expropriation.


Keywords: Corporate governance CEO duality Governance conflict - Content analysis -
Event study.

2
INTRODUCTION

The board of directors effectiveness has become a pivotal concern in corporate governance
debates. According to Heracleous (2001, p. 165) this is because Corporate collapses, fraud
cases, shareholder suits or questionable strategic decisions are attracting attention to the top
decision-making body of the corporation; the board of directors. One of the well-documented
monitoring mechanisms to deal with such an issue is discussing CEO duality
1
(CEO and
Chairman of the Board roles are assumed by the same person) as opposed to the separation of the
CEO/Chairman roles. The most prevalent argument arises from agency theory which concludes
that an independent board structure improves the boards control over the management. Thus,
under the agency theory assumptions, the Chairmans role should be dissociated from that of the
CEO. Generally, in most of the governance guidelines and recommendations of many financial
institutions, separation appears to take precedence over duality. In France, this trend is adopted
through the Vinot 1 and 2 (1995, 1999) and Bouton (2002) reports. It is also endorsed by la Loi
Nouvelles Rgulations Economiques
2
of May 15, 2001. On the other hand, a critical alternative
view based on the stewardship theory supports CEO duality.
This theoretical opposition is relevant in the debate related to the organizational
arrangements that prevent conflictual situations between firm stakeholders. It also leads one to
question which arrangement between the separation of the CEO/Chairman roles and CEO duality
is best able to effectively prevent conflicts in firms. In the field of organizational behavior,
scholars define conflicts as the parties awareness of opposition of goals, values, opinions, or
activities (De Reuver 2006, p. 589). In this perspective, it appears that any organization is
subject to the divergence of interests between its stakeholders. In this sense, corporate
governance mechanisms are implemented to prevent and/or to minimize costs associated with
3
these diverging interests. However, a corporate governance mechanism like the separation of the
Chairman and CEO roles may be the cause of conflictual situations. That is, it does not perform
in the way expected. In other words, a conflict may occur while preventive mechanisms exist. We
call this eventuality governance conflict.
Although shareholders and managers interests incongruence leading to conflicts is well-
documented, such conflicts issues involving groups of firm stakeholders are less examined. This
gap is due to a tradition of research in corporate governance based on a narrow vision of the
agency theory. However, the split of the CEO and Chairman roles shifts the conflict matters
(inherent to the objectives incongruence) to another level. Corporate governance debates in
previous research admit that only two groups of individuals - shareholders and managers - are
subjected to conflicts in a firm. While adopting stakeholders approach of corporate governance,
we can reasonably extend conflicts issues to all individuals related to the firm. More precisely,
we contend that conflicts may occur not only among groups composing the stakeholders but also
within these groups thereafter called in-group conflict. Regarding, the management structure,
Kahn et al. (1964)
3
identify two key types of conflicts. One, called person role conflict is
defined as orientations divergence of the CEO from the other members of the board. The other,
called inter-sender role conflict reflects disagreement among board members. But, from the
agency theory perspective a lot of attention has been paid to shareholders-managers conflicts. So
one may ask the following question: is each group composing firm stakeholders exempt from
conflicts? By examining the stylized facts of our case study within Vinci, the response is no.
The case studied here enlarges the narrow perspective of agency theory by analysing an in-
group conflict opposing the Chairman of Vinci and his CEO. Vinci is a relevant case study
in the sense that its former Chairmans resignation on June 1, 2006, ending a public power
struggle with the company's CEO, highlights one of the core corporate governance issues,
4
particularly that of its mechanisms performance. Also, this event having been given a lot of
media coverage gives us access to an important corpus for a qualitative study. Indeed, the
separation of the Chairman and CEO roles is a corporate governance device by which the former
is supposed to monitor the latter. But although the separation of the Chairman and CEO roles
ends a long time period of CEO duality, it may create an outbreak of tensions. The Vinci group
case study is illustrative of such an eventuality.
Based on a combination of qualitative (content analysis) and quantitative (event study)
methods, this paper analyses the governance conflict which happened in the Vinci Group
4
- the
French company which is the worlds leading integrated construction and concession group -
after the separation of the Chairman and the CEO roles. This empirical device is not meant to
break the demarcation line between the qualitative and quantitative approaches. We use both
methodological approaches as complementary ones in which the qualitative approach helps lead
to an in-depth understanding of the context of the study. It also gives meaning to the study as a
whole. Through this empirical device, our paper aims to respond the following research question:
how do governance reputed best practices come to be a source of governance conflict? We
answer this question according to two levels of analysis:
- Firstly, we trace and analyse the governance conflict. This helps us to identify three stages in
conflict duration (ranging from its occurrence to its resolution).
- Secondly, we try to capture shareholders responses to this governance conflict. The perception
shareholders have of this conflict influences their reaction. One of the most important reactions is
expressed through the stock market. So, the event study is the most relevant methodological tool
to capture this reaction.
5
This paper is structured in three parts. The first reviews the literature on the several approaches to
CEO duality. In the second part, we present our theoretical framework. The last one is devoted to
the empirical research results which are discussed in the conclusion.

1. CEO DUALITY: THE PROS AND CONS
Basically three approaches help to understand the need to separate (or not) the chairman and CEO
roles. This following section shows their oppositions.

1.1. Agency theory perspective of CEO duality
Agency theory assumes that the separation of ownership and control (Fama and Jensen 1983) of
managerial firms can lead to conflicts of interest between managers and owners. Because an
agency problem occurs when there is incongruence between an agents and a principals goals
(Eisenhardt 1989a). In particular, scholars (Smith 1776; Berle and Means 1932; Jensen and
Meckling 1976) acknowledge that relationships between executives and shareholders may be
sources of conflict, depending upon the separation of decision and risk-bearing functions. Taking
for granted that conflicts are source of inefficiency (due to agency costs), it raises the issue of
their prevention and reduction. In particular, Fama and Jensen (1983), in their analysis of the
organizational decision-making process, conclude that the separation of decision management
(the initiation and implementation of decisions) from decision control (the ratification and
monitoring of decisions) in the organization is the major device that limits the costs due to
separation of ownership and control. Consistent with our research topic, this assumes that the
solution to the potential agency problems may be found by delegating the task of decision
6
management to the CEO, and decision control to the board. Thus, the CEO has primary
responsibility for initiation and implementation of strategic decisions, while the board is
responsible for ratifying and monitoring decisions taken by the CEO. So, based upon this theory,
it is suggested that CEO duality reduces the monitoring effectiveness of the board over
management, and supports separation of the CEO/Chairman roles.
In corporate governance literature, some authors (Mizruchi 1983; Walsh and Seward 1990)
assume that the Board remains the primary internal control mechanism for aligning the different
interests of shareholders and top management. In this case, the proponents of this argument
(Hambrick and Finkelstein 1987; Harrison et al. 1988) assume that, when an individual serves
simultaneously as Chairman and CEO, he acquires a wider power base and control authority.
According to this idea, Morck et al. (1989) conclude that the boards control over him will be
weakened. This change in the magnitude of the boards control promotes the CEO's pursuit of his
agenda (Boyd 1995), which increases the extent of his discretion at the expense of other
stakeholders. Accordingly, Lorsch (1989)
5
argues that dual leadership (Brickley et al. 1997)
separation of the CEO and Chairman roles - allows firms to avoid some crises. In addition,
Weidenbaum (1986) postulates that it also facilitates more objective firm assessment and
managers performance. Thus, proponents of agency theory propose that the combination of the
CEO and Chairman roles lessens board control, and negatively affects firm performance (Boyd
1995). Hence, the separation of the CEO/Chairman roles is consistent with the agency theory.
A critical review of that approach calls into question the implicit assumption of agency theory
that executives are opportunistic agents who will capitalize on whatever improves their personal
welfare at the expense of shareholders.

7
1.2. Stewardship theory perspective of CEO duality
This theory addresses the limitations of the agency theorys perception of CEO duality.
Donaldson (1990) argues that agency theorists fail to integrate related research in organizational
behaviour and organizational theory. So, according to that criticism, stewardship theory sets a
moral tone by viewing managers as inherently trustworthy and unlikely to appropriate
organizational resources for their own ends (Davis et al. 1997). In this rationale, CEO duality is
seen to foster strong and unified leadership, rather than flagging Board independence from
management and its monitoring role (Boyd 1995). It is then considered that the desire to
maximize income, for example, might be counterbalanced by a much larger range of human
motives, including needs for achievement, responsibility, and recognition, as well as altruism,
belief, respect for authority, and the intrinsic motivation of an inherently satisfying task
(Donaldson 1990, p. 372). Thus, Donaldson and Davis (1991) proposes a CEO who, far from
being an opportunistic shirker, essentially wants to do a good job, to be a good steward of the
corporate assets (Donaldson and Davis 1991, p. 51).
So, duality refers to a single leader. It is supposed to speed up the response to external events he
is expected to confront. This fast response is revealed in a greater knowledge of the firm and also
in a greater commitment to the organization. Proponents of duality also characterize the board
chair position as being relatively less powerful and more ceremonial and symbolic than the
CEO position (Harrison et al. 1988, p. 214).
The stewardship theory suggests that CEO duality facilitates effective action by the CEO, and
consequently leads to higher performance. So, the stewardship model is consistent with other
research on corporate governance (Boyd 1995, p. 304). In addition, the stewardship theory pulls
some criteria from resource dependence one.
8
Resource dependence theorists (Pfeffer and Salancik 1978) relate the CEO duality issue to
the management of uncertainty (Boyd 1995). In fact, resource dependence theory proposes that
corporate boards are a mechanism to manage external dependencies and reduce environmental
uncertainty. This theory also proposes that characteristics of an effective board will vary as a
function of environmental conditions. This perspective suggests that CEO duality might actually
improve organizational performance in certain contexts. Pfeffer and Salancik (1978) argued that
leaders with greater discretion would be better able to implement their strategic decisions, and
more likely to overcome organizational inertia. Duality would increase CEO discretion by
providing a broader power base and control authority, and by weakening the relative power of
other interest groups (Hambrick and Finkelstein 1987, p. 379). Pfeffer and Salancik (1978) also
argued that a single leader will improve responsiveness to external events, and facilitate
accountability of decision making. Support for this rationale is provided by Harrison et al.
(1988), who found that duality facilitated replacement of the CEO. Unlike agency theory,
resource dependence and stewardship perspectives support CEO duality. Nevertheless, Boyd
(1995) sees these different theoretical perspectives as alternatives that he combines in a single
analysis which highlights the uncertainty.

1.3. Commingling theoretical perspectives of CEO duality
Boyd (1995) notes that the aforementioned rationales are likely to be complementary because
they pertain to a continuum. Therefore, he proposes commingling theoretical perspectives of
CEO duality, the core assumption of which is based upon environmental uncertainty. He draws
his model on the following underlined question: under what circumstances does the
consolidation of power and decision-making afforded by duality outweigh the potential abuses
9
described by the agency model? (Boyd 1995, p. 304). This author proposes that the main factor
that links these divergent perspectives of management structure is environmental uncertainty.
Environmental uncertainty is a multidimensional construct composed by munificence (measures
the abundance of resources in the environment), dynamism (measures environmental volatility),
and complexity (measures inequalities among competitors). The effectiveness of CEO duality is
then expected to vary at high and low levels of uncertainty for each environmental dimension.
This analysis contributes to the debate without indicating which of the two forms of
managerial structures the most effective solution is. Thus, Boyd concludes his study by the
following statement:
Case studies of the CEO's relationship with board and TMT [Top Management Team]
members could answer several salient questions. For example, how much discretion does
the CEO acquire when assuming the board chair? Does the CEO evenly gain power
relative to both the board and TMT? Does the elevated status improve a CEO's ability to
acquire scarce resources? Case studies could also be applied to dual and independent
board structures in an industry which experiences a sudden discontinuity or shock. (Boyd
1995, p. 309)
Based on Boyd (1995)s argumentation, we propose a duality framework that takes into account
environmental uncertainty for the purpose of our paper (See Figure 1, p.10). We suggest that in a
higher uncertainty context, CEO duality (supported by stewardship theory) would be more
efficient than Chairman/CEO roles separation (agency theory). Conversely, at the bottom of this
figure, that is in lower uncertainty circumstances, we argue that agency theory recommendation
of separation may contribute to governance efficiency to a greater extent. Finally, in the
assumption of a stable environment no higher or lower uncertainty it becomes difficult to
10
anticipate the effectiveness of one or the other of the two rationales. This indecision corresponds
to the central area of the figure that we call ambiguity area.

Figure 1: Duality framework under environmental uncertainty










2. THEORETICAL FRAMEWORK
Following Boyd (1995)s continuum of CEO duality, it is relevant to avoid the systematic
opposition of the normative explanations provided by the agency and stewardship theories. Thus,
an in-depth comprehension of governance conflict requires a focus on the role of each
stakeholder involved. So, we mobilize Aguilera and Jackson (2003)s actor-centered model
which helps one to understand how conflicts may occur among the different groups of
stakeholders.

CEO duality
(Stewardship theory)
High uncertainty
Low uncertainty
Duality: is a good means of
reaction
An inefficient protection of
stakeholders
Separation: good
distribution of power

Ambiguity area
CEO/Chairman: inefficiency
of separation
Chairman/CEO separation
(Agency theory)
11
Table 1: Institutional domains related to the three groups of stakeholders
Groups of
Stakeholders
Capital

Definition: "Capital is the
stakeholder group that holds
property rights, such as
shareholders, or that otherwise
makes financial investments in
the firm, such as creditors.

Labor

Definition: Labor refers to
employees ability to
influence corporate
decision making and to
control firms resources.


Management

Definition : Management
refers to managers considered
as the stakeholders occupying
positions of strategic
leadership in the firm and
exercising control over
business activities
Institutional
domains
- Property rights
- Interfirm network
- Financial systems
- Representation rights
- Union organization
- Skill formation
- Ideology
- Career
Source: According to Aguilera & Jackson (2003)

Basically, Aguilera & Jacksons model helps stress the dimensions of corporate governance
which consist of three groups of stakeholders
6
: capital, management, and labor with their
respective institutions shaping the diversity of the relationship (See Table 1, p.11). Thus, we
admit that the outcome of the firms actions reflects the dynamics of the relationships existing
among the stakeholders comprising institutions. The model examines two dimensions of
managers identities and interests in relation to the firm. Following the first dimension, managers
autonomy toward the firm is opposed to their commitment. Their managerial control conceptions
- financial versus functional - is the second dimension.
For the first dimension, the whole argument of Aguilera and Jackson (2003) is grounded on
stewardship theory. For the advocates of this theory (Davis et al. 1997, p. 24-25) identification is
an abstraction by which managers define themselves regarding their membership in a particular
organization by accepting the organization's mission, vision, and objectives producing a
satisfying relationship. Thus, this identification makes them take credit for organizational
successes. At the same time, they also experience frustration for organizational failures. So
managers who identify with an organization are willing to work toward the organization's goals,
solve its problems, and overcome barriers that are preventing the successful completion of tasks
12
and assignments. They are eventually motivated to use their own initiative to promote both their
organization and principals success. This reasoning somehow echoes the cognitive analysis of
conflicts proposed by Wirtz (2002). Indeed, his approach to conflict is based upon mental
patterns which are defined as subjective representations of the reality whose diversity can be a
source of conflict. The author emphasizes this idea by stating: [], two managers, A and B, may
theoretically have different perceptions of their duties as loyal stewards if they do not share the
same mental pattern with respect to the interests to be privileged. But even when they agree on
the dominant stakeholders, there still may be conflict. (Wirtz 2002, p. 13)
On the basis of identification, Aguilera and Jackson (2003) make a distinction between
autonomous managers and committed ones. The former reflect managers independence from
specific relationships within the firm, whereas the latter are distinguished on their dependence
upon firm-specific relationships to pursue their interests. The authors state that by virtue of their
autonomy, managers have increased abilities to enforce hierarchical control in the firm.
In accordance with the second dimension, two conceptions of control are opposed: a
financial one (control by financial mechanisms extensively put forward by agency theory) and a
functional one (control based on functional skills, abilities or personal involvement and
leadership).
These dimensions help understand that neither the management, nor either of the other two
groups of stakeholders, is homogeneous. In other words, managers identities and interests in
relation to the firm may diverge and, in turn, generate objectives incongruence. For example,
Carpenter and Fredrickson (2001) (pointing out top management team
7
members diversity in
terms of the breadth of their international experience and the heterogeneity of their educational
backgrounds and firm tenures) argued: [] excessive heterogeneity may lead to interpersonal
13
conflict and communication breakdowns [](Carpenter and Fredrickson 2001, p. 535). Given
these arguments we suggest the following proposition:

Proposition 1 - The incongruence of managers identities and interests in relation to the
firm leads to conflicts amongst them.

It is considered that the two dimensions of management in corporate governance are
influenced by two major institutional domains, namely managerial ideology and career. First,
managerial ideology helps to understand how managers legitimate their authority, perceive
organizational problems, and justify their actions. Ideologies impact the autonomy or
commitment of managers by shaping the degree of hierarchy or consensus in routine decision
making.
Second, the managerial career is contrasted in the opposition between closed and open labor
markets. This framework helps to specify how the role of each stakeholder toward the firm is
shaped by different institutional domains and thereby generates different types of conflicts and
coalitions in corporate governance. (Aguilera and Jackson 2003, p. 450). According to our
objective, this implies that the incongruence of the CEO and Chairmans identities and interests
will generate conflicts and coalitions in corporate governance.
The overall model shows that three kinds of conflicts and different coalitions are inherent to
the stakeholders interaction. First, when the interests of capital and management oppose those of
labor, particularly regarding distributional issues (e.g., wages), this conflict is labelled class
conflict. Sources of such conflict are trade-offs between wages and profits, capital reinvestments
and paying out dividends or levels of employment and shareholder returns. Second, when the
conflict involves labor and management (both are called insiders) opposed to capital (called
14
outsiders), it is called insider-outsider conflict. In this case, the conflict may occur because the
insiders devote themselves to empire building or to the development of strategies opposing
hostile takeovers. Third, when the capital and labor interests are opposed to those of
management, the conflict that arises is called accountability conflict. In this latter case, the aim
of the coalition formed by capital and labor may be to remove managers or to demand more
transparency.
Considering the dynamics of the model, the three groups of stakeholders may form a variety of
coalitions in order to preserve the collective welfare, regardless of the group to which an
individual pertains. By analyzing the way top managers handle their interpersonal grievances,
conflicts, and disputes in an executive hierarchy, Morrill (1989, p. 396-397) argues that when
executives have grievances against their bosses, they [] may use their secret complaints
8

occasionally to mobilize allies [] Thus, we provide a second proposition:
Proposition 2 - Stakeholders conflicts lead to the establishment of new coalitions supporting
the protagonists.
A conflict has a certain influence upon the organization. Pondy (1969) reviewed
organizational conflicts by distinguishing frictional conflicts from strategic ones in accordance
with their respective impact on organizational structure. A frictional conflict is seen to be a minor
conflict that does not alter the organizational structure. More precisely, he specifies that [] the
pattern of authority relations and the allocation of resources and of functional responsibilities do
not change as a result of such conflicts Pondy (1969, p. 499). Conversely, a strategic conflict is
a conflict that may occur deliberately [] to force the organization to reallocate authority,
resources, or functional responsibilities. Pondy (1969, p. 501). Thus, the outcome of this kind of
conflict is a change in the organizational structure. This rationale is rooted in Assaels (1969)
15
argument for constructive change induced by conflict. In line with this idea, we suggest the
following proposition:

Proposition 3 - Conflicts are instrumental in the reconfiguration of corporate governance
devices.

In turn and according to Pondy (1969), a strategic conflict would push stakeholders to take
sides. But the reaction of stakeholders is dependent on their capacity of mobilization (Rowley and
Moldoveanu 2003). Its level is related to stakeholders expected part of the value created by the
firm. In this context, investors in the stock market are a good example of stakeholders who would
use this arbitrage (mobilization versus expropriation) in their relation to the firm. That leads to
the last proposition:

Proposition 4 - Investors would react to a governance conflict as a mean to protect
themselves against expropriation.

These various proposals are being confronted with a case study which provides an example
of an organizational conflict impacting on organizational arrangements, particularly on corporate
governance devices.

3. VINCIS GOVERNANCE CONFLICT

Vinci is a French company and the worlds leading integrated construction and concession group.
Formerly known as Socit Gnrale des Entreprises (SGE) and founded in 18999, it spun off
16
from parent Vivendi (formerly Socit Gnrale des Eaux) in 1999. In 2000, SGE became Vinci.
Also in 2000, Vinci merged with the GTM10 group. With a presence in more than one hundred
countries, Vinci operates as a holding company for its subsidiaries, structured in four primary
business areas with many units. The VINCI Construction unit is one of the world's largest
building, civil engineering, and maintenance contractors. VINCI Energies is a French leader in
electrical engineering and information technology. Eurovia (the major operating unit of the
VINCI Roads division) is a top European roadworks and urban redevelopment company. VINCI
Concessions (includes Cofiroute, and Groupe ASF11 - ASF and Escota - acquired in 2005), one
of the world's largest concessions companies, builds and operates car parks, toll roads, and
airports. VINCI Park manages parking facilities in about a dozen countries.

3.1. Understanding the conflict: internal management
The first three propositions are tested through a qualitative approach (Eisenhardt 1989b) based on
a case study (Yin 1981, Miles and Huberman 1981). Several authors have resorted to the case
study in addressing issues of research related to the corporate governance (Wirtz 1999b; Catelin
and Chatelin 2001; Chatelin 2001; Pochet 2001). A survey by Wirtz (1999a) also puts forward
the potential of the use of a case study involving corporate governance as a research object.
Moreover, in Organizational Theory and Methodology, Jensen (1983) highlights the interest of
qualitative methods when organizational issues, in which corporate governance takes a great
place, are addressed. Our case study is based on 125 articles collected from the Factiva database,
in six French daily newspapers (Le Figaro, Les Echos, Libration, Le Monde, La Tribune,
LExpansion), from May 31, 2006, to March 26, 2007. We collected this corpus during the
summer of 2007.
17
In June 2006 - six months after the separation of the CEO and Chairman roles, a conflict
arose between the CEO and the Chairman. We trace this conflict with an underlined objective
which is to respond to the following questions: (1) how did that conflict occur? (2) how was its
solution found and what was its impact on the corporate governance devices? Each of both
questions is related to a stage of the conflict process.

3.1.1 First act: the power struggles context
Antoine Zacharias resigned as Chairman of Vinci on June 1, 2006. His departure followed a
dispute with CEO Xavier Huillard, who had accused Antoine Zacharias of taking advantage of
his position to make excessive personal financial gains. How did that conflict begin?
The conflict between Antoine Zacharias and Xavier Huillard dates back to January 2006. The
Vinci Groups press release of June 15, 2005 announced that during the Board of Directors
meeting on June 14, Antoine Zacharias announced to the Board his intention to separate his two
functions as Chairman and CEO of Vinci. The CEO and Chairman roles split would be effective
on January 9, 2006. Antoine Zacharias would retain only the function of Chairman, and he
proposed to the Board the appointment of Xavier Huillard as CEO. He also proposed that the
Board co-opt Xavier Huillard as Director when he was to take up the position of CEO. As
decided, the separation of the Chairman and CEO roles in the management structure of Vinci was
endorsed by its Board meeting held on January 9, 2006.
Xavier Huillard thus became CEO with a director mandate. Henceforth, he was in charge of the
operational responsibility of the group. By making such change, Chairman Antoine Zacharias
ensured the promotion of the one who has been his closest associate for the previous ten years.
18
Xavier Huillard graduated from the Ecole Nationale des Ponts et Chausses, one of Frances
prestigious civil engineering schools, and he spent his career in the construction industry. He was
recruited by Antoine Zacharias in 1996 to be Director of International Business. Xavier Huillard
went on to hold the positions of Chairman of Sogea (19972002), Chairman of Vinci
Construction (20002002) and Chairman of Vinci Energies (20022005), contributing to the
acceleration in the European development of the latter. He has been a senior executive vice-
president of Vinci for three years.
Antoine Zacharias had been Vincis Chairman since 1997, when the company was called SGE. In
2000, he oversaw the acquisition of GTM, which established Vinci as the worlds largest
construction group. He is seen as an emblematic Chairman with a strong legitimacy that he draws
from having made Vinci a European leader in the construction industry in just ten years.
Everyone recognizes his undeniable strategist and manager skills, which, from 1966 to 2006,
have hoisted his group to the rank of world number one of concessions and construction
companies, multiplied its turnover by 3 and its capitalization by 20
12
(Le Monde, June 3, 2006).
From the split of the CEO and Chairman roles, he retains the former role devoted to the groups
strategic and corporate governance issues.
This separation of the CEO and Chairman roles in Vincis management structure took place in
framework of the NRE Act, designed to promote better corporate governance. Antoine Zacharias
justified the appointment of Xavier Huillard as CEO by stating: The logic of my relationship
with Xavier is to reach a consensus. Therefore, there could not be any conflicting situation
between us. And if, for an investment or an appointment that he would have chosen to do, I have
no particular argument and convincing against it, his decision will prevail (Libration, June 1,
2006)
19
Nevertheless, Vinci Groups Board of Directors meeting had been scheduled for June 1, 2006
with a single item on the agenda which was the replacement of the recently-appointed CEO -
Xavier Huillard. Some time before the meeting, Vincis spokesman declared that His [the
CEOs] departure has been noted. Then, the debate would focus more on his departure
premium. Antoine Zacharias attempted to unseat his heir apparent and replace him with Alain
Dinin, the head of the Nexity property company and a Vinci board member for the past 10 years.
Indeed, the newspaper Libration of June 1, 2006 mentioned that Alain Dinin is a close friend of
Antoine Zacharias; in the 1990s, the two men were part of the La Gnrale des Eaux
13
staff , and
he is already Vincis board member. But Vincis directors would not be convinced of the merits
of this choice. Some of them would even challenge the legitimacy of Alain Dinin as CEO.
On the eve of the Board meeting held on June 1, 2006, for his appointment, Alain Dinin took into
account the reluctance of Vincis directors and declined Antoine Zacharias proposal to become
the companys CEO.
In a statement (Les Echos, June 1, 2006), Alain Dinin said, the conditions have not been met in
order for me to take on the CEO role, adding that, while Xavier Huillards departure is not
completed and the board rests in disagreement, I cannot take the proposed position
The relations between the Chairman and his CEO would suddenly deteriorate after the Board met
on February 28, 2006. The principle of a fair compensation to the chairman to recognize his
crucial role in the ASF acquisition had been decided, the amount of which was to be determined
after shareholders general meeting of May 16, 2006. This seems to have resulted in the
disagreement between the Chairman and the CEO, as Xavier Huillard opposed the estimated
bonus. However, some close associates of the Chairman assume that the conflict is due rather to
strategic divergences (Libration, June 1, 2006).
20
The CEO hired Jean Pierre Versini-Campinchi, a lawyer specializing in criminal law, sent a letter
to the Board to detail his defense, and activated all his networks within the company. In this
unprecedented letter, Xavier Huillard wrote to board members saying the Chairman was
growing unreasonably rich on Vincis back. He denounced stock options worth 250 million, a
55 million retirement package, etc. The letter was published by Le Parisien newspaper on June
1, 2006. Laurence Parisot - head of the business lobby group MEDEF (Mouvement des
Entreprises de France) - described as "scandalous" the 13 million severance packages,
supplemented by an estimated 250 million of stock options, earned by Antoine Zacharias.
According to Vincis 2005 annual report, Antoine Zacharias was the companys most highly paid
director in 2004, with gross earnings of 4.29 million. However, in addition to this, Zacharias
owned 2.32 million shares in the company and 3.59 million share purchase options. At that time,
the value of his shares was 167 million, and the options were worth 259 million, based on
Vincis then current share price.
The conflict between the two men was so intense that it impacted and divided the
directors and employees. Denis Vernoux, the director representing employee shareholders, stated:
Vincis employees and managers do not follow the board working hypotheses [ousting Xavier
Huillard] (Libration, June 1, 2006). Le Monde (June 2, 2006) also indicated that Xavier
Huillard was supported by a large part of the staff (employees and managers). Moreover, several
petitions were signed within the company to support him.
Les Echos (June 5, 2006) reported that even Vincis press service did not know who to support.
So Antoine Zacharias was forced to use DGM, one of the major Parisian communications firm, to
make statements on his behalf. For its part, the CEO chose a communication man - Mathias
Leridon - the head of Tilder. This shows that the conflict was at its height. The headlines were
accordingly very evocative, speaking of The war of leaders.
21
Le Monde (June 3, 2006) stated that, Some directors had played a pivotal role in this power
struggle: Dominique Bazy, CEO/Chairman of UBS Holding France, and Denis Vernoux, the
employee shareholders representative, which holds 8% of the capital. In contrast Antoine
Zacharias was able to rely on Alain Dinin, CEO of Nexity, at one time approached to succeed
Mr. Huillard, Alain Minc, president of AM Council (and Chairman of the supervisory board of
Le Monde) and Henri Saint-Olive, Chairman of the Saint-Olive Bank who, according to
LExpansion (June 2006) is one of the managers of Mr. Zachariass wealth.

3.1.2 Second act: the power struggles denouement and its impact on
corporate governance devices

Vincis Board meeting on June 1, 2006 decided to maintain Xavier Huillard as CEO by nine
votes against seven. Antoine Zacharias submitted his resignation from his positions as Chairman
and member of the Vinci Board of Directors in the best interests of the company and to put an
end to the troubles within its management team.

Table 2: The board composition before and after the power struggle
The board composition before the power struggle The board composition after the power struggle
Antoine Zacharias Chairman
Xavier Huillard CEO Xavier Huillard CEO
Bernard Huvelin Bernard Huvelin
Dominique Bazy Dominique Bazy
Franois David Franois David
Quentin Davies Quentin Davies
Guy Dejouany
Alain Dinin
Patrick Faure Patrick Faure
Dominique Ferrero Dominique Ferrer
Serge Michel
Alain Minc
Yves-Thibault de Silguy Yves-Thibault de Silguy Chairman
Willy Stricker
Denis Vernoux Denis Vernoux
22
The board composition before the power struggle The board composition after the power struggle
Robert Castaigne
Jean-Bernard Lvy
Henri Saint Olive
Pascale Sourisse
Total: 15 Total: 13
Source: Vincis 2005 and 2006 annual reports The grey cells in column representing the board composition after
the power struggle correspond to the resigned directors who seem to be very close to Antoine Zacharias. Independent
directors are indicated in italics.

Antoine Zacharias resigned from Vinci on June 1, 2006. Then, Alain Dinin and Bernard Val
resigned from the company on, respectively, December 8 and 31, 2006. Also, Willy Stricker and
Alain Minc resigned from Vinci on, respectively, January 29 and 30, 2007. Finally, Serge
Michel was the last one to resign from the company on February 26, 2007.
The Board accepted Antoine Zacharias resignation and paid unanimous tribute to his
achievements which, in less than 10 years, had made Vinci the world leader in concessions and
construction, notably through the successive acquisitions of Sogeparc, GTM and ASF. Since
1997, under the chairmanship of Antoine Zacharias, Vinci's revenue tripled, its net profit
increased 21-fold and its market capitalisation 20-fold. The Board of Directors elected Yves-
Thibault de Silguy Chairman and confirmed Xavier Huillard as CEO and Bernard Huvelin as
Vice-Chairman (see Table 2, p.21).
The comparison of the board of directors before and after the conflict may be discussed
around three points, namely the evolution in the board composition, the directors independence
and the evolution of the board committees composition. Concerning the notion of independence,
in the new board the independent directors were clearly identified.
At the end of the conflict the board reconfiguration appears as an evidence. In this logic, we note
that the resigned directors comprised all those who were, in addition to their lack of
independence, very closed to the former Chairman. The other resignations were justified by the
23
lack of their independence. The new Board of directors is composed of 13 members, seven of
them can be considered as independent. As the outcome of the conflict, this reflects a reduction
of the total number of directors but an increase in the number of independent directors. Now,
there are more independent directors than non-independent ones on the Board of Directors.
The first meeting of this newly elected board unanimously decided to change its committees
composition (compensation, nomination, strategy-investment, audit) (See Table 3, p. 25). Also,
some contracts which bound Vinci to the companies of two of its directors, Alain Minc and Serge
Michel, had been rescinded. The new Chairman decided to bring the board up to date by deciding
to strengthen its industrial component, feminize, internationalize and strengthen the
independence of directors (Le Figaro, September 7, 2007). He stated that an independent
recruiting service would be hired to this end. Les Echos (February 28, 2007) reported Yves-
Thibault de Silguys statement, explaining: Following the recommendations of a report which
was handed to me, I asked the directors who do not have all the guarantees required by the
Bouton corporate governance guidelines - notably concerning their independence - to leave the
board. Subsequently, four directors resigned from the Board. While Bernard Vals resignation
seemed due to a health problem, those of Alain Dinin and Alain Minc
14
were closely related to
their lack of independence.
With regard to the board committees, there was an evolution to a lesser extent (See Table
3, p. 25). Indeed, directors who had not resigned from the Board and had had a role in one of the
four board committees have been maintained. Three of them were maintained in a committee
position and also assume another role in a different committee. Concerning the new Chairman -
Yves-Thibault de Silguy he assumed the same former chairmans duties in committees.
We also analyzed executive compensation before and after the power struggle. We considered
two independent samples of executive compensation for a descriptive purpose. The first one
24
corresponded to the executive compensation before the conflict and the second one to the
executive compensation after the conflict. We could have done non parametric tests, but our two
samples were very small. So, we analysed the evolution in the executives compensation by
computing a compensation distance (See Appendix 1, p. 38) defined as the square root of the
square differences between two executives amount of compensation following the definition of
Euclidean distance - the ordinary distance between two points.
25
Table 3: The board committees composition before and after the power struggle
The board committees composition before the
power struggle
The board committees composition after the power
struggle
Board Committees Members Head Board Committees Members Head
Audit Committee
Dominique
Bazy*
Dominique
Bazy
Audi Committee
Dominique
Bazy
Dominique
Bazy
Franois
David
Quentin
Davies

Bernard
Huvelin**
Henri Saint
Olive

Compensation
Committee
Quentin
Davies*
Quentin
Davies
Compensation
Committee
Quentin
Davies
Quentin
Davies
Alain Dinin Patrick Faure
Dominique
Ferrero*
Dominique
Ferrero

Dominique
Bazy

Nominating
Committee
Antoine
Zacharias
Antoine
Zacharias
Nominating
Committee
Yves-
Thibault de
Silguy
Yves-Thibault
de Silguy
Bernard
Huvelin*
Bernard
Huvelin

Quentin
Davies**
Henri Saint
Olive

Alain Minc
Investment and
Strategy Committee
Antoine
Zacharias
Antoine
Zacharias
Investment and
Strategy Committee
Yves-
Thibault de
Silguy
Yves-Thibault
de Silguy
Alain Dinin Patrick Faure
Patrick
Faure*
Franois
David

Bernard
Huvelin**
Denis
Vernoux

Denis
Vernoux*

Source: Vincis 2005 and 2006 annual reports
Legend: * Director maintained in the same position regarding the same committee
**Director maintained in a committee position but assuming his role in another committee
Grey cells correspond to directors who were not maintained in a committee position. All of them are those
who resigned from the company due to the conflict except Franois David who remained a Vinci director


In the formula below, C
i]
is the difference between executives i and j compensation,
Compensation
i
is the amount of the executive i compensation and Compensation
j
is the amount of
the executive j compensation.
C
i]
= _(Compcnsotion
i
- Compcnsotion
]
)
2

26
We found that before the conflict the compensation distance between the Chairman and the
other executives was greater than after the conflict. This suggests that the compensation of the
new management team was diminished after the conflict, but this difference was not statistically
significant.

3.2. Shareholders reaction
The first part of the results is about the internal management of the governance conflict. But this
latter also affects some external stakeholders. The shareholders may react to this conflict and to
catch their reaction we mobilize the event study method.

3.2.1. Event study
Since Fama et al. (1969), the event study has became the standard methodology used in
accounting and finance to analyze stock market reaction to an event announcement.
Theoretically, its based on Bachelier (1900)s concept of market efficiency. We use this
methodology to examine the French stock markets reaction to the corporate governance conflict
exposed below in the Vinci case. Before exposing the event study methodology we need to
describe briefly the concept of market efficiency which underlies it. By this concept it is
supposed that in a financial market, stocks prices reflect the relevant information available. That
is what scholars called informational efficiency of financial markets. More precisely, according
to his state of art, Fama (1970) argues that a market can be deemed to be efficient when trading
on the basis of available information cannot provide abnormal profit. Fama (1970) put forward
three hypotheses of market efficiency, namely weak, semi-strong and strong forms of market
27
efficiency. First, supporters of the weak form of market efficiency contend that the information is
reflected by past prices. Thus, its impossible to predict the asset price on the basis of historical
information. Second, advocates of the semi-strong form of market efficiency assert that all
relevant information is reflected in prices as soon as it publicly available. Finally, exponents of
the strong form of market efficiency claim that all non public information is reflected in prices.
Nevertheless, the market efficiency rationale may be weighted by certain market anomalies such
as seasonality, weather, size, etc.
Conducting an event study involves several stages. The first stage consists in the definition of the
event of interest and the identification of the time line for the event study (cf., Figure 2). In our
study the event is the power struggle that occurred in the Vinci Group. In turn, we conducted the
study for a single firm (Vinci) based on daily data.


Figure 2: Time line for the event study







The second stage consists in the computation of abnormal returns. In this purpose, we use the
market model (Sharpe 1963) to assess the normal rates of returns. The normal rate of returns is
defined as the rate of returns that one should observe in the absence of an event.
0 T
2

Estimation window
(250 days)
Event window
T
1
T
3
T
4

250 days
20 days before the
event
30 days after the
event
28
R
i,t
= o
i
+ [
i
R
m,t
+ e
i,t

Where R
i,t
is the rate of return of company i observed on day t, R
m,t
is the market index, o
i
and [
i

are the parameters estimated by the least squares method and e
i,t
are the residuals for the model.
We estimated the regression parameters (o
i
and [
`
i
) over a period of 250 trading days (estimation
window). This estimation is closed 5 days before the event window. We use the parameters o
i

and [
`
i
to compute the normal return.
R
`
i,t
= o
i
+[
`
i
R
m,t

Then, we obtain the abnormal returns for the event window by computing the difference between
the observed return and the normal return estimated by the market model.
RA
i,t
= R
i,t
- R

i;t

where RA
i,t
is the measure of the abnormal rate of return of company i on day t, R
i,t
the observed
rate of return of firm i on day t, and R
`
i,t
the estimate of the normal rate of return using the market
model.
In our event study, we select the CAC 40
15
as the market index. We analyze the same articles
used for our qualitative study (see above) and we believe that there is no delayed market reaction.
As our study was carried out on a single company (Vinci), we use the cumulative abnormal
returns to provide further comprehensive analysis.

3.2.2. What was the stock market reaction to the Vinci governance conflict?
Figure 3 (p. 30) shows how the market reacted to the announcement of the governance conflict.
At the end of phase 1 (May 05, 2006 to June 01, 2006) covering the period before the large
diffusion of the governance conflict through the newspapers, Vincis stock return begins to
decrease and shows that the investors are sensitive to this event. The lower point of the cumulated
29
abnormal returns in phase 1 (and the start of phase 2) corresponds of the announcement of the
Board decision to maintain the CEO in his function (June 01, 2006). The Chairman (Antoine
Zakarias) resignation was welcomed by the stock market (See Figure 3, point P1, June 1, 2006).
But the increase due to the Chairmans resignation was not sufficient to stop the downward trend
of the stocks value.
The Board of directors elected a new Chairman (Yves-Thibault de Silguy), supported the CEO in
his position, and confirmed by the way the adoption of the separation of Chairman and CEOs
roles. The new Chairman announced that the governance system of Vinci had been re-formed and
it was ready to play its full role in the efficient performance of the company. Investors react
positively to these announcements. This is reflected in the increase of the positive daily abnormal
return between point P2 (June 03, 2006) and point P3 (June 15, 2006).
The first element of explanation to this reaction is the strategic character of the conflict. The
conflict was not only perceived as a private conflict between two members of the management
team, but as we explained through the Pondy (1969) approach, this conflict is a strategic one and
was perceived as such as well.

30
Figure 3: Abnormal and Cumulated abnormal returns




One of the reasons for the defeat of the Chairman in his confrontation with the CEO is the
disagreement of a large majority of directors with the replacement of the CEO Xavier Huillard by
Alain Dinin CEO of Nexity. The reason for this refusal is the difference existing between Alain
Dinins profile and the required expertise for Vincis CEO position in terms of good knowledge
of the construction industry. This profile incongruence was largely put forward by newspapers
and considered as unsuitable with Vinci Groups interests. To ensure the directors support, the
CEO criticized the Chairman on his remuneration. He condemned the 8 million bonus the
Chairman asked from the group for the successful operation of the ASF purchase. The CEO
denounced this bonus as exorbitant and he divulged other information about the Chairmans
-0,1
-0,08
-0,06
-0,04
-0,02
0
0,02
0,04
0,06
0,08
0,1
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Abnormal return
Cumulated Abnormal return
P1
P2
P3
P4
Phase 1 Phase 2 Phase 3
31
remuneration that was considered as exaggerated by a part of directors, MEDEFs president and
analysts. This information gives credence to the fear shareholders had of being expropriated. The
shareholders were sensitive to this argument. It is shown clearly in point P4 (June 15, 2006),
when the resigned Chairman declared through his lawyer that his resignation was not valid and he
would bring a law suit to get his position back. The newspapers insisted on the fact that this
reaction was only motivated by the desire to benefit from the 35 million of stock options that
Antoine Zacharias lost because of his resignation. The reaction to this information was immediate
as illustrated by the negative abnormal return of this day (point P4, June 15, 2006, Figure 3). The
increasing tendency of Vincis stock price, after the announcement of the group governance
system reform, was stopped by the investors negative reaction to the information about the
resigned Chairmans potential comeback. Vincis stock registers a large decrease after the point
P4.
An important point that has to be noted here is the reaction of the financial analysts. Despite the
conflict, the analysts remained attached to the fundamental value of Vincis stock. In turn, the
analysts recommendation was to purchase Vinci because the stock was under-valued by the
market and the companys operational performance and forecasted business were higher than the
industry average.

DISCUSSION AND CONCLUSION
The main purpose of this research is to understand how a governance reputed best practice
becomes a source of governance conflict. To do so, we develop four propositions. The first three
ones inform about the internal process of the conflict, and the last one is about the reaction of the
stock market to a governance conflict.
32

The first proposition analyzes governance conflict causes. The conflict between the CEO and
Chairman of Vinci Group seems to be the outcome of the incongruence of their identification in
relation to the firm. Newspapers were unanimous about their respective managerial skills and
abilities. So, one could infer that the CEOs identification towards the company became stronger
than that of the Chairman. This latter claimed that he deserved a prime for the company
performance. Contrariwise, the CEO considered that it was a company performance and not a
single individuals one. If their cognitive differences had lead to this conflict, divergence
intensity in the underlying dimensions of their respective identifications in relation to the firm led
the conflict to its highest level (e.g., each of the protagonists engaged his own communication
firm). The CEO shows more commitment to the firm than the Chairman. This incongruence is the
core cause of this governance conflict, which corroborates the proposition 1.
As we described above, it is clearly shown that this conflict spread through the company.
The petitions signed to support the CEO and the disagreements amongst directors are illustrative.
This in-group conflict led to the emergence of new coalitions that supported the protagonists. The
employees supported the CEO through their representative director. The Board of directors was
evidently split into two coalitions. The votes during the critical board meeting of June 1, 2006
reflect such a conclusion. That corroborates the proposition 2.
After the governance conflict, the number of directors decreased. The composition of the
Broad also changed. Henceforth, more independent directors were nominated and became the
majority. The conflict had also an impact on the composition of the Board committees. The new
Chairman of Vinci Group showed a real will to bring more transparency by reforming
governance structures. All these elements corroborate the proposition 3 about the impact of a
governance conflict on the corporate governance devices.
33
The last proposition is about the external reaction to governance conflict. The stock market
shows his sensitive to this event. The cumulated abnormal return on the duration of the conflict
makes evidence that investors respond negatively to the occurrence of the governance conflict.
After its resolution, the cumulated abnormal return became positive and moved towards zero at
the end of the study window. This fact and the sensitivity of the daily abnormal return to the
different events of the conflict corroborate the proposition 4.
This study shows that governance conflicts are not only limited to the shareholders
managers relationship. A governance conflict can, and often does involve other groups of
stakeholders. When it occurs in a firm, it may mobilize many groups of stakeholders and
institutional domains for its resolution. The findings suggest first that in the separation of the
Chairman and CEO roles, the supervision prerogative may be mutual. In other words, while the
agency theory assigns the monitoring function to the position of Chairman, this study shows that
the monitoring occurs between the Chairman and his CEO. It may thus be termed mutual, rather
than unilateral supervision. According to our duality framework (See Figure 1, p. 10), the choice
of maintaining the separation of the Chairman and CEO roles may be interpreted as a response to
uncertainty surrounding the Vinci Groups strategy. This uncertainty is well illustrated and
justified by the acquisition of ASF by Vinci Group. This new strategic orientation was largely
commented by newspapers we examined.
Second, we show that stakeholders interdependencies intensify the scope of conflicts in the
firm. We show also that conflicts may be instrumental in the reconfiguration of corporate
governance mechanisms. In other words, this governance conflict may be seen as a strategic one.
Finally, the stock markets reaction to this conflict depicts the relevance of stakeholders
approach of corporate governance. A strategic conflict would mean a potential performance
34
decrease that the shareholders anticipated. So, the stakeholders outside of the firm may have
mobilization capacities to some extent.
In this paper we do not focus on the impact of such a conflict on the firms performance.
Our analysis may be supplemented by this perspective; this could be another way to enrich it.
This research, based on a case study, could also be prolonged by analysing other governance
conflicts.
35
REFERENCES

Aguilera, R. V., Jackson, G. (2003). The cross-national diversity of corporate governance:
Dimensions and determinants. Academy of Management Review 28 (3): 447-465.
Assael, H. (1969). Constructive role of interorganizational conflict. Administrative Science
Quarterly 14 (4): 573.
Bachelier, L. (1900). Thorie de la spculation. Paris: Gauthier-Villars.
Berle, A. A., Means, G. C. (1932). The modern corporation and private property. New York:
MacMillan.
Bouton, D. (2002). Pour un meilleur gouvernement des entreprises cotes. MEDEF.
Boyd, B. K. (1995). Ceo duality and firm performance: A contingency model. Strategic
Management Journal 16 (4): 301-312.
Brickley, J. A., Coles, J. L., Jarrell, G. (1997). Leadership structure: Separating the ceo and
chairman of the board. Journal of Corporate Finance 3 (3): 189-220.
Carpenter, M. A., Fredrickson, J. W. (2001). Top management teams, global strategic posture,
and the moderating role of uncertainty. The Academy of Management Journal 44 (3): 533-
545.
Catelin, C., Chatelin, C. (2001). Privatisation, gouvernement d'entreprise et processus dcisionnel
: Une interprtation de la dynamique organisationnelle travers le cas france tlcom.
Finance Contrle Stratgie 4 (2): 63-90.
Charreaux, G. (1997). Vers une thorie du gouvernement des entreprises. In Le gouvernement des
entreprises : Corporate governance, thorie et faits, (Ed, Charreaux, G.). conomica,
421-469.
Chatelin, C. (2001). Privatisation et architecture organisationnelle : Une contribution la
thorie de la gouvernance partir d'une approche comparative des formes
organisationnelles publiques et prives. Dijon: Universit de Bourgogne.
Davis, J. H., Schoorman, F. D., Donaldson, L. (1997). Toward a stewardship theory of
management. Academy of Management Review 22 (1): 20-47.
De Reuver, R. (2006). The influence of organizational power on conflict dynamics. Personnel
Review 35 (5): 589-603.
Donaldson, L. (1990). The ethereal hand: Organizational economics and management theory. The
Academy of Management Review 15 (3): 369-381.
Donaldson, L., Davis, J. H. (1991). Stewardship theory or agency theory: Ceo governance and
shareholder returns. Australian Journal of Management 16: 49-64.
Dornstein, M. (1977). Organizational conflict and role stress among chief executives in state
business enterprises. Journal of Occupational Psychology 50: 253-263.
Eisenhardt, K. M. (1989a). Agency theory: An assessment and review. The Academy of
Management Review 14 (1): 57-74.
Eisenhardt, K. M. (1989b). Building theories from case study research. The Academy of
Management Review 14 (4): 532-550.
Fama, E. F. (1970). Efficient capital markets. Journal of Finance 25 (2): 383-421.
Fama, E. F., Jensen, M. C. (1983). Separation of ownership and control Journal of Law and
Economics 26 (2): 301-325.
Fama, E. F., Jensen, M. C., Fisher, L., Roll, R. W. (1969). The adjustment of stock prices to new
information. International Economic Review 10 (1): 1-21.
Freeman, R. E. (1984). Strategic management : A stakeholder approach. Pitman.
36
Hambrick, D. C., Finkelstein, S. (1987). Managerial discretion: A bridge between polar views of
organizational outcomes. Research in Organizational Behavior 9: 369-406.
Harrison, J. R., Torres, D. L., Kukalis, S. (1988). The changing of the guard: Turnover and
structural change in the top-management positions. Administrative Science Quarterly 33
(2): 211-232.
Heracleous, L. (2001). What is the impact of corporate governance on organisational
performance? Corporate Governance: An International Review 9 (3): 165.
Jensen, M. C. (1983). Organization theory and methodology The Accounting Review 58 (2 ): 319-
339.
Jensen, M. C., Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs
and ownership structure. Journal of Financial Economics 3 (4): 305-360.
Kahn, R. L., Wolfe, D. M., Quinn, R. P., Snoek, J. D., Rosenthal, R. A. (1964). Occupational
stress: Studies in role conflict and ambiguity. New York: Wiley.
Lorsch, J. W. (1989). Pawns or potentates: The reality of america's corporate boards. Boston.
MA: Harvard Business School Press.
Miles, B. M., Huberman, A. M. (1994). Qualitative data analysis : An expanded sourcebook.
New Delhi: Sage Publication, Inc.
Mizruchi, M. S. (1983). Who controls whom? An examination of the relation between
management and boards of directors in large american corporations. The Academy of
Management Review 8 (3): 426-435.
Morck, R., Shleifer, A., Vishny, R. W. (1989). Alternative mechanisms for corporate control.
American Economic Review 79: 842-852.
Morrill, C. (1989). The management of managers: Disputing in an executive hierarchy.
Sociological Forum 4 (3): 387-407.
Pfeffer, J., Salancik, G. (1978). The external control of organizations: A resource dependence
perspective. New York: Harper & Row.
Pochet, C. (2001). Le gouvernement de l'entreprise dfaillante : tude de trente plans de
continuation. Finance Contrle Stratgie 4 (2): 149 181.
Pondy, L. R. (1969). Varieties of organizational conflict. Administrative Science Quarterly 14
(4): 499-505.
Rowley, T. I., Moldoveanu, M. (2003). When will stakeholder groups act? An interest- and
identity-based model of stakeholder group mobilization. Academy of Management Review
28 (2): 204-219.
Sharpe, W. F. (1963). A simplified model for portfolio analysis. 9 (2): 277-293.
Smith, A. (1776). The wealth of nations. Edwin Cannan 1904, Reprint edition 1937, New York,
Modern Library.
Vinot, M. (1995). Le conseil d'administration des socits cotes. AFEP/CNPF.
Vinot, M. (1999). Rapport sur le gouvernement d'entreprise. AFEP/MEDEF.
Walsh, J. P., Seward, J. K. (1990). On the efficiency of internal and external corporate control
mechanisms. The Academy of Management Review 15 (3): 421-458.
Weidenbaum, M. L. (1986). Updating the corporate board. Journal of Business Strategy 7: 77-83.
Wirtz, P. (1999a) Working Papers FARGO, Universit de Bourgogne - LEG/Fargo (Research
center in Finance,organizational ARchitecture and GOvernance).
Wirtz, P. (1999b). volution institutionnelle, schmas mentaux et gouvernement des entreprises :
Le cas krupp thyssen. Finance Contrle Stratgie 2 (1): 117 -143.
Wirtz, P. (2002) Working Papers FARGO, Universit de Bourgogne - LEG/Fargo (Research
center in Finance,organizational ARchitecture and GOvernance).
37
Yin, R. K. (1981). The case study crisis: Some answers. Administrative Science Quarterly 26 (1):
58-65.

38
Appendix 1

Proximity Matrix
Table 4: Difference in compensation amongst executives in 2005

















Proximity Matrix
Table 5: Difference in compensation amongst executives in 2006





















1
CEO duality is the case in which the top managerial officer of the corporation simultaneously serves as Chairman
of the Board and is responsible for monitoring and evaluating top management. In fact, theorists argue that CEO
duality has two mains contrasting effects on the effectiveness of corporate governance. While the advocates of
Euclidean Distance

Yves-Thibault
de Silguy
Xavier
Huillard
Roger
Martin
Jacques
Tavernier
Yves-Thibault de
Silguy
0
Xavier Huillard 962 500 0
Roger Martin 426 770 535 730 0
Jacques Tavernier 40 655 1 003 155 467 425 0
Euclidean Distance

Antoine
Zacharias
Huvelin
Bernard
Huillard
Xavier
Roger
Martin
Antoine
Zacharias
0
Huvelin Bernard 2 384 704 0
Huillard Xavier 2 831 532 446 828 0
Roger Martin 2 764 380 379 676 67 152 0
39

agency theory argue that avoiding duality limits potential CEO entrenchment, other organizational theorists claim
that duality enhances unity of command.
2
La loi sur les Nouvelles Rgulations Economiques ( The New Economic Regulations Act) has introduced a wide
range of provisions to strengthen the legislative framework in the fields of competition, company, banking and,
broadly, corporate governance concerns.
3
Quoted by Dornstein (1977)
4
Vinci - a French company added to the list of the top 40 French firms comprising the CAC 40 index in March 2002
- is the worlds biggest leading integrated concessions - toll highways - and construction group. Formerly called SGE
Socit Gnrale dEntreprises and created in 1899 - it took the name Vinci in 2000.
5
Quoted by Boyd (1995, p. 302)
6
cf. also Pochet (2001, p.155) for a typology of groups composing stakeholders. Her typology is based on Freeman
(1984)s definition of stakeholders and Charreaux (1997, p. 427)s corporate governance mechanism classes.
7
The authors top management team definition includes the CEO, chairman, chief operating officer (COO), chief
financial officer (CFO), and the next-highest management tier of a firm.
8
Secret complaints is the term used by the author describing the complaint of executives to their closest staff
members.
9
In 1899, French engineers Alexandre Giros and Louis Loucheur formed Giros et Loucheur. They changed the
name of their company to SGE in 1908.
10
Grand Travaux de Marseille
11
Autoroutes du Sud de la France
12
Newspapers quotations are in French and translated by the authors.
13
The French utility company
14
Indeed, Alain Minc announced his resignation from the Board of Vinci in La Tribune (January 30, 2007). By
commenting on his statement, this daily underscored its coincidence with the charge of conflict of interest of which
Mr. Minc was the subject. In fact, the conflict of interest was derived from Pinaults Artmis having been granted a
5.1% stake in Vinci albeit Minc being Pinaults personal advisor.
15
The CAC 40 (CAC or Cotation Assiste en Continue means automated quotation) is the most relevant market
index composed by the 40 most significant French capitalizations quoted on Euronext Paris.