Professional Documents
Culture Documents
Vivendi is a mass
media company
established in 2000.
Vivendi SA is a French
multinational mass
media company
headquartered in Paris,
France.
VIVENDI
HEADQUARTERS
HISTORY
Vivendi Universal was originally founded in 1853 as
a utility company under the name Compagnie
Gnrale des Eaux (CGE) by an imperial decree of
Napoleon III. In 1854, CGE obtained a concession in
order to supply water to the public inLyon, serving in
that capacity for over a hundred years. In 1861, it
obtained a 50-year concession with the City of Paris.
VIVENDIS ORIGIN
IVENDIS ACQUISITIONS
Anaya
Cendan
t
Sofware
Path
US$2.59
billion
Nethold
Houghton
Mifflin
Harcourt
$2.2 billion
Universal
Entertainment
$34 Billion
Havas
6 billion
Mp3.co
m
$372
million
Maroc
Telecom
$2 Billion
PEOPLE INVOLVED
AND
COURT RULINGS
Guillaume
Hannezo
CFO
US COURT RULINGS:
Jean-Marie Messier and Edgar Bronfman Jr. paid fines
instead of going to jail for criminal charges related to
Vivendi SAs near-bankruptcy after a $77 billion
acquisition spree while they led the company.
Messier was fined 150,000 euros ($200,000) and
Bronfman 5 million euros by a three-judge panel.
Neither was sentenced to jail time. Messier, 54, was
found guilty of misleading investors during his
tenure as Vivendis chief executive officer.
Bronfman, also 54, was found to have traded on
inside information while vice chairman.
The conviction diverges from a civil jury verdict in a New
York shareholder class-action lawsuit last January. That
ruling cleared Messier and former chief financial officer
PERSONS INVOLVED
REASONS FOR
DOWNFALL
Misleading Information
Messier tried to cover up the fact of huge losses and
debts by issuing press releases portraying:
Cash flows as excellent,
Operating earnings (EBITDA) better than the
projections and ahead of the targets.
The press releases of the first, second and third
quarter of 2002 presented a materially misleading
picture of the financial condition of Vivendi.
In May 2002, Vivendi was talking about comfortable
cash situation an manageable debts.
In July 2002 Vivendi admitted loss of Euro 13.6
billion for 2001 and accumulated debts of Euro
37 billion.
REASONS
FOR
FAILURE &
GOVERNA
NCE
Poor Diversification
Vivendi diversified from water company to media
and communication company with lot of
acquisition after 1980s. Heavy expansion caused
company both financial and legal problems due to
the decaying value of acquisitions.
General corporate strategies were confused and
sometimes contradictory; the firm held various
assets that were unrelated to its supposed
media/communications focus.
Improper
Improper
adjusting various reserve
Accounting
accounts and violating US GAAP. The
company increasing its EBIT by adjusting
wrong transactions.
Ineffective Board
BODs didnt question the strategies of
management and there was in balance in
the board.
The board was composed of CEO-friendly
directors who failed to question
managements strategy and use of
leverage in recasting the company; they
were also extremely slow to act to oust the
CEO when it was already clear that the
firm was in financial distress
Audit Committee
CFO used creative accounting to show a positive gross profit
Failures
margin. Did by taking into consideration the totality of SFR (the
mobile phone affiliate of Vivendi-Universal) results in VivendiUniversals balance sheet, whereas Vivendi-Universal only
owned 44% of SFR at this time. However, this was not illegal
and did not affect the bottom line, which only took in
consideration the 44% owned. The audit committee should
have warned the shareholders and the board of this practice
(Cotton, 2003).
The audit committee should also have warned the board, and
through the annual reports, the shareholders of the risks
associated with said practices. It is difficult to argue that the
audit committee influenced the decision to follow the new
American accounting rules, which were primarily taken in the
light of the recent internationalisation of Vivendi-Universal.
American accounting rules require companies to include the
current value of all acquisitions into their accounts.
Dominating CEO
CEO of the company dominating in behaviour
and started irrational and risky series of
company. Messier took over 30 companies
which lead to 100 billion euro debt.
Most of the board appears to have supported
the strategic expansion throughout the multiyear period; only when liquidity was severely
strained and the firms future was in doubt
did board loyalists take action to force the
CEOs resignation
Other Failures
Overall financial management and control was weak: the
firm assumed far too much debt in pursuing its goals, spent
excessively on both assets and expenses, and put its
liquidity at risk
Certain executive managers appear to have exercised
options for personal gain ahead of market sensitive news
(for example, the sale of stock)
The compensation payable to the CEO towards the end of
his tenure was unreasonable given the collapse of the stock
price and the large operating write-offs the firm was forced
to take. Use of top line revenue as a performance goal was
not effective in aligning pay for performance directives
AFTERMATH
Thank you.