A number of major CEO ousters this quarter have been shrouded in mystery. But Sanofi’s interim CEO and independent chair Serge Weinberg has now explained the long-running problems that led to Viehbacher’s dismissal.
In recent months, CEOs at big companies have been ousted in surprise moves at Sanofi, Juniper Networks, and Christie’s to name just a few. Just last week, United Technologies announced the shocking departure of CEO Louis Chenevert. And just this week, Thomas Cook’s board ousted Harriet Green in a surprise move. The lack of transparency around these departures has generated concerns from investors, analysts and others.
When French drug company Sanofi abruptly announced that it had fired its CEO Chris Viehbacher with brief statements that Viehbacher had failed to communicate fully with the company’s board, many analysts expressed concerns. As with many of the other departures in recent days, until now, the details behind that ouster have not been known. But recently Sanofi’s Chair Serge Weinberg, who is now also interim CEO at Sanofi, spoke with me to explain the long-running problems the company’s board had encountered with Viehbacher.
The board was not happy with how Viehbacher had to go, Weinberg told me, especially without a succession plan in place. The board had been asking for a succession plan for three years, he said, but Viehbacher did not want to have identified successors. In fact, at one point, there was someone at Sanofi who could have functioned as an interim CEO, but that person left the company, Weinberg told me.
The board was dealing with an “uncooperative CEO,” Weinberg said. He described Viehbacher’s relationship with members of the executive committee (i.e. the top managers of the company) as “sore,” a problem that had existed for “quite a long time”.
Weinberg was not a member of Sanofi’s board when Viehbacher was hired in 2008. He became a director in 2010. At that time, the board was receiving very little information from Sanofi’s C-suite, and so, since then, Weinberg said he has worked to enhance the information the board receives. But the board was dealing with a CEO who had a “willingness to not communicate.” The situation only grew worse, “trust diminished and it was very difficult.”
In September, Weinberg had a discussion with Viehbacher on succession, and they agreed that he would step down in a smooth leadership transition. But on the Sunday and Monday in the run up to Viehbacher’s firing on October 29, Weinberg said there were leaks to the press that only Viehbacher could have made. An unsigned letter Viehbacher wrote to the board outlining why he should keep his job was published in the press on October 27. All board members had received signed copies, Weinberg says.
By going public, Viehbacher had dismantled the succession agreement he had made, Weinberg said. The board was not divided and it had no other choice than to move swiftly. When a “CEO doesn’t want to collaborate in a natural, trusting way,” succession “can’t work in the way everyone wants.” Viehbacher “played his cards two days before the announcement of bad results,” perhaps to confuse matters. The board had to act, Weinberg said.
Weinberg said there were two major problems with Viehbacher: his “management style” and his “lack of transparency.” The board kept asking for information and not getting it. One example had to do with problems related to the diabetes drug Lantus, which accounts for several billion dollars in sales for Sanofi. While revenues for the drug dropped, the board was not receiving other information it wanted, including the drug’s market share, which lost seven points over three years, Weinberg said
On the company’s acquisitions, the board (as all good boards do) asked to be kept informed on the outcomes and the lessons learned, Weinberg said, but only received two “victory reviews” in 2013. (From a governance standpoint, that kind of behavior from a CEO is completely unacceptable.)
Regarding the potential sale of a large portfolio of mature drugs in Europe, there was a small leak in Bloomberg at the end of May – and this is how Weinberg and the board learned about the so-called Phoenix project. When Weinberg asked Viehbacher directly about the project, he denied the project’s existence.
Three weeks later, there was a leak of a document on the project to the press, Weinberg said, and Weinberg again asked Viehbacher about the project. This time, Viehbacher downplayed the size of what was a massive initiative, calling it a “local project.” Weinberg told me that Viehbacher never provided him with “a single piece of paper” about the undertaking, not even revenues.
In July, members of Sanofi’s board began to discuss Viehbacher’s departure from the company, Weinberg said. And in early September, Weinberg started discussions directly with Viehbacher to plan for a smooth transition.
The board took a risk firing Viehbacher when it did, but it felt “for all involved” it had to act, Weinberg said. What will the board be looking for in its next CEO? In addition to the requisite pharma and technical chops, Sanofi wants a team builder. Someone who does not think “without me, the company falls down.” Viehbacher’s letter was “ridiculous,” Weinberg said.
Will the board and company come out stronger after all of this? Weinberg said he thinks so (and so do I). We discussed the need for the board to take control of succession—that is the board’s job—and that boards are often too patient on this and other CEO lapses. Even though it may be difficult for a board to act swiftly, at the mere whiff of a CEO’s lack of openness, candor, and cooperation, boards must do so.
In Europe, boards are often slow to act, as there is this view of the “almighty CEO,” Weinberg said. He said that while Sanofi’s board may not have moved as quickly as a U.K. board would have or some boards in the U.S., they did come together to address the issues more quickly than other European boards would likely have done.
Weinberg said that he cares about good governance and sat on the committee that created the French code of corporate governance and he believes the board and company have learned a lot from the experience that may be valuable to other boards as well. Weinberg intends to continue to improve the board’s effectiveness and agility of the board. The next move at Sanofi? “We’ll be making the size of the board smaller,” he said.
Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://www.thevaluealliance.com), an independent board education and advisory firm she founded in 1999. She has been a regular contributor to Fortune since April 2010 and is the author of two books on corporate governance and valuation.