PARIS (Reuters) - A boardroom tussle brewing for months at Sanofi came to a head on Wednesday when France’s top drugmaker fired its chief executive, wiping more billions off its share price.
While the showdown played out in leaks to national newspapers has stunned investors as a “how not to do it” guide to corporate governance, the writing was on the wall in the deteriorating relationship between Chairman Serge Weinberg and CEO Chris Viehbacher.
The decision, which will see Weinberg take the helm until a new CEO is found, follows a dramatic few days during which Viehbacher had to present quarterly results without being able to reassure investors of his board’s support.
Instead, German-Canadian Viehbacher told Reuters on Tuesday that Weinberg had declined to clarify his future at a meeting the previous day, confirming reports of increasingly frosty relations between the CEO and the rest of the board.
On Wednesday, Sanofi said a special board meeting had decided unanimously to remove Viehbacher, its CEO of six years. Weinberg, a former top civil servant and a pillar of the French business establishment, said there had been no clash over strategy, but rather blamed Viehbacher’s management style.
“For 15 people to unanimously take this kind of decision it is not a problem that has to do with personalities, it’s a problem ... of cooperation with the board, fundamentally of management style and also of execution,” he told reporters.
Viehbacher transformed a very French drug company by making it much more international in outlook, in large part through the $20 billion acquisition of U.S. biotech and rare diseases company Genzyme in 2011.
Sanofi’s first non-French boss was applauded by analysts and investors for his global approach to running a complex business and for his communication skills.
But he was dubbed the “smiling killer” by trade unionists for cutting jobs in France and questioning the rationale of investing in a country with famously more rigid labor laws than other life science hubs in North America or Asia.
Over the past months, he has also been directly butting heads with some board members, and his position was weakened on Tuesday when Sanofi warned its key diabetes business would probably not grow next year.
Les Echos newspaper this week published a letter from Viehbacher to the board, dated Sept. 4 and revealing his mistrust of Weinberg, chairman since 2010.
“It has come to my attention, first through rumor, that the Chairman of the Board is actively seeking a successor to me as Chief Executive Officer,” read the letter, in which Viehbacher urged the board to clarify his situation as soon as possible.
One source close to the situation said Viehbacher was upset he wasn’t getting any answers and told the board he would be hiring a lawyer. Viehbacher could not immediately be reached for comment on Wednesday.
The fact Viehbacher moved to Boston in June did not help relations, but his change of residence was not the root of the dispute, which chiefly had to do with the way he communicated with the board, sources close to the board said.
“He’s very authoritarian, solitary, secret. He does not sufficiently inform the board of the decisions he’s taking,” one said, prior to Viehbacher’s eviction.
Another person, a former colleague of Viehbacher, said that while his straight-talking, sometimes brusque Anglo-Saxon management style had won over investors, he could be “stubborn and difficult” when working with senior managers.
Earlier this year, Viehbacher reviewed ways to cut Sanofi’s exposure to an $8 billion portfolio of off-patent drugs in Europe, the bulk of which are produced in France.
Viehbacher oversaw the review without informing board members, until the options studied — which concern six sites and would affect 2,600 staff — leaked to the press in June.
In France, a nation whose double-digit unemployment and waning industrial footprint is a growing headache from one government to the next, the move lacked tact and hurt some sensibilities. Weinberg said the review, dubbed “Phoenix”, was a striking example of the CEO’s poor communication with the board.
Viehbacher, however, wanted a free hand to operate and take quick decisions in a complex industry, which is dominated by companies whose executives spend their time shuttling between cites like San Francisco, Boston and Shanghai.
Asked about the fact that investors appreciated Viehbacher and were rattled by his eviction, Weinberg said: “The role of governance is not merely about external communication, it’s about how a company works internally.”
Viehbacher, who had previously emphasized that “everyone in the industry” was looking at what to do with mature drugs, had appeared much more cautious about the topic on Tuesday. He said while various options had been reviewed, “there is no major plan to do anything in France or anywhere else on these products.”
He defended his track record as Sanofi’s boss, noted that the board had recommended to renew his mandate back in May and said he did not understand the sudden change of wind.
“I’ve run the company six years. Most of those board members have been on board for those six years. The board has supported every major decision I’ve taken,” he told Reuters on Tuesday.
Additional reporting by Ben Hirschler in London and Gwenaelle Barzic and Andrew Callus in Paris; Editing by Susan Thomas and Mark Potter