Vivendi's New Mess: Severance7/06/2003 8:00 PM Eastern
A New York arbitration tribunal has ordered Vivendi Universal S.A. to pay its former chairman, Jean-Marie Messier, 20.6 million euros ($23.5 million) in severance — a ruling the French conglomerate intends to fight.
Messier was ousted by Vivendi's board of directors last July, after running up a huge debt in an acquisition spree that left the French giant on the verge of bankruptcy. At the time of his departure, Messier said the company was required to honor his U.S. termination agreement, which Vivendi claimed its board of directors never approved. The two parties agreed to arbitration to settle the matter in April.
"After reviewing the tribunal findings, Vivendi Universal intends to challenge this decision through all available legal actions, both in France and in the United States," Vivendi said in a statement.
The company's board of directors discussed the matter at its regularly scheduled meeting last Tuesday, restating its desire to pursue legal action.
Sources close to Vivendi said that current chairman Jean-Rene Fourtou was extremely upset about the ruling. Although Vivendi does not have the right to appeal the arbitration decision, it can start a lawsuit, an avenue the two parties were trying to avoid by agreeing to arbitration in the first place.
Vivendi has been trying to distance itself from the flamboyant Messier ever since its board of directors ousted him in July 2002. Messier's high-profile acquisitions of Seagram Co. ($34 billion) and the interest in USA Networks Inc. it didn't already own ($11 billion), coupled with billions of dollars spent to buy back its own stock, caused Vivendi's debt to balloon to about $17 billion prior to his resignation. Since then, Fourtou has embarked on a series of asset sales that have substantially reduced that debt.
Back in April at Vivendi's annual meeting of shareholders in Paris, Fourtou said that Messier received no severance as part of his French employment contract because he resigned. Fourtou said the company believed that the same held true for his American employment agreement.
"As far as the American part of his contract, I clearly refuse to pay him anything," Fourtou said at the April shareholders meeting. "We are clearly stating that we owe him nothing."
Fourtou also sought to reclaim about $93,000 in back rent from Messier for use of the company-owned New York apartment where the former chairman lived. At the April annual shareholders meeting Fourtou said Messier had the right to live in the $17.5 million digs (at a rent of $31,000 per month) until December 2002. Messier stayed until March.
According to reports, the arbitration panel ruled that Messier did not owe Vivendi for the back rent.
Messier apparently negotiated the severance deal days before he resigned. According to The New York Times, he told some directors — including former vice chairman Edgar Bronfman Jr. — that he wouldn't leave without it.
Messier criticized CEOs who accepted lucrative severance packages — so-called golden parachutes — in his 2000 autobiography, J6M.com.
"These special payments — the golden parachutes that we hear so much about — cannot be justified for executive directors," Messier wrote. "My contract has no such clause. I promise my board never to negotiate one."