Finmeccanica SpA (FNC) Chairman Pier Francesco Guarguaglini resigned following Prime Minister Mario Monti’s call for the state-controlled company to swiftly address a corruption probe involving company executives.
Chief Executive Officer Giuseppe Orsi, 66, assumed the chairman’s position at Italy’s biggest defense company, according to a statement distributed by the Italian Exchange.
Guarguaglini faced a showdown with his board over the extent of his powers at a meeting today, the latest attempt to limit his role after the government named Orsi to take over as CEO from Guarguaglini in April. Finmeccanica also appointed General Manager Alessandro Pansa to the board today.
Monti said yesterday it was up to the board to decide the chairman’s fate, when asked whether Guarguaglini should resign. The Finance Ministry owns about 32 percent of the company and nominated Guarguaglini to his position.
“It’s important to have clarity in such an important moment for Finmeccanica’s leadership,” said Marco Cristofori, an analyst at Centrobanca in Milan, who has a “hold” rating on the stock before the announcement.
Directors approved the payment of about 4 million euros ($5.38 million) to Guarguaglini as compensation for the early end of his employment, according to an e-mailed statement. He will receive 1.5 million euros more after finishing a one-year non-compete agreement, the company said.
Guarguaglini had been chairman since 2002 and kept responsibility over strategy, acquisitions and asset sales and government relations since Orsi’s appointment as CEO. The two men have sparred over strategy and relations have been strained since Guarguaglini came under fire after several corruption investigations.
In the latest case, prosecutors are investigating whether executives at a division, Selex Sistemi Integrati, inflated the value of contracts with civil air-traffic manager Enav SpA and then used the funds to pay off politicians. Selex is run by Guarguaglini’s wife, Marina Grossi.
Guarguaglini on Nov. 22 denied allegations that he set up slush funds or gave orders to pay off politicians. Finmeccanica isn’t a subject of the probe. The investigation has led to calls from politicians and union leaders for the chairman to quit.
The allegations by the Rome prosecutors led to the arrests of Guido Pugliesi, the CEO of Enav, and Manlio Fiore, a director at Selex. Finmeccanica’s director of external relations Lorenzo Borgogni resigned his post over the probe.
The investigations have contributed to a 61 percent slide in Finmeccanica shares this year. The board unanimously gave Orsi powers on Nov. 14 to implement broad restructuring, including 1 billion euros ($1.33 billion) in asset sales, after the company reported a record 790 million-euro third-quarter loss. Guarguaglini didn’t attend that board meeting, prompting a letter from directors requesting a discussion of management powers, newspaper Il Sole 24 Ore reported.
Guarguaglini, 74, led acquisitions that helped make the company less reliant on Italian defense spending. Finmeccanica gained full control of helicopter-maker AgustaWestland in 2004 and purchased U.S. electronics maker DRS Technologies Inc. in 2008.
Guarguaglini has been under investigation since last year in a separate Rome graft investigation into a consultant’s role in acquiring a stake in a Finmeccanica venture. Rome-based Finmeccanica, which wasn’t the subject of that probe, has said that it never set aside illegal funds and has repeatedly denied wrongdoing, as has Guarguaglini.
Finmeccanica’s businesses include helicopters and defense electronics and its aeronautic unit makes fuselage sections for Boeing Co.’s 787 Dreamliner and Airbus SAS’s A380 superjumbo. CEO Orsi plans to merge defense electronics activities and sell a stake to an industrial partner in its loss-making train unit AnsaldoBreda.
Finmeccanica closed up 2.7 percent to 3.3 euros earlier today, extending yesterday’s 7.3 percent gain.