Accor: Please Call Housekeeping

The hotel chain's messy CEO search may have an unlikely result: Better governance

Accor, Europe's biggest hotel chain, has lots of experience washing its guests' linens. But now the Paris company must clean up its own sullied reputation after its search for a new boss led to a rare public airing of a messy boardroom battle. A truce was reached in mid-October, when Gilles Pélisson, a nephew of Accor co-founder Gérard Pélisson, was named CEO. As part of the deal, the elder Pélisson agreed to yield the post of chairman of the board to an outsider recruited by dissident board members.

France Inc. has traditionally kept boardroom battles behind closed doors. That's in contrast to the U.S., where directors of companies such as Walt Disney Co. and Hewlett-Packard Co. have brawled openly. Now, France may be moving in the same direction. In early October three Accor board members went public with complaints that the CEO search wasn't impartial. The three -- BNP Paribas CEO Baudouin Prot, Société Générale (SCGLY ) CEO Philippe Citerne, and Caisse des Dépôts & Consignations CEO Francis Mayer -- then helped broker a pact under which Serge Weinberg, ex-chief of French retailing and luxury goods group PPR, will assume the chairmanship in January. Says Prot: "This story may prove to be a milestone in the improvement of corporate governance in France."

The upheaval at Accor began last summer, when board members reached a consensus to replace CEO Jean-Marc Espalioux, whose contract expires in January. Espalioux, who has led the group since 1997, has produced strong financial results: First-half net profits rose 144%, to $186 million, on $4.3 billion in sales. But he was seen as ineffective at selling investors on Accor, whose holdings include the Motel 6 and Red Roof Inns chains in the U.S. and the Novotel and Mercure chains in Europe. That's a particular concern to major investors such as Colony Capital, a Los Angeles real estate investment firm that last spring poured $1.2 billion into Accor.

Any consensus quickly evaporated once Accor co-founder Paul Dubrule joined the search committee. He made no secret that he favored the nephew of his longtime business partner. In fact, Gilles Pélisson boasts strong qualifications for the job. Prior to becoming CEO of Bouygues Telecom in 2001, he worked at Accor for 12 years. "He knows the industry inside out," says Sébastien Bazin, a Colony Capital representative on the board.


Yet after reports that Pélisson had the inside track surfaced in the press, some board members insisted on hiring an executive search firm to avoid the appearance of nepotism. The Paris office of Russell Reynolds Associates was chosen. But the firm quit following a series of leaks, culminating in press reports in early October that Pélisson's rival for the job was Pierre Danon, chief operating officer of Capgemini, a French IT consulting group. Capgemini promptly fired Danon, a move he characterizes as "irrational." Danon then withdrew his name from consideration because he felt the search process was falling apart.

His exit cleared the way for a compromise between Accor's warring camps. They agreed to hire Pélisson, but bring Weinberg in as board chairman and replace Accor's dual board structure with a single board of directors.

The crisis took a toll on Accor's shares, which fell 10% between August and September. But Pierre-Henri Leroy, the president of Proxinvest, a Paris group that has advised Accor shareholders on corporate-governance issues, says the company ultimately will benefit: "In the future, it will be governed better." Maybe France Inc. is starting to open up.

By Carol Matlack in Paris

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