After BNP PARIBAS fined for nearly $ 9 billion imposed for violations of US embargoes, it has been the turn of Alstom to settle for a fine of 700 million dollars (560 million euros) in the US after prosecution for corruption in Indonesia. Corruption is as old practice at Alstom according to experts, and Chairman & CEO Patrick Kron who was in control since 2003 does not appear innocent of these criminal operations started in 2004 and pursued until 2009.
French shareholders in both cases are often outraged the ambiguous behavior of the world’s US policeman, who has obviously found its industrial interest in the strict enforcement in the Lex Americana for non-US firms, a milder treatement here is that General Electric will finally pay the bill. But this corruption case has certainly weakened Alstom by the threat of substantial sanctions and the company was possibly obliged to transfer to General Electric its Steam France division (turbines including nuclear), its grid division (power distribution) and and its renewable energy division. Our first question to the Board is therefore was it any early arrangement with the US Dept. of Justice escaping top Alstom executives from their personal liablity under the US Foreign Corrupt Practice Act ?
Looking at the deal Financial conditions now, Proxinvest, despite of limited appreciation data for the valuation of these assets to be sold, finally supported the deal on the basis of alleged sincere information provided by the company : the French proxy advisor recommend to vote FOR on the sole and advisory resolution proposed at the 19 December 2014 general meeting. The results of the divested activities have continued to deteriorate since its announcement of their transfer, but everyone knows how easy can be the drive of reported results on long contracts in such activities, while General Eleectric can drown this decline including the impact the final DOJ fine in consolidated accounts of a much larger magnitude.
As French says “When you want to kill your cat you tell it has rabies …”
An Alstom profit warning of January 21, 2014 announced the operating margin to drop in 2014/2015 and its cash flow to be negative in the second half in late March 2014 instead of being positive. Why was this not confirmed by the annual results, a positive free cash flow (cash flow) finally was of € 340 million in the second half against a negative figure of € 511M in the first half ? According to Marie-Jeanne Pasquette,a seasoned Financial journalist of DeontoFi “Billed as” balanced “, the Alstom deal with General Electric might happen one day to be one of the great forgeries of the stock market history. “
In both earlier mentioned victim cases of the Lex Americana, BNP Paribas and Alstom, on should notice that the highest level of senior management deliberately opted for further breaching with the US rules. But the as in the BNP Paribas case Managing Directors who at least tolerated these illegal behavior and decided to brave the public interest are not now under any personal indictment…
How can then the Board justify the considerable compensation recently granted to the executive team as the company reduced its size to a third and as its shareholders appears to have lost in the last years under Kron ? The stock price price was 12 euros there ten years then plummet ted at 80 euros to drop for now at 28 euros. But Patrick Kron who has seen annual compensation of 3 million euros reduced by 10% in the last five years and while piling a 13 million provision for retirement will be granted an “exceptional bonus” of an amount equivalent to the value of 150,000 shares of the company“ nearly 4.1 million. How can the Board dare paying so much for “having ensured a sustainable future for Alstom Energy division” while the Alstom group gives up three divisions to be confined to the single rail transportation business?
The new Proxinvest 2015 voting policy will scan seriously this “exceptional conditional remuneration” for this now possibly departing CEO . It now requires the inclusion of a clawback” provision for this type situations in the long-term incentives for senior exécutives, as it is true that the very generous compensations paid in the past to Patrick Kron covered questionable behaviour.
December 18, 2014
