Veolia's boardroom battle
Plumbing the depths
What a row over a water company says about French capitalism.
EVEN by the standards of French business, from which politics is rarely absent, it was an outrageous plan.
This week news emerged of a plot to oust Antoine Frerot, chief executive of Veolia, a private water and waste group, and replace him with Jean-Louis Borloo, a politician and former energy minister.
Civil servants regularly take the top job at blue-chip French firms.
But Mr Borloo, who has no experience running a business, seemed singularly unqualified to run an unprofitable company which needs deep restructuring.
Mr Borloo is a friend of Henri Proglio, who was Veolia's chief executive from 2003 until 2009.
Mr Proglio then handed the job to Mr Frerot, his chosen successor, and became chief executive of Electricite de France, a utility.
For a year after becoming boss of EDF, Mr Proglio stayed on as Veolia's chairman, collecting two big pay packages.
After a corporate-governance storm, he stepped down as chairman of Veolia in 2010 but kept a seat on its board.
The origin of this week's row is Mr Frerot's plan to restructure Veolia, one of France's largest private-sector employers.
The firm's shares have fallen by 60% in the past 12 months, as it has struggled with tumbling profits and high debt.
Instead of following the path set out by his former boss, Mr Frerot announced last December that he would take an axe to Mr Proglio's empire,
which spanned 77 countries and 250 varieties of business, and turn Veolia into something resembling a modern, focused company.
He announced a sale of assets worth 5 billion and a retreat to 40 markets, as well as an overhaul of the company's culture.
It was entirely clear that something radical needed to be done to focus the business, says Per Lekander, an analyst with UBS, an investment bank, in Paris.
But Mr Frerot's rebellion has infuriated Mr Proglio, who has reportedly been briefing fellow board members of Veolia that they need to replace him.
Mr Borloo has denied that he wants to become Veolia's chief executive, but has admitted meeting board members.
Nicolas Sarkozy, France's president, was obliged to deny any involvement in the plan to replace Mr Frerot.
Francois Hollande, the Socialist candidate in the presidential election this spring, denounced the plot.
Mr Frerot should keep his job, at least for now; Mr Sarkozy cannot risk more controversy so soon before the election.
Nonetheless, the affair should worry shareholders in big French companies.
The practice of parachuting political figures to the top of important firms is thriving, despite hopes that it was on the way out.
Most recently, Alexandre de Juniac, a chief of staff to Christine Lagarde when she was finance minister, took charge at Air France in spite of having no operating experience of the airline business.
France Inc continues to be influenced by a small network of politically connected power brokers. Mr Proglio's continuing sway over Veolia is merely an extreme example.
The receptionist led the way to the boardroom.
Capitalism is based on private ownership.
The price is outrageous.
Of these two men, the former is dead but the latter is still alive.
He has had no previous experience in this kind of job.