View from the board: make sure you face the music

Imagine that you are an executive of a business in trouble. How forthcoming
can you afford to be about the problems? The answer is normally simple: pull
down the shutters and wait – hope – for the storm to pass.

I’d like to suggest a different approach: openness.

Of course, I’m not deluding myself. There are plenty of good reasons for
keeping schtum – not least many that relate to regulators, shareholders and,
increasingly, prosecutors.

But there are plenty of bad ones too. These normally relate to a fear of one
kind or another: a fear of being found out, a fear of personal loss or a fear of
misinterpretation. (Though I’d argue that nothing gets misinterpreted like

I found myself thinking this as I read that Vivendi’s accounting policies
have come under fresh scrutiny. It took me back to meeting the company’s then
CFO Jacques Espinasse a couple of years ago. I never thought I’d meet a senior
executive of a company in so much trouble willing to be so frank about its

To recap briefly: when Espinasse joined Vivendi in 2002, the French media
giant was in a dreadful state. In transforming the business from a utility into
a media-led conglomerate, it had run up £24bn in borrowings.

Worse, it had been accused by the SEC of committing ‘multiple violations of
the anti-fraud, books and records, internal controls and reporting provisions of
the federal securities law’.

But addressing a room full of CFOs in 2005, Espinasse was willing to air his
dirty laundry in public, admitting the lengths to which he would go to placate
Vivendi’s creditors.

‘When one banker gets scared, he scares other bankers,’ he said. ‘And when a
big company is in trouble, the rules of the game change and they send you the
special affairs guys. In addition, you don’t only talk to bankers, you talk to

To begin what has been a remarkably successful turn around he needed to
persuade them to be patient – a costly exercise in terms of bank charges.

‘I wanted to buy time,’ he admitted, adding in a very non-CFO way. ‘You don’t
restore confidence with just a click of your fingers.’

At no point was he incautious with his language. Yet Espinasse won over the
room. And he did so by being upfront about the issues that the company was
continuing to wrestle with. Try it.

Damian Wild is editor-in-chief of Accountancy Age

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