The shareholders of LVMH are seeking additional disclosure of the succession process of long-standing CEO Bernard Arnault, which has caused a challenge of governance risk in the largest luxury House across the globe.
According to the shareholders, the absence of an effective succession strategy has materialised and particularly with the 76-year-old Bernard Arnault still leading a company that manages a large portfolio of luxury brands across the globe.
LVMH Succession Ok Caught the Eyes of the Investors
Some of the institutional investors articulate that absence of public information on the succession plan of LVMH might reduce the corporate governance standards and damage the market value of the group. There were warnings by some of the shareholders that in case the uncertainty lingers, a discount on governance would come about unless the situation is clarified.
Although the succession process was not a burning issue in the past, investors now consider it more topical considering the age of Bernard Arnault and the size of the business.
The Family Organization Provokes Leadership Succession
The five children of Bernard Arnault all have the top position in the group and a recent reorganisation of the company formed a family controlled group to oversee continuity of ownership. The investors however, claim that such structure provides little indication on who would take the executive leadership or how decisions would be made during a transition.
The shareholders have pointed out that despite the ownership arrangement, there is still the need to ensure that there is planning on the employment of the executive succession.
Company Maintains Plans Existing
LVMH has confirmed that they have internal succession plans such as emergency plans but they do not publicize these arrangements. The firm has refused to address the occurrence of any leadership change at any time.
Bernard Arnault has already pushed the age limit on the co-service of the chairman and chief executive role by some years enabling him to continue in the job a few more years. This step has generated the speculation that the succession decisions can be postponed.
Governance Expectation and Market Effect
Other investors are worried that a lack of disclosure on the LVMH succession plan could subject the firm to operational and strategic risk in case unexpected changes happen in the leadership. Others say that the better communication would build confidence in stability in the long term.
With increasing importance on governing transparency among global investors, succession planning has gained major attention among those shareholders who are evaluating leadership resiliency among large corporations, including LVMH.
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