Discussion questions

1. What elements constitute a good succession plan? Why is a clear succession plan important to corporate governance?

2. What is the role of the nominating committee (in this case, the Appointments and Governance Committee) in succession planning? Did Sanofi’s committee carry out its duties appropriately?

3. To what extent do you think the blame should be put on the CEO? Who do you think is ultimately responsible for the whole fiasco?

4. Put yourself in the shoes of Serge Weinberg as the Chairman of the Board and the Appointments and Governance Committee. How would you have dealt with the issues of an uncooperative CEO with regards to information sharing and succession planning?

Case overview

In September 2008, Sanofi welcomed its first non-French CEO, Christopher A. Viehbacher. The appointment of German-Canadian Viehbacher marked a cultural shift in the French pharmaceutical company, who introduced a series of revamps in an attempt to revive the ailing drug empire. However, despite the stock market’s positive response to Viehbacher’s reforms, Sanofi’s board of directors, headed by Serge Weinberg, was clearly displeased with their non-French leader. On 29 October, 2014, the abrupt firing of Viehbacher shocked the market and left a question mark over one of the world’s largest pharmaceutical companies. Why was Viehbacher fired? Who would be coming on board next? The objective of this case is to facilitate discussion of issues such as board-management relationship; CEO succession planning; qualities of a good CEO; cultural differences; and hiring and firing of a CEO.

Sanofi: The pharmaceutical empire

Sanofi is the world’s fourth largest pharmaceutical company in terms of sales, with an annual revenue of 33,770 million.1 Formally incorporated in France in 1994, Sanofi gradually expanded into the global markets over the decades. It was first listed on Euronext Paris, and later, on the New York Stock Exchange. Sanofi takes pride in its rich heritage and longstanding history of French innovation through mergers and acquisitions of established pharmaceuticals such as Laboratories Midy and Synthélabo.2

Conseil d’Aministration

Sitting on Sanofi’s board are 15 Directors, comprising Chris Viehbacher, four non-independent directors, and 10 independent directors. Helming the board is Chairman and independent director Serge Weinberg, who took over the reins in May 2010. A majority of the directors (10 out of 15) are French.

One of the board committees is the Appointments and Governance committee, which evaluates the composition and performance of the Board, its committees and its executive management. Before November 2014, the committee was led by the Chairman Serge Weinberg.3 The committee is composed of four directors, three of whom are independent. All the directors on the committee are French.

The drug lord

Christopher A. Viehbacher was head of GlaxoSmithKline’s North American Division before joining Sanofi as Chief Executive Officer (CEO) in September 2008. Having worked in Canada, Europe, and the United States, Viehbacher had a wealth of international business experience. His appointment as Sanofi’s first non-French CEO evoked speculation of major changes at France’s second largest listed company.

Cure to the ailing Sanofi

The market speculated that Viehbacher’s appointment signified a cultural shift in the company in its attempt to make Sanofi more international by encouraging it to move away from its traditional French and European strongholds.6 Before Viehbacher’s appointment, Sanofi had been a European-centred company typically behaving “as if the American market were an afterthought”. Sanofi’s European-centred management style had hindered the company’s expansion into the US and international markets. Right before Viehbacher’s appointment, Sanofi had experienced a major failure with its weight-loss drug Acomplia in the United States.

To make matters worse, Sanofi was also facing the pending expiration of six of its major patents which accounted for 40% of its revenue. As a result, Sanofi was falling behind its European competitors, with analysts calling it “a laggard of the European pharmaceuticals sector”.Sanofi was thus left ill-prepared to deal with new competition and potential rivalry from generic pharmaceutical manufacturers.

When Viehbacher took over the company, he introduced a series of revamps that was a “breath of fresh air for the company”. He focused on strengthening Sanofi’s research and development, and steered Sanofi towards the international markets.

He initiated a massive program of layoffs which included cutting more than 40% of the organisation and selling off non-core assets because he “just didn’t believe in those projects”. Viehbacher’s revamps were well received by investors, with the share price steadily rising from $25.62 when he first took over in 2006, to a peak of $56.43 just a few days before his dismissal in 2014.

Concocting his own disaster

Despite Viehbacher’s contributions to the company, his tenure as CEO was a bittersweet period for Sanofi. Viehbacher’s distinct management style and the cultural clash cre ated conflict and dissatisfaction amongst the board members.

Viehbacher had a reputation for his aggressive and uncommunicative management style, which did not sit well with Sanofi’s board of directors. During his term as CEO, Viehbacher had adopted a solo decision making approach – preferring not to consult the board when making major decisions for the company. Sanofi’s directors more often than not felt ill-informed about his plans. Despite general confidence in the turnaround strategy he was pursuing, his management style cre ated increasing tension between him and the board members. In an interview with Fortune, Weinberg revealed that “the board was dealing with a CEO who had a ‘willingness not to communicate’, [and] the situation only grew worse, ‘trust diminished and it was very difficult'”. He also said that the board collectively felt that “the management style in a company that is big, international and complex needs to be much more inclusive”.

The cultural differences between the non-French CEO and the French-dominated board further aggravated the already tense situation. Not a native to the French culture, Viehbacher adopted an Anglo-Saxon style of management that was heavily questioned by the board. In June 2014, Viehbacher’s decision to relocate to Boston, US, further fuelled concerns from the French government that Sanofi wasshifting its focus away from home. Despite Sanofi’s claim that this was a personally motivated decision which would have no impact on Sanofi’s operations,13 it was clearly a debatable decision made by Viehbacher as Sanofi was one of France’s biggest companies, and its operations were extremely embedded in the country’s corporate and political life.

Burning side effects: Project Pheonix

At the end of May 2014, Viehbacher’s secret project to sell off several of Sanofi’s mature drugs which were suffering from low growth to Bloomberg was leaked to the press. It was the first time Sanofi’s board had heard about the undertaking, dubbed “Project Phoenix”, which Viehbacher had worked on without consulting the board. The board was alarmed, and Weinberg was quoted saying, “The board found out about the project in the press, and would have nixed it had they known.” Viehbacher was reported to have denied the project’s existence when questioned by Weinberg.

Three weeks later, in June 2014, there was another leak of a project document by The General Confederation of Labour, a French national trade union centre, to the media. The twenty five document detailed a plan presented to Sanofi’s investment committee on 6 May, discussing the potential sale of Sanofi’s portfolio of matured and low growth drugs valued at over 6.3 billion. Given the backdrop of France’s high rate of unemployment at that time, the initiative, which affected six manufacturing and distribution sites, and 2,600 staff in Europe, was seen as “tactless and hurtful” and “very sensitive in France.” When Weinberg questioned Viehbacher yet again about the undisclosed plan, the then-CEO downplayed the colossal initiative, calling it a “local project.”

The growing dissatisfaction Sanofi’s board had with Viehbacher led the board members to consider Viehbacher’s departure from the firm in July 2014. This evolved to Weinberg discussing transition plans directly with Viehbacher in early September 2014.

Without me, the company falls

Two months after the unsettling Project Phoenix, Viehbacher caught a whiff of the discontentment stirring within Sanofi’s board of directors. This prompted him to wri te a letter to the board, stating reasons why he should retain his position as CEO of the company20, as well as revealing his wariness of Weinberg. The letter, dated4 September 2014, stated, “It has come to my attention, first through rumour, that the Chairman of the Board is actively seeking a successor to me as Chief Executive Officer.”Through the dispatch, Viehbacher also pressed for further clarification from the board regarding the issue. However, Viehbacher’s quest for answers was not addressed and he threatened the board with legal action.

The contentious letter, along with the private opinions expressed by Viehbacher, was made public on 27 October 2014 in Les Echos, a French newspaper, resulting in the company’s dirty laundry being aired in public. It was suspected by Weinberg that the letter was leaked by Viehbacher himself, as he reasoned that only the CEO had a copy of the circulated unsigned letter; all board members had received signed copies of the letter.

Private matter no more

In September 2014, a month prior to Viehbacher’s dismissal, Weinberg and Viehbacher reached a “mutual” agreement on succession26 where there would be a smooth leadership transition once Viehbacher stepped down as CEO. The agreement seemed concrete, up until the leaked letter on 27 October 2014.

Weinberg perceived this leak as a malicious attempt on Viehbacher’s part to confuse matters and to turn his back on the gentlemen’s agreement. Any chance of a smooth succession was clearly thrown out the window. The leak further drove a wedge between the CEO and the board, resulting in additional

cracks in an already thinning degree of trust between the two parties, where any chance of collaboration for a succession agreement was out of the question.

In light of this, the board was led to believe that the CEO “doesn’t want to collaborate in a natural, trusting way”, and thus, in the words of Weinberg, “the board had to act”. On 27 October 2014, the very same day the leaked letter was published, Viehbacher once again sought clarification on his future at a meeting at Sanofi’s headquarters, only to be declined information by Weinberg, who claimed that the CEO’s succession was not on the agenda.

On 28 October 2014, Sanofi’s directors were notified of an emergency meeting.30 This special board meeting held in the morning of 29 October 2014 led to Sanofi’s board unanimously deciding to remove Viehbacher, who had been with the pharmaceutical firm for six years. This was in stark contrast with the board’s previous statement two days before, raising questions over the sudden change of mind.

Coup d’État – D-Day Viehbacher

On 29 October 2014, Viehbacher’s long-standing tussle with Sanofi’s board came to an end, with the 15 board members unanimously deciding to fire him as CEO.

Following Viehbacher’s shocking departure, Sanofi’s board was left without a successor. The appointment of Chairman Weinberg as the interim CEO signalled only one thing – the board had neglected its key duty of succession planning. In an article by Fortune magazine, Weinberg conceded that “the board was not happy with how Viehbacher had to go, especially without a succession plan in place.”

Sanofi’s Board Charter explicitly stated that the one of the main roles of the Appointments and Governance Committee was to “ensure that there is adequate succession planning for the Company’s executive bodies, in particular through the establishment of a succession plan for the Chairman and the Chief Executive Officer so that replacement solutions may be proposed in the event of unplanned vacancies.”32 Why then did Sanofi not have a succession plan in place for Viehbacher?

There were attempts by the board to cre ate a CEO succession plan. For three years since Viehbacher’s appointment as CEO, the board had requested for a succession plan to be put in place.33 However, the efforts by the board were stonewalled by Viehbacher, who clearly had no interest in identifying any potential successors.

Although it may seem that a well formulated succession plan was not a top board priority, Weinberg defended Sanofi in an interview with Fortune magazine, asserting that “In Europe, boards are often slow to act, as there is this view of the ‘almighty CEO'” and that Sanofi, compared to other European boards, addressed the matter in a more timely manner.34


The sudden dismissal of Viehbacher as CEO unnerved investors. It triggered a ripple effect, resulting in Sanofi’s shares falling 4.5% on the fateful day itself.

Sanofi’s share price hit rock bottom on the Paris Stock Exchange and NASDAQ on 29 October 2014. The plunge came one day after Sanofi’s largest single-day drop in share price in nearly 20 years, which was a result of its announcement that the sale of its bestselling drug ‘Lantus’ – a treatment for diabetes that accounts for 18% of the company’s sales revenue – would be flat in the following year due to a price war.

A new leader

Sanofi’s four month search for a new CEO came to an end in February 2015, when Olivier Brandicourt, who was then Chairman of the Management Board at Bayer’s HealthCare AG, was selected to be Viehbacher’s successor. The appointment of Paris-educated Brandicourt was clearly to the satisfaction of the board, with Weinberg saying Brandicourt had a “deep knowledge of the markets where Sanofi is present,” and the “right personality” for the job. He further added in an interview that he desired “a team player, someone capable of communicating . . .” as well as “someone from the industry and someone with knowledge of the US market”, insinuating that in the board’s eyes, ‘management style’ was one area in which Viehbacher had failed.

With Brandicourt, Sanofi has selected a French citizen with considerable international experience. As well as reviving its international growth plans, Brandicourt will have to consider redefining and communicating the company’s strategy at home, where Viehbacher’s Anglo-Saxon management regime has ruffled more than a few feathers among the French officials and Sanofi’s French dominated Board of directors.

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