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In March 2017, Richard Lepeu, CEO of Richemont, will retire and no one will replace him. At the end of 2016, the company announced they are doing away with the position entirely. It is also reorganising the managerial structure of the company and massively reducing the number of employees. At a time when the luxury sector and watch industry are struggling, can Richemont save money by not having a CEO?
not a long-term
Richemont is an interesting case. Johann Rupert, former CEO, current Chairman of the Board of Directors and majority shareholder, has always acted as if he was the CEO. Eliminating the position only formalises Rupert’s controlling role in the business.
At the same time, the significant management restructuring clearly demonstrates the desire for a generational shift. Directors of the most important departments are now all under the age of 50. Additionally, new cross-disciplinary management positions are opening up, which is a sign that there will be more synergy in the group. I think that this new structure is actually better than it was before. Richemont can make do without a CEO as long as Johann Rupert is Chairman. But I doubt it will last more than five years.
The answer is yes, but it’s an outdated solution. Other companies similar to Richemont have Chairmen who are also CEOs, such as LVMH and Kering. The risk of not having a CEO is that companies lose the big picture and collaborate less. I’m not saying that this is Richemont’s strategy, of course, but giving brands lots of autonomy makes it clear which ones stand out from the rest. This can then be the first step towards selling some brands.
Richemont’s situation also seems to stem from a failed succession. The current CFO Gary Saage, who seemed to be the replacement for Richard Lepeu, is retiring at the same time. This is a sign that the position is quite difficult to fill. The CEO of Richemont is caught between an imposing Chairman and brand directors with strong personalities. According to Johann Rupert, the role of CEO is first and foremost to ’manage egos’.
It depends on who is the Chairman of the board. Johann Rupert has always been the strongman of the company and has always played a significant role in the business. Richard Lepeu’s position was eliminated, but in reality, the operational management was already largely delegated to three solid directors : Cyrille Vigneron, CEO of Cartier, Georges Kern, current CEO of IWC, who will take over the entire watch business, and Jérôme Lambert, CEO of Montblanc, who will also expand his responsibilities to everything besides watches and jewellery. From an operational standpoint, it’s not really necessary to have a CEO.
I suspect, however, that Johann Rupert is laying the groundwork for his son to become the nonexecutive Chairman of the group. And in that case, the position of CEO will become necessary again…