Monday, May 2, 2011

The Bettencourt Scandal and Its Impact on France and L'Oréal

By: Valentina Franco

L’Oréal is the largest cosmetics company in the world, a company that is currently owned by France’s richest woman, Liliane Bettencourt. The daughter of the creator of L’Oréal, she inherited the company after her father’s death in 1957. Since then, she has served in the Board of Directors, and more recently her daughter Françoise Bettencourt-Meyers has served as well.

Liliane Bettencourt and her daughter Françoise Bettencourt-Meyers

Image Source: Women's Wear Daily

The Bettencourt family scandal started in late 2007 when Mme. Bettencourt’s daughter Françoise Bettencourt-Meyers filed a complaint against François-Marie Banier, a celebrity photographer and close friend of her mother’s, for abus de faiblesse or abuse of frailty. She claims that Banier, who is 25 years younger than her mother, had abused their close friendship to obtain about $1 billion in the forms of life insurance policies, art work, and cash. At that point, a trial date was settled for July 2010.

Eric Woerth

Source: Mediapart

The scandal was stirred again in June 2010; about two weeks before the trial date, when a series of recordings made by Bettencourt’s butler were leaked to the press. These tapes, which were recordings of conversations between Mme. Bettencourt and her financial advisor Patrice de Maistre, included information about two undeclared bank accounts in Switzerland that amounted to $100 million, the undeclared ownership of an island in the Seychelles, information about tax evasion strategies, and conversations about privileged relationships with President Sarkozy and the Budget Minister Eric Woerth. The controversy worsened when Le Canard Enchaîné published information that proved that Mme. Bettencourt had received a $38 million tax return in 2008. Also, an old accountant that worked with Bettencourt’s finances declared that she had witnessed various cash donations to President Sarkozy’s campaign in 2007, one that was 20 times larger than the allowed amount for individual contributions in France.

Source: Le Figaro

The various developments that were uncovered in before Banier’s trial, transformed the Bettencourt scandal from a family issue to a controversy that pertained to the interests of all of France. The French people and the world questioned President Sarkozy’s government and its integrity, as well as that of the Budget Minister Eric Woerth. The media’s involvement in the scandal was crucial, since it was the platform and source of information for the whole world. All of France’s media outlets reported on the continual developments of the scandal, and the main news sources of the world did so as well.

L'Oréal's stock from May 2010 to April 2011

Source: Yahoo Finance

Mme. Bettencourt’s ability to be the head of L’Oréal was also questioned, as some saw her decisions regarding Banier as erroneous and potentially harmful. The CEO of L’Oréal, Jean-Paul Agon, said that the company had fallen sharply on a French poll on corporate image. However, the company’s stock did not plunge during the development of the scandal, most likely due to the fact that at that time Nestlé (which owns 30% of L’Oréal) was rumored to be purchasing a larger part of the company.

It is important to highlight the nature of the relationships that precipitated this scandal. The privileged situation of the Bettencourt family in society allowed for her closeness to members of the government, which a normal French citizen would not have. Perhaps in avoiding these kinds of relationships between the members of high society and the government members, corruption could be minimized.

Video: Bettencourt Scandal Summary and Analysis by France 24

Video: Part of Sarkozy's interview to address the public's concern

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