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Mr. Arnault Goes to Washington: LVMH Corporate Citizen

Apr. 20th, 2011 | Comments 0 | Make a Comment   
The French are having a pretty good year so far, both politically with President Nicolas Sarkozy, and in the world of business, with Monsieur Bernard Arnault, CEO LVMH.

On the statecraft front, we have French President Nicolas Sarkozy launching himself into the leadership void left by the absence of a US President (or his delayed presence) on the thorny issues of Egypt, Libya, Syria and the Ivory Coast.

While this might be costing Sarkozy at the polls in France, his actions are certainly earning him major props from his contemporaries around the globe. Sarkozy recently called together leaders from four continents to a summit at the Elysee presidential palace in Paris to determine military next-steps for the aforementioned conflicts. German chancellor Merkel, and British PM Cameron were there. Even Secretary of State Hillary Clinton was in attendance where she was rather hands-off, reflecting the administration’s muted response on these crises.

Where else was Madame Secretary Clinton seen? How about noshing on some sumptuous appetizers along with French businessman Bernard Arnault, CEO and chairman of LVMH at the event honoring him. Arnault has proven he is a corporate citizen unlike any other, and was duly feted by the Woodrow Wilson International Center for Scholars receiving their “Corporate Citizen” award in DC. Who else was there to see Arnault receive his award? The usual LVMH partners and admirers of course: Donna Karan, Marc Jacobs, Frank Gehry (architect to the new Louis Vuitton museum in Paris) and Diane von Furstenberg along with her hubs Barry Diller. Also in attendance were former Prime Minister Tony Blair, Senator Joseph Lieberman, and even President Obama met with Arnault prior to the event at the White House where they discussed globalization, fair trade, and job creation in the US.

It’s no mere coincidence that the power elite were there to praise him and pump his luxury paw (he counts among his personal friends, President Sarkozy, for whom he was a witness at his wedding ceremony). Indeed, Arnault’s is a powerful company with a global presence and more than 80,000 employees whom he thanked during his speech. Besides being gracious, Arnault addressed the issue of a corporate citizenship (alluding to the Galianno anti-Semitic scandal?) based upon a moral code that was “nonnegotiable” and that could make tough decisions “regardless of the impact on our business.”

Bernard Arnault is an ardent globalist; he sees luxury and corporate value even in the remotest regions of the world, often before others would even consider building Wallmarts in these places, let alone a Louis Vuitton boutique. Starting in 1992, perspicacious LVMH began its push into China, and now Asia represents 35 percent of worldwide sales for the luxury holding company with more than 60 brands. There might be more than 333 LV stores in the world, but its flagship store is found in Shanghai. Likewise Bulgari, acquired by LVMH in March of this year, also has its largest flagship store in China. Even the subcontinent is getting in on the luxury expansion with India receiving its first store in 2003 (the first luxury brand store in country), and now Mongolia (yes, you read that right) also has its own LV store.

Arnault’s lingua franca has been his ability to draw from his business experience, circumnavigating the business world with aplomb, where LVMH now has more than 2,500 retail outlets. And, the “L” train keeps rolling along as L Capital, the investment arm for LVMH, is investing not only in luxe rival Hermes (almost 20 percent through a series of shrewd equity swaps), but they are extending the brand to resorts, skin care, and more precious gems and luxury bags. L Capital is investing in Japan, India, UK and the Middle East. Arnault clearly knows what he’s doing, with a track record of regular increased profits year-over-year, dealing with various forms of government (autocratic, democracies and as well as totalitarian states), and a personal net-worth that places him squarely as the richest man in Europe with a net worth of $41 billion.

Arnault continues to do two things that are of great importance to him: (1) he is not afraid to emphasize his French heritage and inculcate it into his worldview; and (2) he continues to explicate the paramount focus of the bottom-line of business as meritocracy. To the latter part, when the brands he owns (or creates) are not performing well, they are sold-off, e.g., the recent Christian Lacroix divestment. And to the first, Arnault has said that he wants to encourage unique aspects of French culture, seeing himself “as an ambassador of French heritage and French culture … what we create (at LVMH) is emblematic.”

The question has been and remains: Will the CEO of a luxury house — with a decentralized operation of 60 brands and 2,500 locations around the globe — play well with a China, which has at its core, a centralized market approach and a human rights record nowhere near Arnault’s “non-negotiable moral code”?

By J. Gregg
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