Governance and Control at AXA

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Case Details:

Case Code : BSTR224
Case Length : 18 Pages
Period : 1991-2006
Organization : AXA Group
Pub Date : 2006
Teaching Note : Not Available
Countries : France
Industry : Insurance and investment management

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"If you want to manage well, you need to get the right balance between feudalism, where there is a strong decentralization of power, and control from the center. If there is going to be decentralization, then you need to have a high degree of transparency over goals and objectives and a way of constantly monitoring performance. There also needs to be a few but very strong common principles that bind the group together. Decentralization without common values and with low transparency just won't work."¹

- Henri de Castries, Chairman, Management Board, CEO, AXA Group in 2004.

Introduction

France-based AXA Group (AXA), that specializes in insurance and investment management solutions, was ranked 13th in Fortune magazine's Global 500 list² in 2005, the highest rank for any insurance company. AXA's operations are spread across Western Europe, North America, and the Asia Pacific. As of December 31, 2005, AXA served over 50 million customers and had €³ 1,064 billion in assets under management. In 2005, the company reported revenues of € 72 billion and net profits of € 4.17 billion. The company operated in five business segments - Life and Savings, Property & Casualty, International Insurance, Asset Management, and other Financial Services (Refer to Exhibit I for the details of AXA Business Segments).

Since the mid-1980s, AXA had begun spreading out its operations across the world mainly through acquisitions. But it remained a highly focused company with insurance and investment products as its core business area. AXA's strategy was to be a leader in financial protection. In light of the rapid globalization, Henri de Castries, (Castries), Chairman, Management Board and CEO of AXA, realized that there was a need for more coordination between the subsidiaries and headquarters if the company was to be run efficiently. In order to achieve synergies, AXA centralized some of the functions, while decentralizing some.

It made efforts to leverage on the strengths of each of its global subsidiaries.

In 1997, AXA established a dual corporate governance structure with a management board and supervisory board managing its activities. The management board looked after the company's day-to-day activities, while the supervisory board was responsible for the efficient operation of the company. According to the Institutional Investor magazine, "The management board rules AXA's sprawling empire with the sort of authority rarely seen in companies that have grown by acquisition, setting strict financial targets while leaving considerable operating autonomy to local managers."⁴

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1] Andrew Capon, "AXA Wielder," Institutional Investor, October 2004.

2] The Fortune Global 500 is a ranking of the top 500 corporations as measured by revenue. The list is compiled and published annually by Fortune magazine.

3] As of October 24, 2006, 1 Euro = US$ 1.254

4] Andrew Capon, "AXA Wielder," Institutional Investor, October 2004.