The price of shares in Compass fell by 6.33% to 174 pence in late morning trading on Friday in London after the announcement.
Media reports said that international investigators were investigating alleged links between Compass subsidiary Eurest Support Services (ESS) and Alexander Yakovlev, a former UN procurement officer who was arrested in August on suspicion of corruption.
Compass said it had instructed law firm Freshfields Bruckhaus Deringer to conduct an investigation into “the relationships between” ESS, the United Nations and IHC, a former contractor and vendor to the UN procurement department.
“Pending progress in that investigation, the company has decided that Peter Harris, the CEO of the group’s UK and Ireland, Middle East and Africa division, should be suspended,” Compass said in a statement.
“The potential UN fine is a wild guess but the reputational damage is likely to be important, especially for government contracts, which currently represent about 15% of the group revenues”
Gary Green, chief executive officer of the group’s Americas Division, was to take over on an interim basis.
Barclays analyst Sebastien Petit described the statement as a “significant blow” for Compass.
“The potential UN fine is a wild guess but the reputational damage is likely to be important, especially for government contracts, which currently represent about 15% of the group revenues.”
Earlier in October Compass said ESS was cooperating fully with the authorities in an investigation into contract procurement at the UN.
Compass has been questioned by US Federal and UN investigators about the matter, according to reports.
In recent years, ESS has won contracts with the UN to supply food to troops in trouble spots including East Timor, Kosovo and Lebanon. Compass supplied 30,000 UN peacekeepers, according to its 2004 annual report, and last year won contracts in Liberia, Eritrea and Burundi.
Compass, which has posted three profit warnings in a year, noted however that revenue from the UN contracts in 2004 was less than 1% of group revenues.