Dive Brief:

• Two days after Nestlé abruptly dismissed CEO Laurent Freixe citing a breach of the company’s code of conduct related to an investigation into an undisclosed romantic relationship with a direct subordinate, CFO Anna Manz on Wednesday detailed a roughly three-month timeline of events that preceded the firing. 
• In May the Switzerland-based food giant received an allegation through internal channels of the the CEO’s relationship with an employee and “improper favoritism” but an internal investigation overseen by the board found no evidence of it, according to a transcript of Manz’s talk during a fireside chat at the Barclays Global Consumer Staples Conference. No evidence of the allegations was found then and the CEO also gave a personal statement that “no such thing” occurred, she said.
• “Subsequent to that, we had a number of other speak-ups making slightly different allegations and with slightly different information,” Manz said. “And on the back of that, the board initiated a second broader external investigation, and it was that, that triggered information that led to the board believing that...they needed to act to change [the] CEO.” 

Dive Insight:

Nestlé is the latest company to undergo an abrupt C-suite reshuffling stemming from C-suite executives’ relationships with employees. In July the data tech company Astronomer’s CEO resigned after he was seen embracing an employee at a Coldplay concert, CNN reported. Last year oil giant BP’s CFO stepped into the role of interim CEO, replacing Bernard Looney, who resigned after he failed to disclose past personal relationships with work colleagues. 

At Nestlé, the anonymous tip came through an internal hotline called “Speak Up,” according to The Wall Street Journal, which reported that Nestlé’s code of business conduct says any personal relationships between employees must be disclosed.

The leadership shakeup will “test investor patience,” Diana Radu, a Morningstar equity analyst wrote in a Sept. 1 report on Nestlé. 

“The leadership transition comes at a challenging time for Nestlé, marked by weak volume growth and underperformance in market shares,” Radu wrote. “Little progress had been made during Freixe's short tenure as CEO in alleviating investor concerns, although we had always expected that initiatives such as the stepup in brand and marketing investment and more rigorous performance management would take time to bear fruit.” 

Following the dismissal “with immediate effect” of Freixe after one year in the role, the Lean Cuisine and Hot Pockets manufacturer appointed Philipp Navratil, the head of its Nespresso coffee brand, to take the CEO reins. 

Asked during the talk why the change happened so quickly, Manz said Freixe was 63 years old “so of course” the board had already been focused on succession planning, had done a lot of work on the issue and viewed Navratil as the best candidate for the position. “In many ways, the work has been done, and they can move quickly to appoint Philipp, it allows us to keep real momentum in the business,” she said.  

Navratil has been at Nestlé for 24 years and has a “strong track record,” particularly in the coffee category and Latin America, according to the Morningstar report which also noted he has shown support for the company’s current strategy, which focuses on using cost savings to fund increased reinvestment in brands. But while the company has been under pressure from private-label brands and “subdued” consumer sentiment, the report states that with “a portfolio of leading global brands, broad geographic exposure, and strong positions in attractive categories such as petcare, coffee, and health science, Nestlé remains well positioned to capture favorable consumer trends once it addresses the root causes of its underperformance.”