Corporate Governance Risks in Global Consumer Goods: Lessons from Nestlé's CEO Dismissal

The recent dismissal of Nestlé CEO Laurent Freixe in September 2025 over a workplace relationship violation has reignited scrutiny on corporate governance risks in the global consumer goods sector. This incident, coupled with the abrupt ousting of his predecessor, Mark Schneider, in August 2024, underscores how leadership instability and ethical breaches can erode investor confidence and destabilize stock valuations. Nestlé’s shares plummeted 4% immediately after Freixe’s removal, compounding an earlier 3% drop following Schneider’s exit, and underperformed industry peers by 12% over the year [1]. These events reflect a broader pattern: governance failures in the sector correlate with heightened stock volatility and increased capital costs [2].

Leadership scandals are not isolated to Nestlé. Similar governance crises at firms like Kohl’s, Kroger, and Target have collectively cost over $12 billion in market value since 2024, driven by eroded trust in diversity, equity, and inclusion (DEI) policies and opaque decision-making [2]. Academic research corroborates these market reactions. A 2025 study found that corporate governance reforms, such as enhanced board oversight, reduce stock price crash risk by 13% on average across 41 countries [2]. Conversely, weak governance structures—marked by reactive leadership and internal control deficiencies—exacerbate investor skepticism, particularly among Gen Z investors who prioritize transparency and ethical alignment [3].

Nestlé’s case also highlights the compounding risks of ESG shortcomings. The company’s low MSCI ESG Risk Rating has amplified concerns about brand equity and long-term value creation [1]. Governance experts warn that rapid leadership turnover, as seen in Nestlé’s recent succession of CEOs, risks strategic drift and undermines stakeholder alignment [1]. While new CEO Philipp Navratil—a 24-year company veteran—has been tasked with stabilizing operations, the challenge lies in restoring trust in a market increasingly sensitive to governance lapses [1].

For investors, the lesson is clear: governance frameworks must evolve to address both ethical and strategic coherence. Companies that prioritize transparent leadership, stakeholder engagement, and ESG integration—such as Costco and John Deere—have demonstrated resilience amid activist pressures [2]. As global consumer goods firms navigate sustainability mandates and geopolitical uncertainties, governance will remain a critical determinant of valuation and investor trust [4].

Source:
[1] Leadership Turmoil and Stock Valuation: The Governance Risks Haunting Multinational Consumer Goods Firms [https://www.ainvest.com/news/leadership-turmoil-stock-valuation-governance-risks-haunting-multinational-consumer-goods-firms-2509/]
[2] Corporate Governance Risks in Blue-Chip Consumer Goods Firms [https://www.ainvest.com/news/corporate-governance-risks-blue-chip-consumer-goods-firms-leadership-scandals-shareholder-erosion-2509/]
[3] Corporate Governance, Financial Transparency, Risk Management, and Corporate Reputation: How They Influence Gen Z Investor Confidence [https://www.researchgate.net/publication/387941884_Corporate_Governance_Financial_Transparency_Risk_Management_and_Corporate_Reputation_How_They_Influence_Gen_Z_Investor_Confidence]
[4] Toward an updated corporate governance framework [https://journals.sagepub.com/doi/10.1177/23409444251320399]