Corporate Governance Risks and Leadership Stability at Nestlé: Implications for Long-Term Value Creation

The recent leadership upheaval at Nestlé has laid bare deepening governance risks and raised urgent questions about the company’s ability to sustain long-term value creation. Over the past 18 months, the food and beverage giant has seen two CEOs exit under contentious circumstances—first, Mark Schneider in 2024, and then Laurent Freixe in 2025—each departure underscoring a pattern of instability that investors and analysts are now scrutinizing closely. The implications for Nestlé’s strategic momentum, operational continuity, and investor confidence are profound, particularly in an industry where brand trust and consistent execution are paramount.

The 2024 Leadership Change: A Response to Underperformance

Mark Schneider’s abrupt exit in August 2024 marked the end of an eight-year tenure defined by mixed results. While his leadership weathered the pandemic and supply chain disruptions, investors grew frustrated with stagnant sales growth and a stock price that had lost nearly 20% of its peak value by May 2023 [4]. The board’s decision to replace him with Laurent Freixe, a 38-year company veteran, was framed as a return to “organic growth” and operational discipline [6]. Freixe’s appointment was met with cautious optimism, as analysts noted his deep familiarity with emerging markets and his track record in Latin America [4]. However, the market’s muted reaction—Nestlé’s shares fell 3% on the news—suggested lingering skepticism about the company’s ability to reinvigorate its core businesses [5].

The 2025 Scandal: A Governance Crisis Unfolds

Less than a year later, Freixe’s tenure ended abruptly in September 2025 due to a romantic relationship with a direct subordinate, a violation of Nestlé’s code of conduct [1]. The board’s swift dismissal of Freixe, coupled with the appointment of Philipp Navratil—a 20-year Nestlé veteran and former Nespresso CEO—highlighted the company’s prioritization of ethical governance. Yet the rapid succession of leadership changes has raised concerns about Nestlé’s internal controls and corporate culture. As one analyst noted, “This isn’t just about two individuals; it’s about a system that failed to prevent these issues from arising in the first place” [3].

Market Reactions and Investor Confidence

The market’s response to these leadership shifts has been characterized by volatility and uncertainty. Following Freixe’s dismissal, Nestlé’s shares dipped another 4%, outperforming the broader consumer staples sector but remaining under pressure compared to peers like Unilever and Danone [5]. Investor sentiment is further clouded by Nestlé’s ongoing ESG challenges, including a low MSCI ESG Risk Rating of 71 out of 547 in the Food Products sector as of June 2025 [4]. These governance risks are compounded by controversies over supply chain ethics and product safety, which could erode brand equity at a time when consumers are increasingly prioritizing sustainability [4].

Strategic Implications: Can “Accelerating Nestlé” Deliver?

Freixe’s brief tenure introduced the “Accelerating Nestlé” strategy, which emphasized cost-cutting, increased marketing investment, and a pivot toward premium vitamin brands [5]. While these initiatives align with broader industry trends, the lack of a clear, long-term vision has left investors questioning the company’s strategic coherence. Navratil’s appointment, though promising, comes at a critical juncture: Nestlé must navigate headwinds in key markets such as North America, coffee, and China, while also executing a planned spin-off of its waters business [4]. The success of these efforts will depend not only on Navratil’s leadership but also on the board’s ability to restore confidence in its governance framework.

Assessing the Governance Risks

The rapid turnover of CEOs suggests deeper governance issues, particularly in a company that has historically prided itself on stability. The fact that both Schneider and Freixe were replaced under pressure—Schneider for underperformance and Freixe for ethical lapses—points to a board that may be reactive rather than proactive in managing leadership risks. As governance experts argue, “A company’s ability to attract and retain top talent hinges on a culture of transparency and accountability. Nestlé’s recent history does not inspire confidence in either” [3].

Conclusion: A Test of Resilience

For Nestlé, the coming months will be a litmus test of its resilience and adaptability. The appointment of Navratil offers a chance to reset, but the company must address systemic governance weaknesses and align its strategic initiatives with the expectations of a rapidly evolving market. Investors will be watching closely to see whether this leadership shake-up signals a necessary corrective action or a deeper erosion of institutional strength. In the food and beverage sector, where trust and consistency are currency, the stakes could not be higher.

Source:
[1] Nestlé Dismisses CEO Freixe Over Relationship With Subordinate [https://www.bloomberg.com/news/articles/2025-09-01/nestle-dismisses-ceo-freixe-over-relationship-with-subordinate]
[2] Nestlé CEO replacement not such a bad thing for investors [https://www.cnbc.com/2024/08/23/nestle-ceo-replacement-not-such-a-bad-thing-for-investors-analyst-says.html]
[3] Nestlé Board appoints Philipp Navratil as CEO following the departure of Laurent Freixe [https://finance.yahoo.com/news/nestl-board-appoints-philipp-navratil-170000678.html]
[4] Nestlé's ESG Struggles: Can the Giant Overcome Controversies and Operational Risks? [https://www.ainvest.com/news/nestl%C3%A9-s-esg-struggles-can-giant-overcome-controversies-and-operational-risks-25071010ca83df04aeb0db15]
[5] The Ripple Effect: Nestlé's Leadership Shuffle and Its Impact on the Food Industry [https://www.reportlinker.com/article/7777]