Leadership Turmoil and Stock Valuation: The Governance Risks Haunting Multinational Consumer Goods Firms

The recent upheaval at Nestlé—marked by the abrupt removal of CEO Laurent Freixe in September 2025 over a workplace relationship violation—has crystallized a broader crisis in corporate governance within multinational consumer goods firms. This incident, coupled with the earlier ousting of CEO Mark Schneider in August 2024 and the resignation of Chairman Paul Bulcke in July 2025, underscores how leadership instability can erode investor confidence and destabilize stock valuations [1]. Nestlé’s shares fell 4% immediately after Freixe’s dismissal, compounding a 3% drop following Schneider’s exit, and underperformed industry peers by 12% in the year to September 2025 [2]. These events align with academic findings that leadership scandals and opaque governance practices amplify stock price crash risks, particularly when ESG (environmental, social, and governance) shortcomings are compounded by internal missteps [3].

The root issue lies in the interplay between corporate governance frameworks and leadership continuity. Studies show that ethical leadership and transparent decision-making are critical for mitigating governance risks and enhancing ESG performance [4]. Nestlé’s struggles reflect a failure to uphold these principles. For instance, the company’s 2025 H1 net profit dropped 10.3% to 5.1 billion Swiss francs, despite maintaining its cost-savings program, as investors questioned the board’s ability to execute a coherent strategy [5]. This mirrors broader trends in the sector: leadership scandals at Kohl’s, Kroger, and Target in 2024–2025 led to combined market losses exceeding $12 billion, driven by eroded trust in DEI (diversity, equity, and inclusion) policies and opaque governance [6].

The appointment of Philipp Navratil, a 24-year Nestlé veteran, as Freixe’s successor has offered a glimmer of stability. Navratil’s focus on core businesses like coffee and confectionery, and his pledge to integrate AI into supply chains, align with investor demands for operational clarity [7]. However, the rapid turnover of executives—including Bernard Meunier and David Zhang—has raised concerns about strategic drift, particularly in markets like China, where localized expertise is vital [8]. This instability contrasts sharply with firms like Costco and John Deere, which have maintained DEI commitments and seen greater resilience against activist pressures [9].

For investors, the lesson is clear: leadership stability and ethical governance are no longer peripheral concerns but central to long-term valuation. Academic research highlights that strong governance reduces the weighted average cost of capital and enhances return on invested capital, while poor governance correlates with higher stock volatility [10]. Nestlé’s case illustrates this dynamic: its 15% stock decline since January 2024 and 7% drop post-Freixe’s appointment suggest that markets punish uncertainty more severely than operational underperformance [11].

To mitigate these risks, firms must prioritize transparent leadership transitions, robust ESG integration, and stakeholder alignment. Nestlé’s new CEO faces a daunting task: restoring trust while navigating geopolitical headwinds and supply chain disruptions [12]. For investors, the key will be to monitor governance reforms and strategic coherence, as these factors increasingly dictate the valuation of multinational consumer goods firms in an era of heightened scrutiny.

Source:
[1] Nestlé dismisses CEO Freixe after romantic relationship with staffer [https://www.reuters.com/sustainability/boards-policy-regulation/nestle-dismisses-ceo-freixe-after-romantic-relationship-with-staffer-2025-09-01/]
[2] Corporate Governance Risks and Leadership Stability at Nestlé [https://www.ainvest.com/news/corporate-governance-risks-leadership-stability-nestl-implications-long-term-creation-2509/]
[3] ESG risks and corporate survival - PMC [https://pmc.ncbi.nlm.nih.gov/articles/PMC9709759/]
[4] Ethical leadership, corporate social responsibility, firm reputation, firm performance, Vietnam [https://pmc.ncbi.nlm.nih.gov/articles/PMC8060600/]
[5] Nestlé H1 Net Profit Declines; Maintains Guidance For 2025 [https://www.nasdaq.com/articles/nestle-h1-net-profit-declines-maintains-guidance-2025]
[6] 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/]
[7] Nestlé to refocus on core business, CEO says [https://www.reuters.com/business/nestle-refocus-core-business-ceo-says-2025-05-22/]
[8] Leadership Instability and Strategic Drift at Nestlé [https://www.ainvest.com/news/leadership-instability-strategic-drift-nestl-implications-shareholders-2509/]
[9] Corporate Governance and Risk Management: A Systematic Review [https://www.researchgate.net/publication/372192229_Corporate_governance_and_risk_management_a_systematic_review_and_synthesis_for_future_research]
[10] From responsibility to value: ESG and long-term corporate [https://pmc.ncbi.nlm.nih.gov/articles/PMC12017491/]
[11] Nestle's New CEO May Cut Guidance in Fresh Start [https://money.usnews.com/investing/news/articles/2024-10-16/nestles-new-ceo-may-cut-guidance-in-fresh-start-some-investors-warn]
[12] 2025 Consumer Products Industry Outlook [https://www.deloitte.com/us/en/insights/industry/consumer-products/consumer-products-industry-outlook.html]