Nestlé's Leadership Turmoil: A Governance Crisis Undermining Investor Confidence?

Nestlé’s recent leadership upheaval—marked by the abrupt dismissal of CEO Laurent Freixe in September 2025 over a code-of-conduct violation involving an undisclosed romantic relationship with a subordinate—has intensified scrutiny on the company’s corporate governance and succession strategy. This is the second CEO change in a year, following the ouster of Mark Schneider in August 2024 for underperformance [1]. The rapid turnover has triggered a 15% decline in Nestlé’s stock price since January 2024, with shares dropping an additional 4% immediately after Freixe’s removal [2]. Investors are now questioning whether the board’s internal succession plan, which appointed 23-year company veteran Philipp Navratil as Freixe’s replacement, can restore confidence in a firm plagued by governance flaws.

The root of the crisis lies in systemic weaknesses in Nestlé’s oversight mechanisms. Freixe’s dismissal followed an internal investigation led by Chairman Paul Bulcke and Lead Independent Director Pablo Isla, who cited the need to uphold the company’s values [1]. Yet, the fact that such a violation went undetected for months raises concerns about the board’s ability to enforce ethical standards. Analysts at Kepler Cheuvreux and Jefferies have warned that repeated leadership instability signals a lack of robust governance frameworks, eroding trust in strategic continuity [2]. This is compounded by Nestlé’s ESG controversies, including supply chain scrutiny and a middling ESG risk score (59th in the Food Products industry) [3].

Navratil’s appointment, while intended to stabilize operations, has not quelled investor skepticism. JPMorgan analysts noted disappointment that the new CEO is constrained to follow Freixe’s strategic roadmap, which has already failed to deliver market confidence [2]. Navratil’s focus on premiumisation, AI-driven insights, and restructuring into geographic zones aims to boost efficiency, but these initiatives must now contend with a stock that underperformed its peers by 12% in the year following Freixe’s ousting [3]. The board’s insistence that the strategic direction remains unchanged—despite clear governance failures—suggests a disconnect between leadership and investor expectations.

The broader implications for Nestlé’s long-term value creation are stark. A 2025 AInvest report highlighted that governance risks, including weak board oversight and ESG performance, could hinder the company’s ability to attract capital in an era where ethical leadership is increasingly tied to financial performance [4]. Navratil’s track record in high-margin sectors like Nespresso may offer some reassurance, but his success will depend on his ability to address systemic issues rather than merely executing a flawed strategy. The board’s decision to retain Paul Bulcke as chair until 2026 further complicates matters, as it delays a potential overhaul of governance structures [5].

For investors, the lesson is clear: corporate governance is not just about compliance but about fostering trust in leadership’s ability to navigate complex challenges. Nestlé’s recent history demonstrates that even a well-established brand can falter when governance lapses undermine strategic credibility. As Navratil steps into his role, the market will be watching closely to see whether he can rebuild confidence through transparent reforms and a renewed focus on long-term value, rather than short-term fixes.

Source:
[1] Nestlé appoints new CEO, [https://www.foodnavigator.com/Article/2025/09/01/nestle-appoints-new-ceo/]
[2] Nestlé's Leadership Transition and Governance Implications, [https://www.ainvest.com/news/nestl-leadership-transition-governance-implications-assessing-continuity-investor-confidence-2509/]
[3] Nestlé's Leadership Turbulence: Implications for Governance and Shareholder Value, [https://www.ainvest.com/news/nestl-leadership-turbulence-implications-governance-shareholder-2509/]
[4] Corporate Governance Risks and Leadership Stability at Nestlé, [https://www.ainvest.com/news/corporate-governance-risks-leadership-stability-nestl-implications-long-term-creation-2509/]
[5] Nestlé announces succession for the Chair of the Board, [https://www.nestle.com/media/pressreleases/allpressreleases/succession-chair-board-june-2025]