Nestlé’s Leadership Turmoil: A Governance Crisis Undermining Investor Confidence and Strategic Clarity

Nestlé’s recent leadership instability has exposed deep governance flaws, eroding investor confidence and casting doubt on its long-term strategic execution. Over the past 18 months, the Swiss multinational has seen two abrupt CEO changes: Mark Schneider’s ouster in August 2024 for underperformance [1], followed by Laurent Freixe’s resignation in September 2025 over a breach of the company’s Code of Business Conduct [2]. These events have triggered a 12% underperformance against industry peers like Danone and PepsiCo, with Nestlé’s stock price plummeting 15% since January 2024 [3]. The rapid turnover signals a lack of governance continuity, raising concerns about the board’s ability to maintain strategic coherence in a competitive consumer goods sector.

The fallout from Freixe’s dismissal—linked to an undisclosed romantic relationship with a subordinate—compounded existing investor skepticism. The 4% stock price drop following his resignation [4] reflects a broader erosion of trust in Nestlé’s internal controls. Analysts warn that such governance lapses amplify the company’s weighted average cost of capital (WACC) and reduce return on invested capital (ROIC), key metrics for long-term valuation [5]. This is particularly problematic for Nestlé, which already ranks 59th out of 540 in the Food Products industry on ESG performance, with a medium ESG Risk Score of 24.4 [6].

The organizational roots of this instability lie in Nestlé’s governance structure. The 2025 restructuring—merging Latin America and North America into “Zone Americas” and promoting Philipp Navratil, a 24-year company veteran, to CEO—aims to streamline operations [7]. However, the abrupt departure of Chairman Paul Bulcke in July 2025 and the ousting of Schneider highlight a pattern of reactive leadership rather than proactive governance. Shareholders, including activist investor Ethos, have demanded stronger ESG transparency and accountability, yet the company’s revised 2025 guidance—mid-single-digit organic sales growth—suggests a retreat from ambitious targets [8].

For investors, the risks are multifaceted. First, leadership instability correlates with higher stock volatility, as seen in Nestlé’s 7% post-Freixe decline [9]. Second, governance controversies, such as the 2025 H1 net profit drop to 5.1 billion Swiss francs, underscore operational fragility [10]. Third, the sector’s shift toward volume-driven growth and ESG integration means Nestlé’s current trajectory could leave it lagging peers. For example, Costco and John Deere’s stronger DEI commitments and governance frameworks have insulated them from activist pressures [11].

While Navratil’s appointment offers a glimmer of stability, the challenge lies in rebuilding trust. His focus on core brands like Nescafé and KitKat, and AI-driven supply chain integration, aligns with sector trends [12]. Yet, without addressing the root causes of leadership churn—such as opaque decision-making and weak internal controls—Nestlé risks further strategic drift. Academic research underscores that governance reforms, including transparent leadership transitions and stakeholder alignment, are critical to mitigating these risks [13].

In conclusion, Nestlé’s leadership turmoil is not an isolated incident but a symptom of deeper governance weaknesses. For investors, the company’s stock valuation and long-term prospects hinge on its ability to implement robust governance reforms, enhance ESG transparency, and maintain strategic continuity. Until then, the consumer goods sector’s scrutiny of governance practices will likely keep Nestlé in the spotlight—and its investors on edge.

Source:
[1] Unpacking Nestlé's CEO reshuffle [https://www.dairyreporter.com/Article/2024/08/23/Unpacking-Nestle-s-CEO-reshuffle/]
[2] Nestlé Board appoints Philipp Navratil as CEO following the [https://www.globenewswire.com/news-release/2025/09/01/3142260/0/en/Nestl%C3%A9-Board-appoints-Philipp-Navratil-as-CEO-following-the-departure-of-Laurent-Freixe.html]
[3] 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]
[4] 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/]
[5] 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]
[6] Nestlé SA - Company ESG Risk Rating [https://www.sustainalytics.com/esg-rating/nestl-sa/100791021]
[7] Nestlé restructures executive board and organisational framework ahead of 2025 [https://www.foodbev.com/news/nestl%C3%A9-restructures-executive-board-and-organisational-framework-ahead-of-2025]
[8] Nestlé's New CEO Could Cut Guidance In Fresh Start [https://www.checkout.ie/a-brands/nestles-new-ceo-could-cut-guidance-in-fresh-start-investors-warn-213583]
[9] Leadership Turmoil and Stock Valuation [https://www.ainvest.com/news/leadership-turmoil-stock-valuation-governance-risks-haunting-multinational-consumer-goods-firms-2509/]
[10] Nestlé’s Half-Year Results 2025 [https://www.nestle.com/media/pressreleases/allpressreleases/half-year-results-2025]
[11] 2025 Consumer Products Industry Outlook [https://www.deloitte.com/us/en/insights/industry/consumer-products/consumer-products-industry-outlook.html]
[12] Nestlé to refocus on core business, CEO says [https://www.reuters.com/business/nestle-refocus-core-business-ceo-says-2025-05-22/]
[13] From responsibility to value: ESG and long-term corporate [https://pmc.ncbi.nlm.nih.gov/articles/PMC12017491/]