Danone’s board of directors has decided to replace Emmanuel Faber as chief executive and chairman, bowing to pressure from activist investors and blowing up a two-week-old compromise designed to have him remain as chairman.
After a long board meeting on Sunday night, Danone announced Faber’s departure with immediate effect on Monday, confirming earlier reports in the Financial Times and Le Figaro.
It was a dramatic end to a months-long conflict at the French consumer goods group behind Evian bottled water, Activia yoghurt and Alpro soya milk that has been grappling with a sales slump since the pandemic began. Activist investors attacked Danone for what they cast as its chronic underperformance compared with larger rival Nestlé, and publicly called for Faber’s departure.
Gilles Schnepp, the former chief executive of industrial group Legrand who joined the Danone board in December, was named as chairman and will lead the search for a new chief executive.
Two executives already at the company will “jointly lead the business” while the search is carried out: Véronique Penchienati-Bosetta, who was running international operations, and Shane Grant, the head of North America.
Danone shares rose 4 per cent on Monday morning.
The departure of Faber, who joined the group in 1997 and took over as chief executive in 2014, marks the downfall of one of the most visible advocates in global business for a more responsible capitalism in which companies do not only serve shareholders but also protect the environment, their employees and suppliers.
Danone has espoused a more human, “multi-stakeholder” model of business going back to the 1960s under the leadership of Antoine Riboud, and Faber continued in that tradition.
When Danone shareholders approved a change in the company’s legal status last year to enshrine its social mission, Faber declared they had “toppled the statue of Milton Friedman”. Danone became the first big listed French company to become a so-called enterprise à mission, or purpose-driven company.
Faber also championed the growing environmental, social and governance movement among investors in other ways, such as when the group began reporting “climate adjusted” earnings per share last year and invested heavily in reducing plastic use.
Although the activists campaigning at Danone were careful not to directly attack its sustainability focus, they did argue that the balance between shareholders’ interests and others had been lost under Faber.
The public campaign carried out since January by activist Bluebell Capital and Artisan Partners, a US fund, put Faber and the board under intense pressure to respond to the criticism. More shareholders had indicated in private that they too supported them.
Danone sought to calm the acrimony on March 2 by announcing that it would split the chairman and chief executive roles held by Faber and begin to look for a new CEO. Faber would stay on as chairman, and the board said it continued to back the lay-off and restructuring plan he had advocated to turn round the group.
But Bluebell and Artisan rejected that plan, saying the moves would tie the hands of any new chief executive and allow Faber to keep too much power. “The new changes announced at Danone violate the most basic of corporate governance standards,” wrote Artisan in an open letter to the board.
In the days after the announcement, other shareholders also expressed misgivings, said people familiar with the matter.
Of particular concern to the dissatisfied shareholders was the decision also announced on March 2 that Schnepp would not be the lead independent director, as previously planned, but instead the important oversight position would go to Jean-Michel Severino, a board member since 2011 and close ally of Faber.
Severino held meetings with top shareholders since then, which one person close to the group said “did not go well’ and left some with the impression that he would not be an effective counterweight to Faber.
“The priority of the board is now to transition towards an improved governance” by “accelerating the process to recruit a new CEO,” said Schnepp in a statement.