Ousted Nestlé CEO Laurent Freixe’s downfall began with an anonymous tip to an employee hotline about his alleged affair with a subordinate, it has been revealed.
Reports started to emerge in the spring about the 63-year-old’s affair with a marketing executive on the company’s internal hotline called Speak Up, the Wall Street Journal reports.
Employees are encouraged to use the hotline to report any ‘non-compliance concerns,’ and under the world’s largest food and beverage company’s code of business conduct, staffers must disclose any personal relationships.
The goal is to avoid any appearance of conflict at the company and to manage a conflict if one arises.
Shortly after the reports came through the hotline, Nestlé Chairman Paul Bulcke also received a letter detailing Freixe’s alleged relationship in May.
It is unclear who may have sent the letter or what it stated specifically.
But after receiving the letter and the reports on the internal hotline, company executives started probing Freixe’s communications with the unidentified marketing employee, who was also based at headquarters on the shores of Lake Geneva in Switzerland.
That internal investigation did not find any evidence to establish an affair, a spokesperson told the Journal, and Friexe and the woman denied being in a relationship to several people at Nestlé.
Ousted Nestlé CEO Laurent Freixe’s downfall began with an anonymous tip to an employee hotline about his alleged affair with a subordinate
The Swiss-based company encourages employees to report any ‘non-compliance concerns’ to its Speak Up hotline
By the summer, it seemed that the issue was dying down.
But soon, the company started receiving questions from the media about the alleged affair, and in late July, Zurich-based finance blog Inside Paradeplatz reported on the relationship and the unidentified female employee’s marketing career.
It said that the marketing executive joined Nestlé as a management trainee in the early 2000s, and she met Freixe at the company’s headquarters in Vevey in 2022.
About 18 months later, she became Vice President of Marketing for the Americas, when Freixe was running that division. It is suspected he personally approved the promotion, although that has not been confirmed.
Still, Freixe denied there was an undisclosed relationship, the Journal reports.
Then, at least one more report came in through the SpeakUp channel – and Bulcke and the board decided to bring in outside investigators from the law firm Bär & Karer to sift through Freixe’s personal data, including text messages and photos.
As the probe wrapped up, showing clear evidence of an intimate relationship between the CEO and his subordinate, Freixe tried to show he was still in control, colleagues told the Journal.
He unexpectedly joined his chief financial officer on an investor roadshow last week, meeting with analysts and investors in London, Frankfurt and Zurich.
At the last minute, Nestlé also asked UK banking giant Barclays for a slot at its flagship consumer-staples conference, which was due to take place in Boston.
Freixe apparently met the marketing executive he was having an affair with at the company’s headquarters in Vevey in 2022
During his short stint as CEO, Freix sought to refocus the company on its core brands like Nescafé instant coffee
Yet those who knew Freixe said they wondered if the investigation may be more serious than the company had originally let on as they noticed a change in his body language.
Their concerns proved to be true when the company announced on Monday that Freixe has been terminated from his job.
‘This was a necessary decision,’ Bulcke said in a statement. ‘Nestlé’s values and governance are strong foundations of our company. I thank Laurent for his years of service.’
Freixe had been CEO for only a year, taking over after the company ousted Mark Schneider – who had served as the chief executive for seven years but came under fire for continuing to sell products in Russia after the invasion of Ukraine.
The Frenchman had been a vocal critic of his predecessor, suggesting Nestlé lost its way with acquisitions and diversified too much in its product lines in recent years.
During his short stint as CEO, Freixe sought to refocus the company on its core brands like Nescafé instant coffee, KitKat bars and Fancy Feast cat food.
He also slashed costs to reinvest in more promising products like cold coffee as he moved all of the regional business heads to the Switzerland headquarters.
Phil Navratil, the boss of a coffee division, will take over as the company’s next leader
Navratil most recently served as the CEO of Nespresso
Yet Freixe’s reign was also marked by a 1.8 percent drop in global sales amid rising production costs for sugary and caffeinated products from Central America.
As price-sensitive consumers sought cheaper alternatives, Nestle’s shares, a bedrock of the Swiss stock exchange, have lost almost a third of their value over the past five years, underperforming European peers.
Freixe’s appointment failed to halt the slide, with the company’s shares shedding 17 percent during his leadership, disappointing investors even as the company continued to dominate supermarket shelves in the US with its grab-and-go products.
Many now hope that his successor, Swiss-born Philipp Navratil, 49, will turn things around.
Navratil got his start at Nestlé in 2001 as an internal auditor.
He had most recently served as the CEO of Nespresso, and joined the company’s executive board back in January.
In his previous position, Navratil appeared to commit to pursuing Freixe’s strategy of refocusing the brand on its well-established products.
Patrik Schwendimann, an analyst at Zurich Cantonel Bank, therefore called Navratil a ‘good Swiss compromise’ between his two predecessors, as Schneider was meant to bring in a ‘breath of fresh air from outside’ and Freixe was a return to ‘tried-and-tested Nestle recipes.’
‘Philipp Navratil should bring a breath of fresh air from within,’ Schwendimann told the Business Times.
Nestlé continued to dominate United States supermarkets
The company is known for its grab-and-go products, like Lean Cuisine frozen meals
Still, Navratil’s appointment comes at a difficult time for the company, which has faced several scandals in recent years.
Bulcke had been accused in a harassment lawsuit during his time as CEO from 2008 to 2016. He will now step down as chair in April and be replaced by Pablo Isla, a former CEO of the Spanish fashion retailer Inditex.
Whistleblower Yasmine Motarjemi also said she warned Nestlé about safety issues in baby food and claimed she was targeted in retaliation.
The company settled in 2020 by paying her about $2.5million.
She reacted furiously to Freixe’s ousting, writing on LinkedIn: ‘What hypocrisy! In other words, at Nestlé, you can harass your subordinates, but you can’t love them.’
Navratil also now has to forge his own path, which investors say should include slimming down the company, cutting costs and above all else reducing the number of staff.
It is also crucial that the company raise organic growth to boost volumes, they said.
AJ Bell investment director Russ Mould said that the company will now likely face a period of uncertainty.
‘While Navratil is also an internal appointment, he will want to put his own mark on strategy and that suggests the clock could be reset when it comes to the turnaround plan,’ he said.
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