Nestle chairman Paul Bulcke will step down early after investors questioned his handling of the removal of the food company’s former chief executive due to an undisclosed romantic relationship with a subordinate.
Pablo Isla, who had been due to succeed Bulcke next year, will take over on October 1, the Swiss foodmaker said. Nestle previously said that both Bulcke and Isla oversaw the probe that led to CEO Laurent Freixe’s firing.
Nestle shares traded 0.5 per cent lower early on Wednesday in Zurich after the announcement late on Tuesday. They’re down 17 per cent over the past 12 months.
A veteran of almost half a century at the KitKat and Nespresso maker, Bulcke was under intense scrutiny over the upheaval and removal of Freixe, who he had described as a “perfect fit” to be CEO on his promotion last year.
The 71-year-old said Freixe’s dismissal, which came after two probes into his behaviour, was “a necessary decision” in line with Nestle’s values and governance. But amid media speculation, a Nestle spokesperson denied Bulcke had sought to shield Freixe during the initial probe.
The scandal had raised issues of accountability and judgment for investors including Christopher Rossbach, chief investment officer of J. Stern & Co.
“Pablo Isla will be the first external chair of Nestle. He has a tremendous opportunity to improve board experience, accountability and governance,” Rossbach said. “He also has a tremendous responsibility to address the issues that led to the leadership issues and enable Nestle to return to the paragon of growth and value creation it has been throughout its history.”
As chairman, Bulcke presided over unprecedented management turmoil for a company that had only three CEOs between 1981 and 2016. He spearheaded the selection of both Freixe and before that Mark Schneider, who was also pushed out after nearly eight years as Nestle struggled to revive growth. Philipp Navratil, a veteran of the Nespresso coffee empire, was appointed CEO this month.
Working at Nestle since 1979, Bulcke has served in numerous management roles across the globe, and as CEO for almost nine years before becoming chairman in 2017. Nestle’s stock climbed about 44 per cent under Bulcke’s tenure as CEO, but some of the company’s recent struggles trace back to his strategic decisions.
During his time as CEO, Bulcke helped push Nestle into new areas such as skin health, while Schneider then bulked up the health science unit with acquisitions. These proved distractions as Nestle’s core food business lost market share during the Covid pandemic and the inflation surge that followed.
Isla was the former CEO of Inditex, the Spanish apparel multinational and owner of Zara, from 2005 to 2011, and chairman of the same company from 2011 until 2022. He has served on Nestle’s board since 2018.
The Spanish executive, 61, is credited with expanding on Inditex founder Amancio Ortega’s vision, boosting revenue and international reach to turn the company into the world’s largest seller of apparel.
The management turnover does come at a difficult time for Nestle, which has had recent missteps including a $2.1 billion (€1.8 billion) writedown on an investment in a peanut allergy medication. Then IT problems caused shortages at its vitamins and minerals unit. Like other makers of branded goods, it has also struggled to keep consumers coming back to its products as private-label food and household items have gained popularity.
“Pressure on the chairman has intensified in recent months and reached a peak in recent weeks. Given the share-price decline, a decisive break became necessary,” said Vontobel analyst Jean-Philippe Bertschy, who added that Nestle’s new leadership team will have to urgently try to restore investors’ confidence. Bloomberg
