Danone begins search for new chief in effort to placate activists
Emmanuel Faber will stay on as chairman despite investors calling for his departure
Danone has sought to calm an acrimonious public fight with activist shareholders by agreeing to split the chairman and chief executive roles now both held by Emmanuel Faber.
But the French consumer foods group stopped short of removing Faber altogether, as the activists had demanded, and instead decided to allow the embattled executive to remain as chairman once a new chief executive has been found.
“The separation will be effective upon the appointment of a new CEO,” said the company in a statement on Monday night after an extraordinary board meeting.
“The process to recruit a new CEO has been launched and, once complete, Emmanuel Faber will focus on his role as non-executive chairman.”
The board of directors also backed Faber’s turnround plan announced in October that includes asset sales, job cuts and a reorganisation of the company on more geographic lines rather than by category.
It remains to be seen whether the moves will quell the rebellion led by activist Blue Bell Capital and US fund Artisan Partners, which says it is Danone’s third-biggest shareholder.
The funds had not only called for Faber’s departure but also opposed the planned reorganisation he has championed, saying it would be unnecessarily disruptive at a time when Danone’s business was already reeling from the Covid-19 pandemic.
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Artisan said: “We note the latest developments and will respond in due course.” Blue Bell Capital declined to comment.
Danone shares initially rose on Tuesday but then fell 0.5 per cent in morning trading in Paris, compared with a largely flat blue-chip CAC 40 index.
Jefferies analyst Martin Deboo welcomed the announcement but pointed out how Faber’s continued presence as chairman would “constrain the latitude” of what a new chief executive could do.
Bernstein’s Bruno Monteyne was more blunt: “This is not a clean break. It leads to one of two options: either a CEO-in-name-only who executes the chairman’s plans, or a repeat of this tense stand-off with shareholders a few years from now.”
The dissident shareholders had criticised Danone for what they cast as a prolonged period of underperformance compared with larger rivals Nestlé and Unilever in terms of total shareholder returns. They have also criticised Danone for underinvesting in its brands to boost short-term profitability.
Faber, who has been at the helm since 2014, has defended Danone’s record and promised that his strategic overhaul would ignite a period of stronger growth.
Danone’s businesses in dairy and yoghurt, baby formula and bottled water have been hit hard during the pandemic. In bottled water alone, the group lost almost €1bn, or one-fifth, of revenue and €340m, or half, of operating profit last year.
In addition to the search for a chief executive, the board announced several other changes to “continue strengthening Danone’s governance”.
The most notable was a new lead independent director, a position of particular power that is supposed to provide key oversight of management. In December, Danone had said Gilles Schnepp, former chief executive of French industrial group Legrand, would join the board and be nominated as lead independent director.
But now it has changed course, saying Schnepp would instead share the role of “vice-chairman” alongside Cecile Cabanis, the former finance chief. Jean-Michel Severino, a board member since 2011, will be lead independent director and head the governance committee.
That change was interpreted by two people familiar with the board as a victory for Faber, since it elevates his loyal ally Severino while potentially neutralising Schnepp as a credible alternative. The fact that Cabanis will stay on the board as vice-chairman is also a rebuke to the activists, who had called for her departure so as to ensure that the board was not dominated by former executives.
In the statement, Faber welcomed the changes. “I am pleased we took the governance arrangements that will allow us to anticipate the next phase of development of the truly unique company [that] Danone is.”