Danone CEO Faber ousted: "a short term win for activist investors that puts profit before purpose"

Summary

Highlights

• Emmanuel Faber's exit followed pressure from activist investors focused on profit over purpose 😮.
• Danone promises to keep its environmental standards despite the shift in leadership 🌱.
• Critics argue that activist pressures may compromise Danone's long-term sustainability goals 🔍.
• Danone remains committed to a restructuring plan to enhance both financial and social value 🔄.
• The situation reflects a common tension between short-term gains and long-term commitments 💼🕰.

Key Takeaways

• Activist investors prioritized short-term profits over Danone’s long-term sustainability initiatives 🌍💰.
• Emmanuel Faber's removal as CEO marks a significant shift in Danone's strategic direction 🚀.
• The leadership change raises concerns about the impact on Danone's social and environmental commitments ⚖️.
• Danone's situation highlights a global debate over profit versus purpose for corporations 🌐🤔.
• The challenges faced by Danone could serve as a case study for balancing profit with sustainability in business textbooks 📚.

Overview

Chapters

• 00:00 - 00:30: Introduction and Background The chapter discusses a significant event for the French food company Danone. Activist investors successfully removed Emmanuel Faber from his position, marking a major change in the company's leadership. Initially, Faber had offered to step down from his role as chairman while continuing as chief operating officer, but this compromise did not satisfy the investors. Consequently, Danone confirmed that Faber would be completely replaced as chairman. This decision has led to a positive trading day for Danone, marking its best performance in over four months.
• 00:30 - 01:00: Activist Investors and Pressure on Danone The chapter titled 'Activist Investors and Pressure on Danone' discusses the pressure faced by Danone from activist investors due to its financial performance in 2020. Danone's shares lost about a quarter of their value, and sales fell for the first time in 30 years, primarily due to the COVID-19 pandemic. As a result, there was a leadership shift within the company. Activist investor Blue Bell Capital and investment fund Artisan Partners were instrumental in pushing the company to revise its strategy to create value for stakeholders.
• 01:00 - 01:30: Environmental and Social Strategy vs. Profit This chapter discusses the balance between focusing on profits and maintaining environmental and social standards within a company. It highlights how Danone's former leader, Faber, prioritized the latter, establishing Danone as a leader in these areas. However, there's a tension between this approach and traditional profit-focused models, which have their limits. Unions are advocating for the company to continue prioritizing its social and environmental strategy, even at the cost of reduced profitability.
• 01:30 - 02:00: Company's Profitability vs. Social Responsibility The chapter discusses the balance between a company's profitability and its social responsibility. It highlights the necessity for companies to not just focus on profitability like larger groups but also consider environmental standards and the surroundings. Emmanuel Fabio implemented a layoff and restructuring plan to improve the group's economic performance while maintaining environmental standards, and the board plans to continue with this strategy.
• 02:00 - 03:00: Interview with Mark Desjardins: Analysis of Faber's Ouster The chapter titled 'Interview with Mark Desjardins: Analysis of Faber's Ouster' features a discussion with Mark Desjardins, a strategy and sustainability expert at Pennsylvania State University and co-founder of Shepard Governance Advisors. The interview takes place in State College, Pennsylvania and is covered by France 24. Desjardins provides insight into the narrative surrounding the ousting of Emmanuel Faber, contrasting perspectives that blame activist investors prioritizing profits over environmental concerns.
• 03:00 - 04:00: Danone's Long-term Strategy and Challenges The chapter discusses the leadership challenges faced by Danone, focusing on a leader perceived to govern in a solitary manner without effective communication with his team and shareholders. This leadership style is suggested as a reason for the leader's exit from Danone. The chapter also touches upon the market conditions that have given rise to activist involvement, noting the current environment of declining stock prices as an opportunity for these activists.
• 04:00 - 05:00: Importance of Communication with Shareholders The chapter discusses the significance of effective communication with shareholders, particularly in situations where the company's stock is bought at a low price, possibly by entities aiming to spearhead a turnaround. It stresses the importance for a company to acknowledge and address shareholder concerns to maintain its reputation. The chapter also touches on leadership changes, specifically mentioning Faber's departure as a critical decision influenced by shareholder sentiment.
• 05:00 - 06:00: Governance Issues and Lessons This chapter discusses governance issues, focusing on the contrast between long-term and short-term business strategies. A specific example is given with the company, Danone, which has a long-term orientation towards stakeholders and value creation. Activist investors with short-term goals can create tension within such organizations. Danone is highlighted as one of the top three food producers in Europe, alongside Nestlé and Unilever, and has been investing more in recent years, including in certain brands.
• 06:00 - 07:30: Conclusion: Balancing Profit and Purpose The chapter delves into the overarching theme of balancing profit and purpose within a company, particularly one that produces vegan products. It highlights the inevitable missteps companies face, which may not generate as much value as anticipated. The dialogue between 'Dan' and others reflects on a long-term strategy they've maintained over the years. Despite moments of financial success, like doubling the stock price from 2014 to just before the pandemic, the chapter acknowledges current downturns, emphasizing that this balance between achieving purpose and maintaining profit is an ongoing challenge.

Danone CEO Faber ousted: "a short term win for activist investors that puts profit before purpose" Transcription

• 00:00 - 00:30 french food giant dannon on track for its best trading day in more than four months that's after activist investors finally got the scalp of emmanuel faber he had first promised uh to split off the post of chairman of the board and only remain on as chief operating officer it wasn't enough however confirming it's replacing its chairman emmanuel fabel french food group danon outlined its
• 00:30 - 01:00 priorities accelerating efforts to create value for stakeholders in 2020 danone's shares lost about a quarter of their value sales fell for the first time in 30 years those results due in large part to the covet pandemic were the reason behind the leadership shift pressure was high mainly from activist investor blue bell capital and investment fund artisan partners who pushed a company to revise its strategy
• 01:00 - 01:30 focus more on improving profits less on danon's environmental results making danone a leading company on environmental and social standards was faber's trademark the productivist agricultural model of these last 50 years has shown obvious limits workers unions have called on the company to stick to its social and environmental strategy even if it means it is less profitable
• 01:30 - 02:00 they must also understand that we cannot have the same profitability as some large groups who only seek profitability without looking at what's around them said on monday its goal is to bring both high economic performances while keeping its environmental standards before standing down emmanuel fabio put in place a layoff and restructuring plan to turn around the group a plan the board says it will continue
• 02:00 - 02:30 to back for more let's go to state college pennsylvania mark desjardins strategy and sustainability at pennsylvania state university co-founder of shepard governance advisors thank you for speaking with us here on france 24. thanks for having me so help us sort the wheat from the chaff here if you read some accounts it's these evil activist investors who chose profits over saving the planet in forcing out emanuel faber if you read
• 02:30 - 03:00 other accounts it's a boss who had a solitary method of governing uh didn't communicate well with his team and with his shareholders and got his just desserts why is he out today at danon yeah great great question um i mean part of this starts with the campaign right so you have um you have a market right now that's created an opportunity where stock prices are down and so activists have
• 03:00 - 03:30 come in and bought stock cheap so purportedly with plans to you know turn down and around um but ultimately in that that the company needs to save face right they need to tell shareholders and signal to shareholders that they've heard the message loud and clear and that they need to make a decision um here and um unfortunately faber at the top has uh taken the the load there and he's been uh departed because of that and i mean if you talk to faber and uh and i have and and you see how he
• 03:30 - 04:00 managed denon um he has a long-term orientation he thinks about stakeholders he thinks about the the long-term value that can be created and so when you have activists with shorter uh term goals then there can be attention there and that's what's happening today yeah just remind our viewers here dannon is one of the three big food producers in europe alongside uh nestle and unilever and it's it has invested more in recent years in things like for instance this um brand
• 04:00 - 04:30 that makes um vegan products all pro so what went wrong um well part part of this i mean you in any company right you have missteps you have things that don't create as much as value value as others and i mean here with uh dan and we have we have a long-term strategy that if we look at the stock price um you know fat bear came in in 2014 uh that stock price has almost doubled over that period prior to the pandemic and now stock prices are down
• 04:30 - 05:00 uh this is a company that's still thinking about a lot of stakeholders where um you know you have activists coming in and saying that's actually it's it's just about those short-term returns this is what we have to fix and that's what created this uh this opportunity so that doesn't bode well for the planet if uh we're just gonna be beholden to those who uh want profits and dividends um unfortunately not i mean that's where my research steps in you have 30 years of finance study showing stock prices rise like they did today around
• 05:00 - 05:30 announcements of what activists bring but then you look two three four five years out and it and it really doesn't right i've looked at campaigns starting in 2000 up until 2016 and then the five years that follows up until today and and it's clear employees other stakeholders communities the planets they don't fare better when you just go solely after short-term uh share prices and that's the way you manage the company so that that that might happen here that's the risk mark you wrote a paper where you gave
• 05:30 - 06:00 basically tips on how to counter activist shareholders who don't have the company's interested hearts and you spell out one thing which perhaps imagine fabel did not do well which is communicate better with the long-term shareholders i mean that that's what has to happen here right so you have multiple activists coming in uh they've they've solicited support they have an idea they're trying to rally shareholders against uh this board against this
• 06:00 - 06:30 management team and ultimately it comes down to convincing other shareholders that actually management that it's you know faber has been in here for seven years the existing company the existing strategy that's been put in place that's going to actually maximize the long-term returns and so yeah a big big part of that is messaging um and that's that's what has to happen here that's part of the research that i've been doing to sort of uncover these adverse longer-term consequences that you know there hasn't been there's just been this gap of research in the past and so that's what uh that's really on on management now to do
• 06:30 - 07:00 that this is a a tragedy in two acts for emmanuel faber since uh there was a at first he uh conceded the uh concept of giving up the chair of the board of administrators and just remaining on as chief um as ceo in france the tradition is that you're both you're you're you're you're the super boss you're the you're you're not uh one or the other you're both
• 07:00 - 07:30 should he maybe have uh spun that off sooner and actually his death now they say is because of the person he was putting in is in in place to to be the chairman of the board was a crony of his i mean i i wouldn't necessarily say that's the case that he should have done this sooner there's part of the the um popular belief right in in governance is that you need to always always separate the ceo and the chairman roles to support shareholders and maximize value and that's not the case there's
• 07:30 - 08:00 efficiencies that can come there when you have someone who's managing the company also overseeing the board and transitioning what's going on in management to the board of directors so i don't know necessarily if that would have helped and i mean in this activism campaign you have that as part of the rhetoric around what's going on here but ultimately you know there's a bigger picture that these activists have in mind rather than you know just separating uh these roles so ultimately um if you do want to have a more sustainable way of selling food in the future because
• 08:00 - 08:30 this is such a crucial issue uh for the planet uh what do we do uh so it goes back to what you said earlier it's about messaging it's about getting shareholders on board paul pullman did this well at unilever that you referenced when he came on he said hedge funds have a place in society but no place in a company like ours and so it is around knowing your shareholders about where the value is being created it's around education it's about understanding the trade-offs it's not about
• 08:30 - 09:00 uh what we often get confused with is it is its profits or purpose and it's not it's about a purpose that create profits in the long term so it's whether you're on board with an activist where most the value will probably be realized in the short term or you're on board with a long-term strategy and most the value is actually going to come in the long term we need to understand that so you know we can set companies up better to do both the profit and the purpose and that's thinking long term mark de jardin professor of strategy and sustainability at pennsylvania state university thank you for speaking with
• 09:00 - 09:30 us here on france24 thanks very much for your time stay with us there's more to come more news plus the day's business and sports [Music]