In the theory of business, particularly with a public company, the saying of you can fire the President if they underperform. People say it, they half believe it, as the reality is unless the company is also losing money, it is rare for a CEO to be fired for underperformance, but it does happen.

In an article by John Revill and Richa Naidu of Reuters, the world’s largest food-maker Nestle SA CEO Mark Schneider was ousted in a sudden decision relating to the underperformance of the company. Mr. Schneider was the CEO for 8 years and is being replaced by Laurent Freixe.

Chair of the Board of Directors, Paul Bulcke said the Board had assessed the current environment and together agreed to make the change.

Berstein analyst Bruno Monteyne said the suddenness of the move means it was not a planned transition and was clearly not Mr. Schneider’s choice. Mr. Monteyne suggested that he probably would have managed a smoother transition.

Nestle shares hit a record in January 2022 but since then have decreased. There has been a series of mishaps, earnings misses and guidance downgrades.

Sales volumes increased by 0.1% in the first half of 2024. There were worries about product development with new products taking longer to be devised and rolled out. The virtuous cycle of introducing new products, which generated cash for new products was slowing down.

Freddie Lait, managing director of Latitude Investment Management believes, Nr. Schneider loved to make deals to chase growth, but few worked out or were expensive acquisitions.

The new CEO has pledged to grow organically rather than through acquisitions. Mr. Freixe has worked for Nestle for 40 years is from the sales and marketing side of the firm.

Linking to dividend paying stocks, when a company makes a quick change at the top, it is not unusual for analysts or outsiders looking in to suggest all the things that have gone wrong and need to be fixed. Some of them are true, it is also true at the executive level of compensation, executives negotiate their contracts which means to let someone go early will involve potentially millions of dollars. Is it worth it, maybe or were there other issues?

There are more questions than answers, till the next time – to raising questions.