It was June 2020. Emmanuel Faber, CEO of Danone, had managed to pass the new status of the group as a benefit company (or B-Corp), with the approval of 99.4% of the general meeting. It was recognized that the company no longer aimed only at profit, but also with the aspiration to a positive impact on society and the biosphere. It was the triumph of one of the most powerful captains of industry in France, the emanation of an innovative and socially compatible management, with particular attention to ecology. Well, it was less than a year ago, but it feels like a lifetime ago. The practicing Catholic manager, who with Pope Francis shares strong opposition to the “financialization of the market economy”, has been definitively torpedoed.
It all happened in a few months and is a textbook example of the influence that so-called activist investment funds can now have on the top management of large groups. And then, how can we forget the reflections of a year ago, at the beginning of the pandemic, on the changes that this would have brought about for society, the economy, the change in values, the human first of all and so on. But now it is Covid that takes away Faber, 57, already the carrier of a message of that type. And who had made his entire career at Danone, CEO since 2017 (and CEO since 2014).
Let’s get to the facts. In November Bluebell Capital, an investment fund based in London (but managed by Francesco Trapani, of the family that owned Bulgari, before selling it to LVMH for 4.3 billion, accumulating a real war treasure), had asked that the CEO’s position was spun off into president and CEO and that Faber was slain in both cases. Later Bluebell (which has a very small presence in Danone’s capital) also managed to involve the managers of another particularly aggressive fund in this battle, the American Artisan Partners, which has accumulated 3% of the capital since December, becoming the third shareholder of the group. Bluebell and Artisan have taken Gilles Schnepp, a member of the Board of Directors, as their referents. They gradually convinced the majority of the board that Faber represented an obstacle to the development of the company. Even Franck Riboud, an influential member of the board of directors, already at the helm of Danone and son of the founder Antoine Riboud, would have given in, despite once considering Faber his “natural son”.
Well, already last March 1st the Board of Danone had stolen the role of CEO from him, keeping him president. A new manager would then be sought to be appointed CEO, for operational management. But in the meantime Faber has resisted, reluctant to give up as regards his influence on the French agri-food giant. And so on Sunday, late in the evening, a new Board of Directors decided to overrule it completely. Schnepp was appointed interim president: it squared the circle, Bluebell and Artisan won on all fronts.
But what do the shareholders blame the outgoing manager? Virtually not making enough profits in 2020 (the group remains solid, but profits are lower than those of rivals such as Nestlé and Unilever) and paying too little dividends. Covid penalized Danone, especially in the bottled water sector (its brands such as Evian, Volvic and Badoit), whose consumption takes place mainly outside, certainly not favored in the times of the pandemic, between confinement and curfew. During 2020 the stock had lost 27% on the stock market. Faber’s reaction to the crisis had not been sufficiently toned and, even in the last few days, a certain rigidity of the character in a delicate phase like this has not helped him. However, in November he had launched a plan to reorganize the multinational (“Local First”), which favored management at the level of each national market. Thanks to his good relations with the unions, he had managed to pass a 2,000 job cut. But it was not enough, also because the activist investment funds, which entered the capital thanks to the loss of the value of the stock, were aiming for a rise in the share. They saw in his torpedoing the solution to regain the confidence of the stock exchange. They were right. Today, at the end of the morning, Danone was earning 4.3% and since the beginning of the year it is already above 12%.