Portfolio

Introduction
Different approaches to “stakeholder governance” have been explored, ranging from the widely
observed co-determination model in various European countries to the unique structures of
cooperatives. Dialogue tools with various stakeholders and the establishment of dedicated
stakeholder oversight boards with specific governance powers have also been considered (Amis
et al., 2020). However, various literature texts show governance mechanisms representing
stakeholders interests in large corporations are frequently deemed to have a very limited impact
and a limited authority to stakeholders (Spitzeck, Hansen, and Grayson, 2011).
The ongoing exploration for corporate governance frameworks that promote greater
sustainability has reignited discussions around “stakeholder governance”. This goes back to the
debates of the 2000s, following the widespread adoption of “stakeholder theory” (Donaldson and
Preston, 1995; Jensen, 2001; Freeman, Wicks, and Parmar 2004). The theory emphasized the
need to consider the diverse and intricate relationships between companies and their “multiple
stakeholder groups,” moving beyond the conventional focus on the “governance of manager
stakeholder relations,” which primarily revolves around the distribution of created value.
In addition to the revived interest in stakeholder governance, there has been a surge of
innovations that seek to shift the corporate governance landscape towards prioritizing social and
environmental objectives. It focused on the establishment of profit-with-purpose corporate forms
in various countries, as discussed by Levillain Segrestin, and Hatchuel (2019). Rather than
emphasizing “stakeholder” governance , these legal provisions are driven by the notion that
directors or executives aspiring to spearhead responsible initiatives for social or environmental
goals should be equipped with formal governance mechanisms. Such mechanisms are designed
to safeguard them from the evolving expectations and pressures of shareholders.

Background
The Danone saga sparked two major discussions within French practitioners’ and academic
circles regarding the societe mission. The first centered around the sustainability of this corporate
form and its commitments amid governance crises intricately tied to the company’s financial
performance. Some analysts viewed Emmanuel Faber’s dismissal as emblematic of the societe a
mission’s perceived inability to effectively balance the profit pursuit of large transnational and
listed companies when it conflicts with social or environmental objectives. The new chairman
and CEO reiterated Danone’s commitment to its mission, reassuring the mission committee of

adequate resources for fulfilling its purpose. Former CEO Faber defended the robustness of the
societe a mission in various national press interviews, attributing its durability to the
incorporation of purpose in the bylaws, preventing the board of directors from retracting or
altering the firm’s commitment.
The second part is about the legitimate authority of the newly established mission committee.
While the Danone case brought attention to the societe a mission, it also prompted observers to
acknowledge the significant governance transformations introduced by the mission committee.
The committee’s interactions with the board of directors are both novel and unclear, as corporate
law doesn’t provide specific positive counterpower to this committee , apart from its right to
request any pertinent information for mission follow-up and the ability to compile a report for
shareholders.

About the company: Danone
Danone, a global food and beverage company , has been a pioneer in adopting a sustainable and
socially responsible business model. The governance framework of Danone, as stated on the
company’s website, revolves around establishing an efficient decision-making process, engaging
in steering that encompasses all company stakeholders, and employing an assessment system.
This encompasses various procedures, rules, and structures aimed at ensuring transparency in
company operations and maintaining a balanced distribution of power among shareholders,
directors , executives , employees, suppliers, and customers.

Danone’s Leadership
Under the leadership of CEO Emmanuel Faber, the company embraced the concept of an
“enterprise a mission,” aligning its purpose beyond profits with environmental and social goals.
Faber’s vision known as “One Planet, One Health,” aimed to make Danone a leader in
sustainability by creating a carbon-adjusted earnings per share indicator and emphasizing
regenerative agriculture.

However, Faber’s tenure faced challenges. Despite being a forerunner in sustainable practices,
Danone’s market performance lagged behind peers like Unilever and Nestle. The bottled water
division, a significant part of Danone’s business, suffered during the COVID-19 pandemic,
impacting overall revenue. Consequently, Faber’s leadership style was described as rigid, led to
turnover in top management levels and hindered the company’s performance in certain areas
(Forbes, Reuters, and Wall Street Journal).

Danone’s decision to oust Faber raises questions about balancing short-term financial goals and
long-term sustainability objectives. The criteria for evaluating a CEO’s performance should
extend beyond immediate financial returns to encompass the broader impact on the environment,
society, and the company’s long-term resilience. The debate over short-term versus long-term
management is crucial in evaluating Faber’s dismissal. Warren Buffett’s value investing
philosophy, which emphasizes long-term value maximization, suggests that sustainable strategies

take time to yield the results. The decision to remove Faber may have been influenced by
short-term financial underperformance, overlooking the potential long-term benefits of his
sustainability initiatives (Short-term or Long-term Management Video, 2024).

Implications of the decision
The dismissal of Faber has broader implications for stakeholder governance, corporate
sustainability, and the role of CEOs in the evolving landscape of business responsibility.
Stakeholder Governance and Sustainability

Faber’s termination highlights challenges in implementing stakeholder governance models.
Despite the increasing interest in stakeholder involvement, existing governance mechanisms may
grant limited power to stakeholders. The tension between broad stakeholder participation and
expertise, managing relationships, and appropriate accountability mechanisms remain unresolved
(Amis et al., 2020; Spitzeck et al., 2011).

The Role of CEOs in Sustainability
CEOs, especially in large corporations, are facing a paradigm shift where sustainability and
environmental, social, and corporate governance (ESG) factors play a pivotal role. The dismissal
of Faber raises questions about the readiness of companies to embrace leaders who prioritize
sustainability over short-term financial gains. The increasing focus on ESG by employees,
shareholders, and governments indicates a shift toward a more sustainable future (Faber’s
Insights).

Corporate Governance Frameworks
In the context of Danone’s case, the story prompts a reevaluation of corporate governance
frameworks conducive to sustainability. Innovations like “benefit corporations” and “societe a
mission” offer legal provisions that protect executives pursuing responsible initiatives. The
resilience of such governance models, as seen in the case of Danone, requires ongoing scrutiny
and adaptation (Levillain, Segrestin, and Hatchuel, 2019).

Conclusion
In my opinion, the firing of Emmanuel Faber as Danone’s CEO appears to be a decision driven
by short-term financial concerns, overlooking the long term potential sustainability initiatives.
The case underscores the need for a better and nuanced approach to evaluating corporate
leadership and advisory boards, taking into account both financial performance and the broader
impact on stakeholder and the planet. As the business landscape evolves towards sustainability,
companies and organizations must reconsider stakeholder and environmental governance models
and the criteria for any CEO’s success to ensure balance between profitability and responsibility.

References
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