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Breakingviews - Danone CEO exit gives France governance upgrade

Company logos are seen on products displayed before French food group Danone 2019 annual results presentation in Paris, France, February 26, 2020.

LONDON (Reuters Breakingviews) - Activist shareholders may find a more receptive audience in Paris. The ouster of Danone boss Emmanuel Faber shows French companies can no longer be impervious to uppity investors. Other underperformers should be nervous.

Faber’s departure comes less than two weeks after he agreed to step down as Danone chief executive but stay on as chairman. He also pledged to stick to his strategy for the 42 billion euro company, effectively making any incoming CEO a lame duck. The governance fudge failed to mollify his critics, and the board on Sunday ejected him from both roles immediately. Investors Artisan Partners and Bluebell Capital Partners didn’t even need to seek a shareholder vote to remove him.

Faber, who had been in charge since 2014, could be forgiven for thinking he had some protection from shareholders. After all, the French government in 2005 stepped in to fend off a rumoured bid from PepsiCo by declaring the yoghurt maker a strategic, protected industry. No such intervention came from the Élysée this time, perhaps a tacit acknowledgement that Faber had run out of road. Since his own turnaround plan included cost-cutting, keeping him on would not have protected jobs in France.

The activists’ success has consequences for other underperforming French companies whose chairman is also the chief executive. Many of the country’s biggest groups still have one executive in both roles. Some are protected by large strategic shareholdings or by good performance. Activists would struggle to remove Alexandre Ricard from family-dominated Pernod Ricard, for example. Meanwhile Thales boss Patrice Caine is mainly answerable to the aerospace group’s largest shareholder, the French government.

But companies attempting tough turnarounds are more exposed. Arthur Sadoun, who is both chairman and chief executive of media group Publicis, is trying to pivot from traditional advertising into digital and data-led services. His pricey 2019 acquisition of Epsilon invites scrutiny. Supermarket chain Carrefour, led by Alexandre Bompard, could also become a target after the government blocked a possible merger with Canadian group Alimentation Couche-Tard.

There may still be no welcome mats, but activists calling on French boardrooms in future are less likely to have the door closed in their face.

Breakingviews

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