January 19, 2018 / 1:00 PM / a year ago

Breakingviews - Nestlé fashions a more activist-friendly board

A Kitkat chocolate bar is pictured in the supermarket of Nestle headquarters in Vevey, Switzerland, February 16, 2017. REUTERS/Pierre Albouy

LONDON (Reuters Breakingviews) - Nestlé is making its board more activist-friendly. The chief executives of Adidas and Spain’s Inditex are among the heavyweight non-executive directors that the Swiss giant is proposing to appoint. Their e-commerce expertise will help steer efforts to sell more directly to consumers. They may also help to pre-empt any plan by activist Dan Loeb to install his own candidates.

While highly regarded in their sectors, the new names are not obvious choices for a global food company. Inditex boss Pablo Isla sells fast fashion through high-street clothing chain Zara, while Kasper Rorsted heads German sportswear brand Adidas. They will be joined by Kimberly Ross, the former finance chief of oilfield services company Baker Hughes. The trio brings a strong track record for rewarding investors. Inditex and Baker Hughes delivered total shareholder returns of 46 percent and 74 percent respectively over the past five years. Adidas shareholders are up 178 percent in the same period, Eikon data shows. The two consumer brands also have valuable experience of navigating the kind of digital disruption that Nestlé Chief Executive Mark Schneider is now facing.

Fresh blood is also a welcome addition to a board that has been overwhelmingly older, Swiss and insular. Chairman Paul Bulcke is Schneider’s predecessor and the 10th former CEO to act as chairman since the merger of Nestlé and the Anglo-Swiss Milk Company in 1905. Assuming shareholders approve the new directors at the company’s annual general meeting in April, the average tenure on the board will drop to four years.

That means Schneider has probably done enough to avoid the kind of activist showdown which undermined his Procter & Gamble counterpart David Taylor late last year. Loeb, whose Third Point fund revealed a $3.5 billion stake in Nestlé last June, could still put forward his own board nominee. But by proposing some credible external appointments, Nestlé has probably sidestepped that risk.


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