February 16th 2021
The shareholders of the Phitrust Active Investors France fund, a Danone shareholder since 2003, met to review Danone’s governance crisis. They wished to express their misunderstanding of the demands expressed publicly by some shareholders and by the “leaks” reporting disagreements within Danone’s Board of Directors.
Governance: Is the splitting of functions just a pretext?
1/ Traditionally, Danone has favored the unification of functions (CEO), combined for several years with the appointment of the Delegate CEO (Directeur Général Délégué) as a Director?
2/ According to French law, in a company with a Board of Directors , the decision to split or merge the functions of Chairman and CEO is taken by the Board of Directors. In 2017, Danone’s Board of Directors, chaired by Franck Riboud, decided to merge these functions (separated since 2014) and entrust them to Emmanuel Faber. Any decision to change this organization is therefore up to the Board of Directors, which alone decides whether or not to separate these functions?
3/ Since 2003, Phitrust has urged many CAC 40 CEOs, including those of Danone, on the importance of separating management functions in large groups to obtain a balanced governance and a clear distribution of powers. The existence of a Lead Independent Director at Danone is nevertheless a clear counter power factor. This role is all the stronger if the function is set out in the articles of association rather than in the internal rules of the Board. In 2020, Phitrust insisted to the CEO of Danone on the need to include the role of the Lead Independent Director in the articles of association at the next General Meeting.
4/ All Board members are bound by the confidentiality of the discussions within the Board. The information disclosed in media reports on “dissensions” within Danone’s Board regarding the strategy led by its CEO should only raise questions about the reasons and objectives of these “leaks”, which in fact are destabilizing the company. Disclosing private letters sent by shareholders to the Board of Directors, at a time when top management is unable to answer them, strengthens this idea of a destabilizing move.
Legitimacy of strategic decisions widely approved to date by the General Meeting of Shareholders:
1/ The “Local First” transformation plan, publicly announced since 2015, was approved by Danone’s Board of Directors and announced on November 23, 2020, only 3 months ago. It thus seems that the criticisms expressed with regard to this plan are either without real legitimacy if made by recent shareholders (this plan has not yet produced its results), or without legitimacy if made by members of the Board who have “challenged” this plan and approved it.
2/ Danone’s water business is facing a very sharp slowdown due to the health crisis, which doesn’t challenge its long-term relevance, but weighs on its results to date. In addition, the strategic shift made by Danone under the leadership of Emmanuel Faber (notably with the acquisition of WhiteWave in 2017), even if it has not yet been fully integrated into the company’s results, is proving to be a sustainable growth driver. This strategy has been approved by the Board of Directors and all shareholders at the Annual General Meeting.
Being a responsible shareholder means supporting companies’ necessary environmental and social transition. Danone Group has managed to make major strategic changes in its history, generating sustainable growth, and this while respecting the rights and interests of all its stakeholders (including employees and shareholders). The strategic vision proposed by Danone’s Board of Directors, and approved by the large majority of shareholders, has been a pioneering one for many years and aims to reconcile Danone with the environmental and social challenges of the regions in which the group operates.
Supporting long term strategies is precisely what Phitrust has been implementing since 2003 with the management of CAC40 Companies. This relationship is based on a long and sometimes difficult dialogue. Being a Danone shareholder since 2003, Phitrust has always kept up a constructive dialogue and mutual listening with the management of the company, even if this has sometimes resulted in the filing of resolutions at the the General Meetings.
The 2021 AGM will be the right moment to discuss these fundamental issues and the long-term vision that encompasses them with serenity and hindsight. It is up to the shareholders to validate or not the strategy presented by its Chairman and Chief Executive Officer and the Board of Directors.
Since its creation in 2003, Phitrust has been investing in order to act with large listed companies so that they improve their E, S, and G practices (Phitrust Active Investors) – and with innovative social enterprises to give them the financial and human resources to change scale and deploy their impact (Phitrust Partenaires). Two activities, one mission: acting as a shareholder engaged for impact.
- The decisions of large companies on the allocation of the wealth created and the use of capital in the economy have an impact well beyond their scope. They have become key players in finding solutions to social and environmental challenges. By mobilizing institutional investors, Phitrust fully exercises its role as a committed, constructive and demanding shareholder. With a single objective: to alert to the risks and to encourage them in changing their business models. With more than 15 years of experience and direct relations with the managers of large companies, Phitrust is the only independent management company to have filed more than 45 resolutions in AGMs.
Denis Branche / Olivier de Guerre
Stéphanie de Beaumont
Tel. : 01 55 35 32 65