• Nuno Moreira da Cruz

Stakeholder vs shareholder primacy: a concrete example OF DANONE


November 29th 2020


“We do not consider the purpose of this company to be returning money to shareholders. There is a broader purpose.” Emmanuel Faber, CEO of Danone. May 2020Danone will cut as many as 2,000 jobs, including one in four positions at its global headquarters, as the world’s largest yogurt maker attempts to revive profitability after getting hit by the coronavirus pandemic harder than other rivals. Annual cost savings should reach 1 billion euros ($1.2 billion) by 2023”. Financial times. 23rd November 2020 “Reshaped ‘local-first’ organization: a key step to restore value creation in a COVID-world

  • Shifting to a local-first and efficient organization, unlocking future growth and margin expansion

  • €1bn cost savings expected by 2023 including through 20% reduction in overhead costs

  • Updated mid-term profitable growth ambition

  • Targeting mid-term recurring operating margin at mid-to-high teen levels

  • First milestone: > 15% recurring operating margin in 2022”

Danone Press Release. 23rd November Danone is a “yogurt giant” with global staff of 100,000 and operations stretching across Europe, Asia, and America, where it sells a range of familiar products, from dairy foods to baby formula, Evian water to almond milk. For most people analysing the corporate strategies of large multinationals, Danone has been considered a “beacon of sustainability”, always very vocal on defending the Planet (“One Planet, One Health” claim), showing societal concerns and undertaking actions in a number of social dimensions. They recently became the first listed company in France to embrace the status of “Entreprise à Mission”, embodying its social responsibility values into the statutes of the Company, and using them to engage all parts of the economic ecosystem - employees, consumers, customers, suppliers, stakeholders and shareholders. Yet, the Company announced this week what they call a “local-first” strategy, which also involves deep cost-cutting and headquarter lay-offs in times of pandemic. Simplifying the issue: What you have in the above statements is a CEO talking to stakeholders and the company strategy talking to shareholders. Is this consistent and compatible? It may seem awkward and it provides a very interesting corporate example of how difficult it is to navigate the “waters” of shareholder vs stakeholder primacy and balance the trade-offs between short and long term objectives. Despite attempts by Danone over time to build synergies between financial goals and impact goals, there are moments of truth when the apparent conflict surfaces again and “how you solve it” will make or break your reputation and market positioning. Yes, one can talk to both audiences but how you deal with the situation and how you communicate what you do becomes crucially important. At the end of the day, there are at least three important audiences that you need to please all the time: investors, customers and employees. They will be the judges, as always, of corporate behaviours. But the final judge is society as whole. So having clarity on that broader purpose of the company is what allows you to find the narrow path for continuity in tough economic times. Have a great and impactful week! Nuno Moreira da Cruz Executive Director Center for Responsible Business & Leadership