Nestle shares slump on European STOXX 600 index after CEO sacked over romantic relationship with junior employee

European stocks declined Tuesday morning, September 2, as Nestle shares fell sharply after the Swiss food giant removed Chief Executive Laurent Freixe from his position after one year in the role. The STOXX 600 index dropped 0.1 per cent to 550.48 points as of 0707 GMT.

The food and beverage sector posted the steepest losses among European equity sectors, falling 1.2 per cent. Nestle shares tumbled 3.2 per cent after the company ousted Freixe for failing to disclose a romantic relationship with a subordinate.

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After finding out about an undisclosed relationship with a direct subordinate, the Nestle Board of Directors through an internal investigation, Freixe, the company CEO, was dismissed from his role of CEO.

Freixe’s failure to disclose the relationship violated company policies regarding workplace conduct and transparency requirements for senior executives.Philip Navratil, an experienced Nestle employee who’s been in the company since 2001, as an internal auditor appointed as new CEO. He headed the Nespresso Coffee Brand. Nestle faces continued volatility amid leadership change.

The unexpected CEO departure threatens additional volatility for the KitKat maker, which has faced challenges from a difficult consumer environment and disruptive US tariffs. The Swiss blue-chip index declined 0.3 per cent on the news.

Several stocks posted gains despite broader market weakness. Kering jumped 3.8 per cent after HSBC upgraded the Gucci owner to "buy" from "hold." Partners Group climbed 3.37 per cent following its first-half earnings report.

Market attention centered on the initial estimate for eurozone inflation in August. Reuters-polled economists expect the inflation rate to reach 2 per cent for the month.