Legal and Business Risks of the Nestle CEO Ouster Case
The ouster of Nestlé executive Laurent Freixe is a textbook example of why a clear workplace relationships policy is not just HR “red tape,” but a critical risk-management tool. (Reuters)
On its face, Freixe’s relationship wasn’t illegal under Swiss law — just as many workplace romances aren’t prohibited under U.S. law. But the fallout shows how quickly a private matter can snowball into a corporate crisis.
So what are the risks when an executive has a relationship with a subordinate? Here are just a few:
1. Harassment Claims When Things Go Wrong
If a workplace romance ends badly, the power imbalance between supervisor and subordinate often turns into claims of harassment or retaliation. (You can find the EEOC Guidance on Workplace Harassment here.) Even consensual relationships can be reinterpreted in hindsight. That risk was magnified at Nestlé because Freixe was in a position of direct authority — the kind of scenario that puts employers on the hook under U.S. Title VII and similar global laws.
2. Breach of Confidentiality and Loss of Trust
Executives carry sensitive information. A subordinate with direct access to the executive may be exposed to strategy, financials, or personnel decisions they would not otherwise see. Nestlé’s concern likely wasn’t just the relationship itself — but rather the possibility that confidential information might be shared inappropriately. That risk became reality when Freixe initially denied the relationship to the board. By lying, he compounded the breach of trust and left leadership questioning his judgment.
3. Perception of Favoritism and Conflict of Interest
One of the most damaging aspects of workplace relationships is perception. Even if no actual favoritism occurs, colleagues may believe opportunities or assignments are being influenced by romance rather than merit. At Nestlé, employees voiced those exact concerns through the company’s reporting channel, prompting multiple investigations. Once a board chair and outside counsel had to get involved, the issue was no longer a private matter — it was a governance problem.
4. Leadership Credibility and Accountability
When the CEO himself violates company policy, the ripple effects are enormous. How can other leaders discipline employees for similar misconduct if the most senior leader is excused? How does the rest of the leadership team, and rank and file staff take the CEO, and its stated values seriously in the wake of that conduct? Nestlé avoided that trap by enforcing its Code of Conduct consistently — terminating Freixe without an exit package, despite his 40-year tenure. The message: no one is above the rules.
5. Reputational Damage and Cultural Fallout
Even if Nestlé had quietly let Freixe go with a severance, employees would have read it as a double standard. Instead, Nestlé’s decisive action reinforced its culture of accountability and reassured employees that concerns raised through reporting channels would be taken seriously. The alternative — protecting a powerful executive — would have fueled distrust and reputational harm.
Each of these risks underscores why organizations need a clear, consistently enforced workplace relationships policy. By addressing disclosure requirements, conflicts of interest, and anti-retaliation measures up front, companies can prevent private relationships from spiraling into public scandals.
Workplace Policy, Workplace Relationships and Best Practices
But that begs the question: How can an employer avoid this situation in the first place?
Here are some recommended best practices:
1. Require Disclosure of Relationships in a Safe, Confidential Way
One of the key issues in the Nestlé case was that the CEO did not disclose his relationship with a direct report and denied it when asked. “According to a recent SHRM survey, workplace romances are common and can affect team dynamics if not properly disclosed.”Companies can avoid similar situations by requiring employees to notify HR or a designated ethics officer about workplace relationships that could create conflicts of interest.
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Make reporting confidential to encourage honesty.
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Clarify which relationships require disclosure (typically, any involving a reporting line).
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Emphasize that disclosure is not a punishment but a risk management tool.
2. Use Relationship Agreements or “Love Contracts”
Many organizations have employees in relationships sign a formal acknowledgment — often called a Relationship Contract — to outline expectations and reduce liability. These agreements typically cover:
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Confirming the relationship is consensual.
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Affirming compliance with company policies, including anti-harassment and anti-retaliation rules.
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Agreeing to avoid favoritism or decisions that could compromise objectivity.
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Committing to notify HR if the relationship ends or circumstances change.
By putting these guidelines in writing, employers protect both the company and the employees involved. Nestlé’s swift action underscores that accountability applies to everyone, from junior staff to executives.
3. Train Managers and Employees on Policy Expectations
Even a well-written policy fails without communication. Regular training ensures employees understand:
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Why workplace relationships policies exist.
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How to disclose a relationship safely.
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The consequences of failing to follow the policy, as seen in the Nestlé CEO case.
Training should also cover power dynamics, highlighting why relationships between supervisors and direct reports carry extra scrutiny. Click here to learn more on why just “having policies” isn’t enough.
4. Apply Policies Consistently Across All Levels
Nestlé’s decisive action — terminating a CEO with decades of service — sent a clear message: no one is above company rules. Consistency is critical. Policies that are enforced selectively, or that give executives special treatment, can erode trust, invite legal risk, and harm culture.
5. Monitor and Audit Policy Compliance
Employers should periodically review workplace relationships policies to ensure they remain effective and relevant. Key steps include:
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Auditing reported relationships for potential conflicts.
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Updating policies to reflect regulatory changes or organizational growth.
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Soliciting employee feedback to understand whether the policy is working in practice.
6. Tie Policies to Culture and Leadership Accountability
Finally, the Nestlé case demonstrates that policies are only effective when leadership models the behavior they expect. Boards and HR leaders must reinforce accountability, communicate that rules apply at all levels, and act quickly when violations occur. This approach not only protects the company legally but also strengthens organizational culture.
📌 Lesson for Employers: Nestle, in my opionion got it right. The Nestlé CEO case shows that the risks of undisclosed workplace relationships aren’t hypothetical. They touch every area of business: harassment liability, confidentiality, conflicts of interest, leadership credibility, and corporate reputation. A clear, enforced workplace relationships policy is what allows employers to manage these risks before they explode into public scandals.
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