The Courage Boards Need When CEOs Cross the Line

The global corporate world, especially those focused on boards, has just witnessed an extraordinary act of decisiveness. Nestle’s chief executive, Laurent Freixe, was dismissed less than a year into his tenure after it was established that he had concealed a romantic relationship with a subordinate who reported to him directly. 

The matter began with an internal alert, which the board pursued with rigour. An external investigation confirmed the facts, and the company acted immediately. There was no equivocation, no elaborate explanations, no soft landing. Nestle Board Chairman Paul Bulcke simply said the decision was “necessary.” 

The message cannot be more unambiguous: when trust is compromised, values leave no room for compromise.

The dismissal of a sitting chief executive is a rare event, and on moral grounds, ever rarer. It represents a board exercising the full weight of its responsibility, making a choice that is principled, even if it is costly in the short term. What the Nestle board did was to place the integrity of the institution above the stature of the individual. It is this willingness to confront uncomfortable truths head-on that gives governance its true meaning.

The question it leaves behind is not about one man’s private life in a faraway boardroom sitting in India; it is about whether such an uncompromising stand could ever be taken here. In Indian corporate life, workplace relationships, especially those involving reporting hierarchies, are not uncommon. They surface across sectors, yet rarely do they find their way into formal processes or boardroom discussions.

After the #MeToo movement, some progress was visible. A number of multinationals operating in India introduced disclosure requirements, with provisions to alter reporting lines if needed. Certain Indian firms, especially those with global investors, followed suit. But these remain isolated measures. Across much of Corporate India — family-owned businesses, traditional industries, mid-sized enterprises — the frameworks are absent or only on paper. Where policies exist, they are often left untested, lying dormant until a crisis forces them open.

Not long ago, a celebrated technology leader was forced to leave not one, but two high-profile companies after his undisclosed relationship with a subordinate came to light, first through a harassment complaint and later through an internal probe that established violation of company policy. More recently, a co-founder of one of India’s most valuable e-commerce firms resigned abruptly after allegations of personal misconduct surfaced during a board-led investigation. Both episodes shook public confidence, not just because of the allegations themselves, but because they exposed how unprepared Indian companies often are in dealing with questions of conduct at the very top.

For Indian boards, such situations present an acute dilemma: how does one act firmly when the individual in question is both a star performer and central to market confidence, or worse, when the person is bound by blood, marriage or influence to the promoter family itself? To dismiss a high performer risks unsettling investors and disrupting operations; to discipline a promoter-relative risks unsettling the very balance of power that defines many Indian companies. 

Too often, boards resolve this tension by doing nothing, hoping that time or circumstance will quietly bury the matter. The silences around these matters are telling. Consider a large family-run conglomerate where the relationship between a senior executive and the promoter’s heir was widely known. It shaped promotions and postings in ways that were obvious to colleagues, yet no one intervened. HR lacked the authority, and the board preferred not to risk the displeasure of the promoter family. In one private bank, personal entanglements within the leadership team became the stuff of corridor talk. Appointments were questioned, attrition rose, and the board stayed silent.

Part of the difficulty lies in the wider cultural context. In Indian society, matters of personal conduct, relationships, and power equations are often treated as private terrain, not to be questioned openly. That instinct to look away seeps into boardrooms as well, where silence is rationalised as discretion and avoidance masquerades as respect. The challenge is compounded by the ownership structure of much of India Inc., where promoter families remain the ultimate power centres and “independent” directors often find their independence tested in practice. In such environments, even senior leaders understand which subjects are best left untouched, and which skeletons are better left undisturbed. What may be culturally convenient in the social sphere becomes corrosive in corporate life, because it blurs the line between private choices and institutional consequences.

Boards cannot eliminate gossip, but they can ensure it never remains the only channel through which sensitive issues circulate. But we must realise that what is not acknowledged cannot be addressed, and what is not addressed ultimately corrodes institutions. The responsibility of the board is therefore to replace the currency of whispers with systems of trust : trusted disclosure mechanisms, genuine whistleblower protection, and independent directors willing to probe beyond formal reports. 

This is why the Nestle episode resonates so strongly. It shows that a board can choose to hear the quiet signals, to act on them, and to place the integrity of the organisation above the discomfort of confrontation.

Yet another question arises once boards act with such severity: what becomes of the wealth created by those very executives while in office? Should a chief executive dismissed for misconduct still be permitted to walk away with stock options, long-term incentives and accumulated gains? At first glance, it feels almost paradoxical: an individual judged unfit to lead retains the right to encash the very rewards earned in that position.

The arguments can cut both ways. One view holds that wealth creation in a listed company is collective, not personal, and that no executive should be stripped of what is legally theirs. Another contends that boards have a duty not merely to terminate contracts but also to signal fairness to shareholders, employees and the wider market. Allowing a disgraced leader to depart enriched risks sending the wrong message that values are negotiable when money is involved.

In practice, the answer rests on the fine print of the employment contract. Unless the contract explicitly provides for forfeiture on grounds of moral turpitude, boards may find themselves constrained by law. It is precisely for this reason that global best practice is moving towards sharper clauses that tie executive rewards not just to performance but to conduct. Without such provisions, Boards are left with blunt tools: they may dismiss, but they cannot claw back. With them, however, institutions acquire the ability to act with true alignment between governance, accountability and consequence.

For Indian boards, the challenge is not one of imagination but of will. The regulatory frameworks already exist; SEBI’s requirements and the Companies Act provide for independent directors and oversight structures. The question is whether these structures are empowered to act when values are at stake.

True governance is not found in codes of conduct filed away in manuals, but in the readiness to enforce them when it matters most. It lies in creating environments where disclosures are not feared, where whistleblower mechanisms are trusted, and where boards are willing to act without hesitation. It lies, above all, in demonstrating that ethics are not an accessory but part of the institution’s operating system.

In an age where the average C-suite tenure is shrinking and listed companies are under relentless pressure to deliver quarter-on-quarter results, boards face an unforgiving tension between protecting values and meeting value expectations. The temptation is to prioritise short-term earnings over long-term credibility, to look away from conduct lapses so long as the numbers hold. Yet history shows that financial outperformance built on eroded trust is unsustainable; markets eventually punish opacity more severely than missed targets. 

The true test of a board’s maturity lies in recognising that values are not the opposite of value, but its precondition.

For India Inc., it is a reminder that governance is measured by the courage of decisions. Boards reveal their character not in routine times, but in those rare, uncomfortable moments when silence is the easier path and action is the harder one. Choosing the harder path is what sustains trust, and that trust, ultimately, is the only real currency of enduring institutions.