With the old cliques came the problems: How Nestlé fell into crisis under President Paul Bulcke

It's the end of a long-standing alliance. On Monday, Paul Bulcke sits face to face with his colleague Laurent Freixe at Nestlé headquarters in Vevey. The Chairman informs the CEO that he is being dismissed without notice – because of a secret relationship with a marketing manager who has risen rapidly within Freixe's sphere of influence.

Freixe had to hand over his cell phone. His business email account was also deactivated on Tuesday. It wasn't until Wednesday evening that the Frenchman posted on LinkedIn: "I got my cell phone back." A humiliation after 39 years with the company.

But Bulcke also loses. The 70-year-old Nestlé veteran chose the wrong person to get the company back on track. Moreover, the question arises whether he did everything he could to clear up the affair in a timely manner.

Conversations with insiders and lawyers paint a picture of a Nestlé president who could have reacted to warning signs earlier. Bulcke knew that Freixe had had an internal affair years ago. This led to his current marriage. Even then, Freixe didn't openly communicate the relationship, as an informed source told the "NZZ am Sonntag." Despite this, Bulcke relied on his CEO's assurances for a long time.

That was a mistake, says a corporate governance specialist at a major Zurich law firm, who declined to appear in the newspaper. Bulcke and the board of directors must accept the accusation that they didn't take internal tips seriously enough. While they did initiate an internal investigation in May, such an internal investigation into a CEO is a "suicide mission"—impartiality is impossible.

In May, initial information about the CEO's conduct came through "Speak Up," Nestlé's whistleblower reporting center. President Bulcke, who received a letter containing the same allegations at the same time, confronted Freixe. After consulting with the Board of Directors, he initiated internal investigations. Freixe denied the affair. The audit yielded no evidence. The company returned to business as usual.

The matter would likely have remained closed had the rumors not reached the media. At the end of July, the financial portal "Inside Paradeplatz" reported on an internal affair involving the Nestlé CEO. At the same time, new information reached "Speak Up." Distrust within the board of directors grew. The board then commissioned the law firm Bär & Karrer to conduct a comprehensive investigation. The result: Freixe and the marketing manager did indeed have a relationship. The suspicion that the CEO had favored the woman in her career could not be refuted.

How the external investigators convicted Freixe remains unclear. A lawyer specializing in such cases explains that in such cases, emails, phone records, and expense reports are primarily examined. Direct evidence is rare, but patterns emerge: times of calls, meetings at events, suspicious travel.

Nestlé emphasizes that Bär & Karrer's findings were news to the Chairman of the Board. But questions remain: Why did the marketing woman leave the company back in June? Was she pressured? If so, by whom? Did she receive severance pay? Nestlé has not commented on this, and the person involved did not respond to inquiries.

Laurent Freixe himself spoke out this week. On Wednesday evening, he posted on LinkedIn after "recovering his means of communication." He congratulated his successor, Philipp Navratil: "I wish you and all your colleagues at Nestlé all the best for the next phase. You deserve it."

Freixe received a surprisingly high number of warm words from former and current employees. One wrote: "You can be proud of your career. No one can take that away from you." Freixe replied: "Thank you. Some try (you know who I mean), but they won't succeed. They don't represent what Nestlé is at its core."

There's a hint of bitterness in these words. Freixe clearly sees himself as a victim. The "NZZ am Sonntag" contacted him to give him the opportunity to present his perspective. But Freixe declined: "It's not the right time for comments, but it will come," he said via email.

At the same time, he expressed concern about the company's future: "My only wish is that Nestlé recovers from the years of decline."

This is more than just the comment of a disempowered manager. Other Nestlé employees are also alarmed. A former top manager declares: "The company is in trouble—the company is in serious trouble." Nestlé has been a force for good for 160 years. This reputation must be salvaged and the company brought back on track.

That's exactly what Bulcke had in mind when he appointed Freixe CEO overnight a year ago. He was tasked with leading the world's largest food company back to its former strength, focusing on its traditional brands. Nescafé, KitKat, and Maggi were supposed to bring about the turnaround – not vegan shrimp or vitamins, which his predecessor, Mark Schneider, had focused on.

The idea was to revive an old Nestlé world. Bulcke and 63-year-old Freixe embodied it: between them, they combined 85 years of experience with the company. Both have experienced the classic Nestlé career path – from the sales front to managing large regional companies to the top of the company.

Now, however, they've achieved the opposite. Bulcke's reputation has also been damaged. Until his departure next spring, he remains a "lame duck." His designated successor as president is Pablo Isla. The Spaniard shaped the fashion group Inditex for many years with brands like Zara. He's an outsider without Nestlé connections.

This is new territory for the company. For decades, the unwritten rule was that only internal talent could reach the top – first as CEO, later as Chairman of the Board of Directors. "This automatic process now seems to be over, and that's a welcome development," says Hendrik Schmidt, governance expert at the German fund management company DWS, which represents the shareholder rights of private and institutional investors.

Many likely see it similarly. Isla has already emancipated himself from his predecessor in the Freixe case. The old guard is stepping down in ignominy. The attempt to revive the old Nestlé world has failed.

The bitter irony is that Bulcke and Freixe themselves initiated the recent events when they confidently presented a new "Code of Conduct" in April, the code of conduct for their approximately 270,000 employees worldwide. They urged their employees to report any misconduct. This call resonated. And how.