Shareholders Unhappy With Sodexo's Insider CEO Appointment

Hot on the heels of a solid first-quarter result, narrow-moat Sodexo announced on Feb. 17 that it’s chair Sophie Bellon will be appointed CEO, a position she took over on an interim basis in October 2021. The market is taking the news negatively, with shares off around 5% at time of writing, and rightly so in our view. Although we view the announcement as negative, we do not see any immediate negative financial impact and will not be making any material changes to our forecasts at this time. We reiterate our EUR 100 fair value estimate. Sophie is the daughter of founder Pierre Bellon, who passed away in January, with the family holding 43% of the shares and 57% of the voting rights. When former CEO Denis Machuel departed in July 2021, investors had hoped for some fresh blood, ideally an outsider to the business to come in and cut away some of the organisational fat that has contributed to some degree to the operational gap between Sodexo and rival Compass Group, which boasts superior operating margins. While we are happy to stand corrected, we view the appointment of Sophie Bellon, who has served on the board for more than 30 years, the last six as chair, as more of the same. From a corporate governance perspective, we also view negatively the appointment of existing nonexecutive director Luc Messier as chair. Given Sophie Bellon’s outsize influence on the board, we would have preferred the appointment of a strong outside chair.