The Trump Effect Heads Abroad: European CEOs Are Getting Ousted
As President Donald Trump escalates his trade war with nations worldwide, there’s an unmistakable message ringing through the boardrooms of European corporate giants: Time’s up. European CEOs have been grappling with mounting pressure from investors, a stark contrast to the market resurgence in the United States, and their relative failure to keep pace with their American counterparts. The termination of executives is increasingly becoming the order of the day.
Take Unilever, for example. The consumer goods conglomerate, known for household names like Dove soap and Ben & Jerry’s ice cream, recently parted ways with CEO Hein Schumacher after a tenure lasting less than two years. Under the previous leadership, Unilever’s stock suffered a 7% decline over the past six months, while the U.K.’s FTSE 100 index enjoyed a 3% increase in that same timeframe. Unilever’s board expressed satisfaction with 2024’s performance but acknowledged the need for significant improvement moving forward. This sentiment was echoed by activist investor Nelson Peltz, who endorsed the leadership change following his Trian fund’s stake in the company.
Unilever isn’t alone in the hot seat. France’s Schneider Electric ousted its CEO in November after only 18 months, and Nestle saw the departure of Mark Schneider last August after he drove the company for eight years—all amidst stock prices that plummeted more than 20% over a two-year period following initial gains felt during the COVID-19 pandemic.
The European landscape has been fraught with economic challenges. As Martin Todd, portfolio manager for Sustainable Global Equity at Federated Hermes noted, European corporations face rigorous scrutiny, particularly in light of their underperformance compared to their U.S. counterparts. “In the case of Unilever, this looks to be a faster restructuring; at other companies, it may translate into simply re-listing, or reevaluating their capital allocation,” he stated.
The pressure is mounting for other corporations as well. Murray Auchincloss of BP recently disclosed plans for a “fundamental reset” of the company’s strategy—a response to being outpaced by U.S. energy titans Exxon and Chevron. Elliott Management’s interest in pushing for change at BP further underscores the shifting dynamics of corporate governance.
The Underperformance of European Companies
For too long, European companies and their stocks lagged behind those in the United States. The fourth quarter highlighted this discrepancy, with the STOXX Europe 600 averaging a price-to-earnings ratio of 16, in stark contrast to the S&P 500’s overheated 28. This valuation disconnect stems partly from sluggish growth in the European economy and the larger, risk-friendly American market that lacks the transformative tech giants present in the U.S. market.
But things are changing. Trump’s trade policies, along with his more isolationist approach, have thrown European leaders into a defensive posture. As tariffs loom on the horizon, nations like Germany are planning one of their largest increases in state spending in decades, specifically earmarked for military defense. This pivot toward greater financial investment has bolstered European stock markets, which have actually outperformed their American counterparts since the start of this year. Additionally, analysts are observing an uptick in earnings; fourth-quarter earnings for STOXX 600 companies—excluding the energy sector—rose by 10%, marking the most substantial growth in two years.
The Rise of Transatlantic Activism
As political uncertainty cascades through Europe, American activist investors are taking an increasingly vocal role in shaping corporate management. Recent reports from Alvarez & Marsal indicated a jump in activist campaigns in Europe, supported primarily by American groups, which rose to 35% last year, compared to 27% the previous year. This trend suggests that increased scrutiny and pressure will persist as we move into 2025 and 2026, especially within industrial and consumer sectors.
The current environment presents a unique opportunity for investors. The rejuvenating European stock market is primed for a rebound, particularly for firms that have recently ousted subpar leadership and are preparing to re-align their strategies. In short, it’s a classic case of survival of the fittest—and the savvy investor stands to benefit from this corporate upheaval.
As we look ahead, watch closely the ramifications of this shifting landscape. European companies either adapt and thrive in the face of pressure or risk falling to the wayside—a consequence further underscored by Trump’s bold international posture. Those in the know will seize the moment as these firms reshape their futures.
