Nestlé, slavery, shareholders and a lot of booing

This is a translation of a shareholders intervention at the Nestlé shareholder meeting last week. The shareholder was booed by many other shareholders once they realised their glorious company was being criticised.

Surely a little short-sighted as the shareholder was raising issues of financial importance. Mr. Brabeck refused to respond to the questions asked.

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Ladies and Gentlemen,

Last year, I came before this assembly to speak of the court case that Nestlé must confront in the United States for complicity in crimes against humanity.

This is a case that goes back to the end of the nineteen-nineties and that resulted, in 2001, in an agreement negotiated by a senator and a member of the House of Representatives of the United States with the companies most involved in the cocoa trade.

According to this agreement, these companies, including Nestlé, accepted to eliminate the worst forms of forced child labor – amounting to slavery – and the trafficking in children that this forced labor triggers.

In order to allow the companies in question enough of a transition period to avoid any adverse effects on the cocoa market, the agreement set a five-year deadline.

However, this agreement lacks key provisions that are vehemently opposed by the companies. Thus, there is no provision for guaranteeing an equitable price to cocoa producers.

The forced child labor results from the power of these companies – including, once again, Nestlé – in this market and their ability to force the cocoa producers to sell their crops at such a low price that only the use of forced child labor can save them from bankruptcy.

In 2006, the five-year deadline passed without anything having changed in Ivory Coast in any way, in spite of the repeated assurances of these companies.

Hence, in 2006, several children brought suit against the three companies most implicated – including Nestlé – in the courts of the United States. It is a “class action” suit, meaning that it can eventually include as plaintiffs hundreds of thousands of other children claiming compensation for the same reasons.

In the United States, the Alien Tort Claims Act, enacted in 1792, established what is known as universal jurisdiction. This means that United States courts may hear cases regarding persons – including legal persons such as corporations – accused of crimes against humanity such as slavery, kidnapping and torture. These crimes have no statute of limitations and need not have been committed on United States territory.

The three companies in question are accused of the three above mentioned crimes:

first, slavery, since the forced child labor (the children are as young as eight or nine years old) under the conditions that prevail on the plantations constitute slavery;

second, kidnapping, since the lack of enough children in Ivory Coast – and the lack of parents willing to entrust their children to the planters, as more and more parents become aware that the idyllic working and living conditions promised, as well as the advertised splendid schooling, lodging and overall conditions, are non-existent – has pushed the planters to cultivate the networks of child trafficking in order to obtain sufficient child labor;

third, torture, since those children who manage to escape and who are caught are systematically tortured as an example of what happens when one tries to leave.

Mr Brabek used the word “sensationalism” last year to describe my statements; however, charitable organizations working for the rights of the child – and especially for the rights of children in the poorest countries – have been gathering solid evidence for years, as have been other observers whose moral integrity is unimpeachable.

Thus, there is no lack of credible evidence about this, contrary to what certain persons would have us believe.

The case is currently under way in the United States court system and in its second year. In spite of the arduous objections of Nestlé, the courts have declared that the case may be heard.

A case similar in many ways was launched against the Unocal oil company for use of slave labor in the construction of a gas pipeline from Burma to Thailand. After eight years and more than one hundred millions dollars spent on lawyers fees, Unocal gave up and agreed to settle out of court. The amount of compensation awarded is secret, in keeping with the final agreement, but the colossal sums demanded are known, as are the colossal sums routinely awarded by United States courts in such cases.

Obviously, if Unocal settled out or court, it was to avoid an endless dragging out of a hopeless case with an endless accumulation of lawyers and court costs. It is likely that the sums paid out were less than what the plaintiffs were demanding, all while being substantial.

In the case against Nestlé, in addition to the decision of the courts that the case could be heard, there is a most disturbing aspect for the Nestlé shareholders, given the magnitude of the costs – similar to Unocal’s – that the company risks having to pay.

The only defense that Nestlé’s lawyers have been able to come up with before the court is the request that the case be dismissed unless the identity of the plaintiffs be ascertained and made public.

Such a motion demonstrates beyond dispute that Nestlé’s defense in the case is despaired of. Minor children have a guaranteed right to anonymity in such cases. Asking that the case be dismissed because their names are known to the public amounts to asking the impossible, for it is strictly prohibited by law.

Either Mr Brabek has approved the hiring of lawyers that are completely incompetent and know nothing about the law in the United States – and are thus incapable of defending the interests of Nestlé’s shareholders – or these lawyers are, indeed, competent and recurred to this tactic out of pure despair.

It is rather the latter, I would contend.

I return to the question that I put to Mr Brabek at last year’s shareholders meeting, and I would add three others.

First, what financial reserves is Nestlé setting aside in anticipation of a settlement of this case, a settlement that is likely to cost the company dearly?

Second, why, given the obvious hopelessness of mounting a defense, did Nestlé not immediately open negotiations with a view to settling out of court and thus minimizing the cost?

Then, what is Nestlé doing to keep the commitments originally made in the 2001 agreement in order to eliminate the crimes that triggered this case?

And, finally, why has Mr Brabek done nothing to inform the shareholders of Nestlé of the case in the first place and to keep them up to date through the annual reports?

Thus, four questions, if you please, Mr Brabek, if you can manage them:

1. the financial reserves set aside in view of a settlement likely to be dear;

2. why no negotiations from the outset to limit the cost to the shareholders;

3. what is being done to correct the wrongs behind the case;

and 4. why the silence in the annual reports?

I thank you.

Robert James Parsons, Nestlé shareholder

19 April 2007, before the shareholders assembled in the Nestlé annual shareholders meeting.
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