Monday, September 24, 2007

Will the new Nestle boss be the same as the old Nestle boss?

Nestlé is going to have a new Chief Executive Officer. Will it make any difference? Let's hope so, but first some background.

There was a great deal of controversy in 2005 when Chief Executive Officer, Peter Brabeck-Letmathé, had himself declared Chairman of the Board of Directors as well. A shareholder rebellion over this outright breaking of corporate-governance best practice got only 36% of the vote.

Shareholder democracy is compromised as Nestlé makes it difficult for share owners to register their shares. Indeed, so few are registered that it makes it statistically impossible to change some aspects of the articles of association of the company. Nestlé refused to let me register my one share, which the broker I used found unusual. It meant I couldn’t use it as intended to attend the shareholder meeting and had to go by other means. Nestlé claims that more than a third 'have elected' not to register their shares, meaning the two-thirds majority required for some changes is impossible.

There is a further obstacle to holding Nestlé to account through shareholder democracy. As I reported in April, it was a shock to see how shareholders hissed and booed anyone standing up to question Mr. Brabeck’s management practices. See:

With even institutional investors voicing concern when Mr. Brabeck's wanted to take on a dual role, only a third of votes represented at the shareholder meeting could be mustered. In an attempt to show sensitivity to shareholder concerns, however, Mr. Brabeck said he would stand down and Chief Executive in 2008, with his successor being identified in September 2007.

That process has now completed. And the winner is….

Mr. Paul Bulcke, currently Executive Vice President and Zone Director for United States of America, Canada, Latin America, Caribbean.

He is not yet a member of the Board. The Board is proposing that he be elected and appointed Chief Executive at the shareholder meeting in April 2008. This is being treated by Nestlé as a done deal and Mr. Bulcke will shortly begin the process of restructuring the Executive Board as CEO-designate.

So will Mr. Bulcke be any different from Mr. Brabeck when it comes to respecting the World Health Assembly marketing requirements for baby foods (or any of the other issues where Mr. Brabeck has attracted criticism and charges of abusing human rights and the environment)?

Well, we will give him a chance and ask him to accept the four-point plan aimed at saving infant lives and ultimately ending the international boycott. Mr. Brabeck rejected the plan and also rejected an invitation to attend an independent expert tribunal where he would have had the opportunity to show whether the claim that Nestlé markets infant formula ethically and responsibly is true. His reluctance to attend the tribunal is perhaps not surprising, as he knows we can demonstrate the claim is not true. Indeed, we have already done so before the UK Advertising Standards Authority after Nestlé made the claim in an anti-boycott advertisement.

Whether Mr. Bulcke will continue the strategy of denials and deception pursued by Mr. Brabeck in a failed attempt to undermine the boycott, while continuing with aggressive baby food marketing practices, remains to be seen. Nestlé’s Global Public Affairs Manager, Gayle Crozier Willi, admitted earlier this year that Nestlé is ‘widely boycotted’ so perhaps a new leader will face up to this and respond to the four-point plan.

Mr. Brabeck’s regime has been beset with public relations disasters on the boycott, from the ruling against the anti-boycott advertisement and his response to it (which generated headlines like “Mr. Nestlé gets angry") and his big book of letters from governments (which it turned out was not all it seemed). Perhaps his unsafe pair of hands when it comes to responding to the boycott will not be missed. See

Mr. Brabeck has been successful in delivering on the so-called Nestlé model. This involves aggressively pursuing growth in sales and unceremoniously dumping any business which does not achieve 5-6% annual growth.

This is where the signals about what to expect from Mr. Bulcke do not look good. As head of Latin America he has been successful in exceeding this growth target, with infant nutrition being one of the key growth areas.

He is already on the record saying that the recent acquisition of Gerber baby foods will be a motor for growth. As we exposed last year, Gerber violates the World Health Assembly marketing requirements in a systematic manner and there is little hope of this changing if it is fundamental to growth plans.

Mr. Bulcke has also stated that he sees China and India as key growth markets. The company has a poor record in both when it comes to baby food marketing. In China, for example, it provoked a boycott for refusing to remove from sale formula with levels of iodine outside permitted levels and then tried to recover its image by putting health workers into supermarkets in ‘nutrition corners’ where pregnant and lactating women were targeted. In India it has targeted medical students and workers with sponsorship in breach of national legislation and has distributed promotional leaflets to parents. See past reports in our Campaign for Ethical Marketing.

Will the new boss be the same as the old boss?

It remains to be seen. But Mr. Brabeck will remain the Chairman of the Board so setting strategic direction, which can't be good.

Some years ago, before he became Chairman, we wrote to all board members asking them to investigate Mr. Brabeck’s baby food marketing policies. We did not receive one reply. Since he became Chairman there has been little point complaining to him about himself and there will be little point complaining to him if Mr. Bulcke follows the same approach of putting profits before infant health and the rights of mothers.

All the same, we will write to Mr. Bulcke when he takes up his post and would like to raise questions at the shareholder meeting, if possible. Why not buy a share yourself and come along, or send us a donation to help us attend. See:

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