SWITZERLAND – Food manufacturer Nestlé has dismissed media reports that its board of directors would step down if a group of pension funds succeeded in preventing CEO Peter Brabeck from becoming chairman of the board as well.
“Nestlé SA and its board of directors wish to underline that there is no threat of collective resignation of the board,” a statement issued by the company stated.
The Swiss media has speculated in the last couple of days on the possible en-masse resignation after Ethos Foundation, an SRI organisation backed by 83 pension funds, said it would object to the appointment of Nestle’s chief executive to the additional post of chairman at the annual general meeting on Thursday.
Brabeck, who already is vice-chairman and CEO, is supposed to take over from current chairman Rainer Gut, who is expected to retire at the AGM. Brabeck was elected to the board in 1997.
Ethos has presented three shareholder resolutions, also backed by five pension funds including the Canton of Jura, City of Zurich and Canton of Luzern, to prevent the combination of the functions on corporate governance grounds.
The six shareholders have a combined 0.25% of shares, Ethos chief Dominique Biedermann said.
Biedermann said Ethos is hoping for the support of up to 20% of shareholders including international consultant Deminor and US group Institutional Shareholder Services.
“If we get 15-20% support, it is a great message to the board and they cannot ignore that,” Biedermann said. The organisation hopes that such support would make Nestle’s board cut the time span of Brabeck’s double mandate from the intended five years to a few months.
Nestlé’s own pension fund does not belong to Ethos but is a member of the Swiss Pension Fund Association, ASIP. CEO Jean-Pierre Steiner was not available for comment.
“We do not believe this is a corporate governance issue,” Francois-Xavier Perroud, Nestlé spokesman told IPE. He said that the board of directors and not its chairman would control management.
In addition, the board is set to elect two deputies with “clear-cut authority” in certain areas.
“Ethos wants this company to shoot itself in the foot,” he said, pointing-out that Nestle conforms to the Swiss code of best practise in corporate governance, which he said was endorsed by Ethos. Ethos manages CHF875m (€564.8m) in its eight equity and bond segments on behalf of its members.
“I wonder why suddenly we seem to commit the original sin,” Perroud said. Biedermann confirmed that Ethos was been involved in the code.
Perroud told IPE that in the past 85 years, Nestlé has had 12 years worth of senior management’s “double mandates”.
“We are strongly opposed to the Ethos proposal because it would make it impossible, in the future, to be flexible enough to adapt the best possible solution at a given time. It is this rigidity which constitutes a competitive handicap,” he said.
The company’s management however would “instantly and without question respect the will of shareholders”, if they backed Ethos at the AGM, Perroud said.