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contact us: iuf@iuf.org |
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NOT in the Annual Report!
Nestle's 2008 Annual Report builds on its predecessors in lavishing praise on the company's commitment to "sustainability", "creating shared value" ("going beyond sustainability") "our people", their Corporate Business Principles and new Code of Business Conduct, the UN Global Compact and general willingness to abide by the law. All of this is summed up in what is described as "basic ideas of fairness, honesty and a general concern for people". However, if there is one central message in the report, it's this, which puts all the talk about "stakeholders" in the shade: "We have once again not only achieved, but even outperformed, the Nestle model. The on-going CHF 25 billion share buy-back and increased dividend reflect our commitment to create value for shareholders, even in a period of depressed financial markets." Nestle in 2008 spent CHF 8.7 billion (USD 7.95/EUR 5.73 billion) buying back its own shares on the stock market in order to reduce the number of shares in circulation and boost the earnings per share ratio. That's over half of what the company spent on wages and salaries, and nearly double the capital expenditure for the year! Together with the enormous dividend hike, this is money that was not invested in research, new capacity, training, improved wages and pensions or other benefits for "our people". Nestle calls this "creating shared value". What it actually represents is the growing diversion of enormous amounts of cash to shareholders, including executives with stock options. So here's what you'll find - and what you won't - in the 2008 Report: In 2008, we paid salaries amounting to CHF 16 billion (USD 14.6/EUR 10.5 billion). Many Nestle workers would be acutely interested in knowing their precise share of this nice round sum, and how it was calculated. Beginning in 2007, the union at Nestle's chocolate factory in Perm, Russia, sought negotiations for a collective agreement to improve on poverty wages. Management consistently refused to release basic information concerning wage scales or even the number of workers in each wage category, claiming that such information was confidential and it was Nestle policy to exclude wages from collective bargaining. It took 6 months of local, national and international solidarity actions and an IUF submission to the OECD for Nestle to grudgingly respect this basic workers right. (Read more.) Now the same tale is being repeated in Indonesia, where management is telling workers at the Nescafe factory in Panjang that wages and wage scales are "confidential" and a "commercial secret." For over two years, workers have been waiting for negotiations, while management has attempted to undermine the union, transferred its leader to a position under video surveillance and sought to subvert negotiations and the collective bargaining process by turning to the industrial court to impose a settlement. Nestle workers - "our people" - and their workplace rights are increasingly under attack in the rush to deliver "shareholder value", including stock options for Nestle executives (whose compensation, in contrast to that of many Nestle employees around the world, is described in detail in the 2008 report to investors). Our people, their qualities and values, are at the heart of what makes Nestle the company it is. We thank them for their energy, enthusiasm and commitment that have contributed so much to our performance in 2008. When workers arrived at the Nestle ice cream factory in Santo Domingo in the Dominican Republic for the morning shift on June 19, 2008, they found their factory surrounded by security guards, police officers - and ambulances and paramedics. The workers were herded into the parking lot where they were told that the factory was being shut down with immediate effect. Then their severance checks were handed out. This exercise in "creating shared value" built on past practice in the country, where in January 2007 a factory achieved an 80 percent increase in production and management rewarded its workforce by laying off 45 regular workers to replace them with outsourced labor. Throughout 2008 as in previous years, workers at Nestle Brazil were working 7 days on and one-day off, in violation of the legal 44-hour workweek. According to the union, that left workers with an average 364 hours of unpaid overtime per year - their contribution to the "energy and enthusiasm" eulogized by Peter Brabeck. Only in May 2009 did they begin to enjoy the right to one day's rest per week. In July 2009, the Hong Kong Nestle Workers Union went on strike to protest abusive working conditions which scandalized public opinion, including 17-hour workdays. An institutionalized system of permanent insecurity had kept up to a third of the workforce on casual contracts. Management backed down on its promise to grant permanent employment to casual workers (many of whom had worked there for 10 years) by firing them one by one before their contracts expired. The union is still waiting for recognition and negotiations for a new collective agreement. Behind the talk about "our people" lies a growing number of "temporary", casual and outsourced workers and workers producing branded company products in non-Nestle factories for third party contractors. These non-Nestle Nestle workers contribute to Nestle's growth in profits, sales and dividends, often working side-by-side with Nestle's "regular" workers manufacturing, packaging, transporting and distributing Nestle products. But they are not regarded by the company as "Nestle people" They are employed on inferior terms and conditions to the ever-decreasing number of permanent workers and are excluded from most benefit schemes. They are also excluded from membership in unions which negotiate with Nestle, a key goal of corporate strategy for shrinking workers' ability to exercise in practice the rights which Nestle claims to respect. Nestle could publish ("for the first time") data on energy consumption and C02 emissions, so the IUF repeats its 2008 challenge to make available for the first time precise data on the number of direct and indirect employed workers producing Nestle products, including outsourced, casual, "temporary" employees and numbers of workers producing for third party contractors ("co-packers"). In 2008 we opened a new R&D center in Beijing focused on food safety and quality with an investment of over CHF 11 million (USD 10/EUR 7.2 million) This brings the company’s total R&D investment in China to CHF 21 million (USD 19.2/EUR 13.8 million) and the number of Nestle Research employees in China to over one hundred. In summer 2008, melamine contamination of Chinese-made milk products, caused the death of at least 4 babies, sickened over 53,000 and hospitalized some 13,000. While other dairy producers initiated recalls and suspended production, Nestle, putting public relations before safety, asserted that "that none of its products in China is made from milk adulterated with melamine." Shortly thereafter, the Hong Kong government found traces of melamine in a Nestle milk product manufactured in Mainland China. Nestle responded with a press statement that all its milk products manufactured in China are "absolutely safe". We engage in ongoing dialogue with a wide variety of stakeholders. This includes: government and regulatory authorities in order to promote and implement sound legislation and regulation; non-governmental organizations that are committed to constructive engagement and principled behavior; academic and professional bodies to foster new knowledge; and local communities to promote their well-being. 2008 saw still more lawsuits against Nestle Waters in North America filed by local communities who failed to grasp the true significance of Nestle's efforts to promote their well being. Nestle fought back with Nesdialogue - piling lawsuit upon lawsuit. Part of Nestle's testimony in the Supreme Court of Maine - where they notoriously argued that community resistance to granting them commercial access to public water resources infringed their right to maximize market share and was therefore "anti-competitive" - can be seen on YouTube (but not in the Annual Report). At the same time, absurd claims like "Bottled water is the most environmentally responsible consumer product in the world” and spurious environmental impact statements have exposed the company to class action lawsuits by consumer and environmental groups The corporate arrogance on display in China and in the water wars is an open invitation to product liability, truth-in-advertising, and environmental impact lawsuits. The arrogance extends to Nestle's determination to define which NGOs "are committed to constructive engagement and principled behavior" and which researchers are fostering "new knowledge". The French-language Swiss television TSR reported last year that, in the autumn of 2003, Nestle hired the private security company Securitas to infiltrate a group of members of the organization Attac doing research for a book on Nestle. By way of justification, Nestle issued a statement to the television company invoking the need to protect its property during the 2003 G8 summit, which took place in Evian, France, across Lake Geneva. But the G8 summit took place on June 1-3, 2003, three months before the surveillance began. Furthermore, the German-language Swiss weekly, WOZ, has since revealed that Securitas was still recruiting for this undercover job in the autumn of 2003. "Fairness, honesty and a general concern for people"? Central to this crisis is the notion of trust. The 2008 report shows declining capital expenditure and a net debt to equity ratio of 28.7% (below the level of 2007, but lavish borrowing that year effectively doubled the company's financial liabilities). The detailed financial report also shows loading up on derivative products whose recent explosion has blown a hole in numerous corporate balance sheets. The discussion of derivative assets and liabilities in the detailed financial report is an object lesson in obscurantism. Investors could well ask about the long-term viability of a "Nestle model" which delivered a 56% increase in share buybacks and a projected dividend boost of 14.8% at the expense of real investment, relying on sell-offs, casualization and outsourcing to feed the buybacks and dividends. |
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