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UK Parliament report again slams Kraft

25 May 2011 Editorial
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The second UK House of Commons Business, Innovation and Skills Committee appointed to examine the consequences of Kraft's Cadbury takeover has just published its report (available online here). The conclusions echo union concerns but could go further. This is why the issues it raises should be kept alive and pressure on UK lawmakers and on the company must continue, a point taken up by the UK's Unite, whose press release is available online here (Kraft's secrecy will risk Cadbury's future unless the government acts, warns Unite)

The Committee sharply condemned Kraft CEO Rosenfeld's two-time failure to appear directly before MPs to provide evidence, terming her second no-show a "sorry episode" which "steered close to a contempt of the House." The Committee did find that Kraft's speedy reversal of their announcement to reconsider the Somerdale closure once the deal was closed had contributed "positively" to a critical examination of the UK takeover regime, and hoped that the lessons learned would be fully taken on board in a reexamination of the takeover rules.

The Committee expressed two ongoing concerns: that Cadbury's strategic marketing was now being directed from Zürich, and that Kraft's Rosenfeld standins had outlined plans for "harmonizing" pay and conditions in oral evidence to the Committee "in advance of any union involvement." "We trust", concludes the report, "that Kraft will fully engage with the union, and that the harmonisation programme will fully respect Kraft's non-time limited undertaking to respect Cadbury's existing employee terms and conditions."

The problem, as Unite points out, is that Kraft is not just "not engaging" with the union. Unite's request for routine information on the Cadbury business needed to prepare a pay claim has been rejected on the grounds that disclosing such items as sales or revenue would violate…regulations of the United States Securities and Exchange Commission (SEC).

This is a willfully false invocation of these rules, which apply to investors, not union negotiators, and prohibit the disclosure of information for private gain through the sale of securities, a practice known as insider trading. They were never intended to serve as an obstacle to disclosing information necessary for collective bargaining, and do not serve that function in the United States. In this situation, the right to information trumps securities law.

The Committee missed a perfect opportunity to investigate the fiscal implications of Kraft's recent "harmonization" of Cadbury into its European tax avoidance scheme. By now booking the profits in low-tax Switzerland, Kraft's move will cost the treasury millions in tax revenue at a time when public services are being cut to the bone. The Committee called its report "Is Kraft working for Cadbury?" The answer is no: they're working for investors, and top management with stock options.

Vanishing corporation tax is an issue not only for unions, but for all citizens concerned with tax justice - and should be elevated into a major public campaign for corporations to again start paying up a portion of their profits. Of specific concern for Kraft workers worldwide, however, is the company's spinning a tax dodge into a collective bargaining dodge. Kraft unions in Europe already have their hands full trying to make sense of the information they currently receive, based as it is on cash flows designed to reduce taxes rather than give a clear idea of the state of the various businesses and their complex of intermediaries which now make up Kraft Holdings. If there is one department at Kraft where payroll is growing, it is the tax division.

Kraft unions must be alert to the company's new tactic for restricting information necessary for collective bargaining and call their bluff. The company CEO should be called again to answer questions before the Parliament. And Kraft corporate management should be called upon to provide firm guarantees that no Kraft union anywhere will be refused the right to the information they need to carry out their trade union mandate, a mandate which is protected under national law, international labour standards and the OECD Guidelines for Multinational Enterprises.