Nestlé boss Brabeck threatens to quit

Peter Brabeck may not have it all his own way on Thursday Keystone

Nestlé chief executive Peter Brabeck has threatened to resign if shareholders do not also make him chairman of the world’s largest food group on Thursday.

The board will resign too, if a group of shareholders opposing the double mandate succeeds in derailing the company’s plan, a Nestlé spokesman has confirmed.

Nestlé, which has its headquarters at Vevey on Lake Geneva in western Switzerland, has proposed Brabeck take on the role of both CEO and chairman when current chairman Rainer Gut steps down at the shareholders’ annual meeting.

While opponents are unlikely to prevent the Austrian Brabeck from assuming the dual function, the debate could weaken his position, according to observers.

Switzerland’s Ethos Investment Foundation, which has a membership of 83 pension funds from all over the country, has launched three counter-proposals for the shareholders’ meeting.

Ethos administers SFr875 million ($730 million) according to sustainable development criteria – financial, environmental and social – on behalf of its members.

Too much power?

Supported by a number of international investors, including Institutional Shareholder Services in the United States, Ethos wants to stop Nestlé from concentrating too much power in the hands of one man.

Nestlé spokesman François-Xavier Perroud told the Sonntagszeitung newspaper: “This is an official statement from Peter Brabeck: If Ethos gets through with its proposal at the annual general meeting, Brabeck steps down as Nestlé chief.”

According to the newspaper, Gut has been campaigning heavily among institutional investors over the past few days to try to drum up support for Brabeck.

Nestlé says splitting the two roles would sacrifice continuity and stability, arguing that Brabeck is the best man for the job because there is no other appropriate candidate available.

“For us, the decision must be about a well thought-through governance that seeks the smoothest and most cost-effective division of responsibility for strategy, control and execution between the board of directors and the executive board,” Brabeck said in a recent speech.

Double mandate

“We have come to the conclusion that under present conditions the best solution for Nestlé is the double mandate,” he added.

Opponents say a double mandate can be useful in such situations as turnaround cases where quick action is needed, but that this is not the case at Nestlé.

“It could be a second-best for a very short period of time in certain special cases but that is not so at Nestlé,” argues the head of Geneva-based Ethos, Dominique Biedermann.

He has no illusions of gaining a majority of votes at Thursday’s meeting in Lausanne.

Big signal

“That will not be enough for a legal victory but it is a big signal towards management,” Biedermann told Reuters, adding that it might prompt Brabeck to give up as CEO earlier than expected while continuing as chairman.

“If our proposal gets say 20 per cent support, I am sure it will not take five years for Nestlé to find a new CEO,” he added.

Analysts widely expect 60-year-old Brabeck to retire from the chief executive post by the age of 65.

swissinfo with agencies

Key facts

Ethos was created in February 1997 by two Geneva-based pension funds and now has a membership of 83 pension funds throughout Switzerland.
The foundation administers SFr875 million according to sustainable development criteria (financial, environmental and social).
At the shareholders’ meeting, Ethos wants a separation of the chairman and CEO positions.
Ethos and five pension funds together hold Nestlé shares totalling more than SFr1 million of nominal value, corresponding to a current value of more than SFr300 million.

In brief

Helmut Maucher of Germany was CEO and chairman of Nestlé from 1990 to 1997. He is now honorary chairman.

Since 2000, Rainer Gut has been company chairman and the role of CEO has since 1997 been separate.

Peter Brabeck joined Nestlé in 1968 and became CEO in 1997.

His name was put forward to take on the dual function of CEO and chairman in January.

He is also vice chairman of the Credit Suisse Group, and a director of L’Oréal and Roche.