Corporate Governance at Nestle: The Debate Over Combined CEO and Chairman
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Code : GOV0016
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Region : Switzerland |
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The Debate over Combined CEO and Chairman Inmid-January 2005,Nestle announced its plan tomakeBrabeck theChairman andCEOof the company. It also stated that Brabeck would bemade amember of the Remuneration Committee and amember of theChairman’s and Corporate Governance Committee.Nestle stated that itsmove was ‘pragmatic’ and ‘the right thing to do under the circumstances’.10 Nestle also stated that the splitting the top roles between two peoplewould increase the stability of the company, especially when the company was finding it difficult to get a suitable candidate for the post ofCEO. BesidesNestle, the companies that practice the dual role format includes Procter & Gamble’s A.G. Lafley, Kellogg’s James Jenness and Danone’s Franck Riboud.Major Swiss companies that follow the same are the pharmaceuticalmajors,Roche andNovartis... Brabeck as the Chairman and CEO On April 14th 2005, Brabeck was appointed the Chairman and CEO of Nestle as less than 51%of the shareholders supportedEthos and 50.55%voted in favour ofNestle’s decision [Annexure 5].Nestle ensured that the dual role of Brabeck would be temporary but at the same time stated that forced splitting of rolesmight lead to ‘loss of competitiveness’ ofNestle. Immediately after winning the vote, Brabeck commented that the voting in favour of Ethos’ proposals would have been a ‘huge handicap’31 for the company. Denying that he had ever asked the board to entrust both the roles to him, Brabeck said, “I do not think I. . . deserved the suspicion that the Ethos proposals have (implied).”32 He added, “I have to recognize that there was an important number of shareholders who also expressed clearly their preference for a separation of chairman and CEO. The board of directors will take up this idea, this strong expression of opinion... |
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Corporate Collapse
In 1976 JohnArgenticlearly identified six symptoms of corporate collapse.This list is close to being universally accepted as
inarguable truths. Argenti defined the symptoms as:
1. One-man rule:Any one person (man or woman), cannot possess the wisdom to do what is best—indefinitely.
Everyone has a “best before” date.Argenti is a strong believer that absolute power corrupts, absolutely.
2. Anon-participating board:This, perhapsmore than any other factor, can signal the failure of corporate governance.
A non-participating board will spend asmuch time on thewording of a document as it will on issues of strategic
importance. A non-participating boardwill not challenge, and will fail to ask thought-provoking questions.,
3. An unbalanced top team:While it is understandable that people like toworkwith people of similar backgrounds,
temperament and interests, diversity is key to serving the needs of the various stakeholders....
