Free Essay about Nestle: Corporate Governance, Stakeholder Theory, and the Boycott Launch

Executive Summary and Company Introduction

Nestle Australia Limited is an Australia based corporation. It is a transnational food and drinks organization whose main office in Australia is in Rhodes. In terms of revenue, profitability and other metrics used for measuring company size, Nestle Australia is undeniably among the largest food companies in Australia among George Weston Foods, Bidvest and Teys (Graham & Trotman, 2012). The company operates in the food industry and deals in such products as medicinal foods, baby food, breakfast cereals, dairy products, pet foods, snacks, cream frozen foods, ice cream and coffee products (Graham & Trotman, 2012).

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About 29 to 30 of the company's product brands have been estimated to have an annual sale of about $1.1 billion comprising Nescafe, Vittel, Maggi and Nespresso (Graham & Trotman, 2012). Moreover, the company has got 447 factories that are functional in 189 countries across the globe. In addition, Nestle Australia Limited has ever since acted as a source of livelihood among many people and families by employing a whopping capacity of about 339, 000 workers across its functional factories. Moreover, the corporation is also one of the largest shareholders of L'Oreal, which is the globe largest cosmetic organization which has also led to the further creation of employment opportunities (Graham & Trotman, 2012).

One of the major factors that led to rapid development and expansion of the corporation was the high demand for its products especially after the first and Second World War (Graham & Trotman, 2012). This prompted the corporation to introduce and invest in other lines of business operations apart from its initial condensed milk which included infant formula products. Notably, during this period the company managed to acquire other corporations such as Crosse and Blackwell in 1950, Libby's in 1971 and Findus in 1963 among other significant acquisitions which assisted the corporation in coping with the high demand for its products. Additionally, the Company enjoys a primary listing on the Six Australia Exchange, and it is a constituent of the great Australia Marketing index besides having a secondary listing in Euronext (Graham & Trotman, 2012).

Corporate Governance, Legal and Fiduciary Duties of Directors & application of Stakeholder Theory

Under the general law of Australia that applies to all food companies, directors of Nestle Corporation have acted on good faith and have avoided any conflicting interest as required by the law. The directors have instead acted for the general good of the company by ensuring safety products to their consumers (Graham & Trotman, 2012). Moreover, the directors of the corporation have constantly observed and maintained their legal duties by maintaining high standards of due care, skills and great diligence in marketing of its products. Since the formation of the company, the organization has been operating beyond its domestic market in Australia by operating under such principles as integrity, fair dealing and full compliance with the applicable laws.

For instance, the company's employees in Australia have upheld and have practiced these principles especially when dealing with customers making the company's reputation to be good and remaining one of the company's most essential assets today (Broeckx & Hooijberg, 2016). The company has prescribed a specific code of ethics and principles in which the management and the employees have always lived by and maintained.

These principles specify and assist the company in the implementation of the corporate business principle by setting certain minimum standards of behaviors in organization key areas such as product branding and safety (Broeckx & Hooijberg, 2016).The board of directors is responsible for the management of Nestle Australia key operations and investment. However, the day to day management of the company operations is taken care of by the executive board. The boards are responsible for managing the diverse parts of the global company (Broeckx & Hooijberg, 2016). The major company relationship issues have been with the general public both in Australia and globally.

The corporation has been on the fault side by violating safety and ethical marketing codes and the manipulation of its consumers with deceptive and misleading nutritional claims about the product it offers especially the infant formulas (Broeckx & Hooijberg, 2016).

Stakeholder theory adopted by Edward Freeman is basically a theory of Corporation management which is based on business ethics and morals. The theory basically attempts to shed light on who really counts in the overall success of the organization. Ideally, it's the owners or shareholders who really count and Nestle has a fiduciary duty by shareholders needs first with a sole reason of increasing value (Broeckx & Hooijberg, 2016). However, this is not always the case, since the theory asserts that, other parties other than shareholders can affect the long term survival of the organization. Hence, Nestle have used this theory to value its employees, customers, trade associates, financiers for the overall success of the Corporation.

The Baby Formula Scandal and the Boycott Launch (Company and Crime)

A significant boycott was staged in July 1977 in the United States against Nestle Company. The boycott spread across Europe in the early 1980s, and the primary concern was about the corporation aggressive marketing of one of its primary products. Breast milk substitutes especially in less developed countries and particularly among the less fortunate mothers in the society were at the center of the boycott launch (Beath, 1983). The organizers of the boycott categorically stated that the substitute of the breast milk is not recommended for infants' health.

Various groups including the International Baby Food Action Network and Save the Children argued that, the marketing and promotion of the baby formula over breastfeeding was the primary cause of infant deaths in many developing countries (Beath, 1983).They based their arguments on the possible problems that could arise when poor mothers in less developed countries switched to the formula as a substitute. First, the organizers of the boycott argued that the sanitation under which the formula was used was not healthy. The formula must be mixed with water, which is mostly impure and not portable in less developed counties hence causing infections among vulnerable infants.

Due to the low literacy rates in developing countries, many were not aware, particularly mothers, the sanitation procedures that are required in the preparation of the bottles (Beath, 1983). Moreover, even the few mothers who were conversant with the English language were not in a position to educate their fellow colleagues on how to mix the formula. Some of the mothers were in a position to understand the health and sanitation prescriptions and standards needed, and they mostly do not poses the means to perform such standards and prescriptions (Beath, 1983). For instance, means of fuel to boil the water for the formula or a reliable electric light that can enable sterilization of the formula at night.

Notably, UNICEF has estimated that children that were fed the formula under unhealthy condition associated with unclean water are between 6 and 25 times likely to lose their lives as a result of diarrhea than children that were directly breastfed (Beath, 1983). Another issue was the nutritional concern. Many less fortunate mothers in developed countries use less powder than is recommended for the sole reason of making a container of the formula to last longer. Hence it is making some of the babies to fall short of nutrition from the weak solution of the baby formula (Beath, 1983). As a matter of fact, breast milk has got many advantages that are not in the formula, antibodies and Nutrients are passed from the mother to the baby whereas hormones are released in the mother's body.

Babies that are naturally breastfed are actually at a safer health position in various varying degree from different types of disorders like the ear infection and respiratory issues. Breastfed milk has the recommended quantity of nutrients that are important for brain and nerve developments. The connection that exists between the baby and the mother can be adjusted during breastfeeding (Beath, 1983).

The outcome of the Boycott Launch

The outcome of the Boycott impacted negatively on the company's image since many universities, colleges and schools in Australia banned the sale of the Corporation products from their vending machines and shops. On the other hand, Nestle management reacted promptly by changing how it marketed its infant foods, especially in developing countries. If the boycott launch had attained its objectives, it would have been no longer necessary. This is because; the Corporation rejected the milk actions and maintaining its full compliance with Federal Food and Commodities Act (Beath, 1983). The Corporation management undertakes annual audits on W-H-O code compliance with a sample of its products and investigates any substantial negative claims. The corporation maintains that many of the allegations that led to the Boycott are unsubstantiated.

Specific Legislation, (Federal Food and Commodities Act) and Other Laws

As at the year 2013, the boycott was coordinated by the International Nestle Boycott Committee and since the corporation operations are closely regulated by the International Baby Food Action Network (IBFAN), which regulate more than 200 countries, making Nestle, not an exemption (Beath, 1983). Since Nestle Australia has its headquarters in Australia, the regulation and monitoring are the mandates of the Australian Confederation.

The confederation has put in place the Federal and Commodities Act with the sole reason of protecting the final consumers in accordance with article 97 of the Australian Constitution (Beath, 1983). These laws strictly regulate the corporation activities especially on the preservation of the milk supply. The trend of mothers relying on a free-supplied formula in maternity wards mostly meant that many mothers lose their abilities to make their own milk and as such must purchase the formula. Advocacy organizations, groups and various charities have questioned Nestle Corporation of their unethical techniques of promoting the baby formula over breast milk to less fortunate mothers in less developed countries (Beath, 1983).

For instance, IBFAN argues that Nestle supply free formula samples to various health centers and after leaving the health centers, the formula is no longer free, but since the supplement has already interfered with lactation, many families have no option but to purchase the formula. Moreover, IBFAN also have staged allegations that Nestle uses humanitarian aid to establish new markets and therefore does not have proper labels in appropriate languages for various countries where their products are sold.

Besides, the company also offers sponsorship and gifts to induce health workers to promote their products (Beath, 1983). Frequent breastfeeding can lead to the delay of fertility in mothers, which in turn is essential for women in developing countries to plan their births. World health organization (W-H-O) has placed great emphasis that; the majority of cases, infants should be breastfed for a period of six months and given supplementary diet in addition to breastfeeding for up to 2 years or so (Beath, 1983). The law on different food and commodities which are found in this act contains necessary regulations that apply to all food industries in Australia, and Nestle Australia is not an exemption (Martin, 2010).