Nestl� Accused of Violating OECD Guidelines in the UK

Posted to the IUF website 04-Oct-2006

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Nestle is once again in the dock at the OECD, where the IUF, acting on behalf of its UK affiliates, has charged the company with flagrant violations of the OECD Guidelines for Multinational Enterprises in connection with the latest job-cutting exercise in the UK.

The OECD Guidelines, whose provisions and implementation procedures have been accepted by all OECD and other adhering governments, set out clear standards governing the relationship between foreign direct investment by multinational companies and the social, political and human rights context in which they operate. The Guidelines specifically prohibit companies from invoking the threat of production transfers abroad to influence the outcome of collective bargaining negotiations. Nestl�, however, doesn't seem to get it - despite having had their hands burned over the very same issue in Korea three years ago.

In the 2003 Korean conflict, Nestl� locked out workers at manufacturing, warehouse and distribution centers across the country in an attempt to unilaterally impose its restructuring plan on the workforce. When the union failed to submit, Nestl� tried to pressure workers - and the government of Korea - by publicly threatening to transfer production to China.

Through the OECD procedures invoked by the IUF in Korea and in Nestl�'s home base of Switzerland, management was ultimately compelled to enter into the negotiations it initially rejected.

Now they're at it again, this time in the UK, where a long series of management blunders and systematic failure to invest in productive capacity (while handsomely rewarding investors) have led to a loss of market share in confectionery.

Net profits at Nestl� rose by 11.4% in the first 6 months of 2006, beating analysts' expectations and boosting share prices, already riding high on the back of previous buybacks. CEO Peter Brabeck praised the "excellent levels of growth and profit margin."

In early July, Nestl� management informed trade union representatives at the company's UK Rowntree confectionery sites that it would be seeking a 15% reduction in wages and benefits for all Rowntree employees. Union representatives were told that if they did not comply, the future of chocolate production in the UK would be in jeopardy. The unions responded by declaring their willingness to work together with management to examine possible cost reductions.

On August 21, Nestl� management at the York Rowntree facility announced that it would be eliminating jobs as part of the restructuring. Union representatives were also told that certain product lines would be transferred in whole or in part to other Nestl� plants in Europe. On September 20, management announced the figures - 645 jobs would be eliminated at York. These come on the back of 264 redundancies earlier this year at Nestl� Rowntree in York.

At that same meeting, Nestl� management informed employees and trade union representatives that it was unilaterally withdrawing from existing collective agreements setting out terms and conditions of employment. The unions were given 90 days to "negotiate" - provided the result gives Nestl� the reduction in wages and benefits it insists on. Against a background of proposed production transfers and the implicit threat of future transfers, Nestl�'s written notification to employees dated September 20 states: Should agreement not be achieved, new terms and conditions will be applied via a process of termination and re-engagement.

Moreover, since the company has informed union representatives at all UK Rowntree sites of its intention to similarly reduce wage and benefits through the UK Rowntree system, it has effectively used the threat of production transfers to hamper the eventual process of negotiations at the country's three other Rowntree facilities.

By invoking the threat of current and possible future production transfers abroad to influence the outcome of a negotiating process, Nestl� has clearly breached Section IV.7 of the OECD Guidelines, which states that enterprises should:

In the context of bona fide negotiations with representatives of employees on conditions of employment, or while employees are exercising a right to organize, not threaten to transfer the whole or part of an operating unit from the country concerned � in order to influence unfairly those negotiations.

CEO Brabeck has expounded a "Nestl� model" delivering "shareholder value" to investors through double-digit profits, increased dividends and regular share buybacks. The women and men around the world who work in that system have come to know the underside of the model, namely shareholder value through job destruction, in which permanent restructuring and the permanent threat of production transfers are a permanent feature of working for Nestl�.

Through its submission to the OECD representatives in the UK and Switzerland, documenting Nestl�'s violation of the Guidelines for Multinational Enterprises, the IUF aims to pressure Nestl� to abide by internationally recognized rules. The IUF's UK affiliates at the York Rowntree facility - Amicus and GMB - seek genuine negotiations, not corporate ultimatums backed by public threats to move production out of the UK.