The directors of Swiss food giant Nestle on April 14 approved the appointment of chief executive Peter Brabeck as board chairman. The decision came after shareholders at the company's annual general meeting rejected an attempt to bar Brabeck from holding both posts.
The proposal by an investment fund, Ethos, which was backed by some large Swiss pension funds, and a group of ethical investors, was rejected by Nestle shareholders who controlled 50.55% of the voting rights. Ethos had argued that the separation of powers would have followed "best practice" in corporate governance at the food giant, to maintain independent oversight by the board over management's running of the company.
The practice of combining the two posts has become increasingly frowned upon around the world in the wake of spectacular corporate collapses or accounting scandals.
In a speech at a U.S. college last month, Brabeck said the controversy over holding both posts ignored the "smoothest and most cost-effective division of responsibility for strategy, control and execution" between the board and executive managers. "It is a voluntary mutilation of our corporate governance structure, resulting in a clear loss of global competitiveness on the altar of dogmatic corporate governance ethic," he said in the text released by Nestle.
Joint chief executives and chairs are allowed by Swiss laws on corporate governance and Nestle's previous chief executive Helmut Maucher combined both functions. But Swiss codes also outline the board's role in overseeing the management's running of a company.
Copyright Agence France-Presse, 2005