Multinational Corporations and the Impact of Public Advocacy on Corporate Strategy: Nestle and the Infant Formula Controversy

408 Pages·1994·20.68 MB·English

by  S. Prakash Sethi (auth.)

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Issues in Business Ethics
VOLUME 6
Series Editors
Brian Harvey, UniversityofManchester, u.K.
PatriciaWerhane, UniversityofVirginia,
U.S.A.
Editorial Board
BrendaAlmond, UniversityofHUll, u.K.
AntonioArgandona, lESE, Barcelona, Spain
William C. Frederick, UniversityofPittsburgh,
U.S.A.
Georges Enderle, UniversityofNotre Dame,
U.S.A.
Norman E. Bowie, UniversityofMinnesota,
U.S.A.
Henkvan Luijk, Netherlands Schoolof
Business, Groningen, The Netherlands
Horst Steinmann, UniversityofErlangen
Nurnberg, Germany
Multinational Corporations and the
Impact of Public Advocacy on
Corporate Strategy
Nestle and the Infant Formula Controversy
by
S. Prakash Sethi
8aruch College
The City University of New York
~.
"
Springer Science+Business Media, LLC
Library 01 Congress Cataloging-in-Publication Data
Sethi, S. Prakash.
Multinational corporations and the impact of public advocacy on
corporate strategy : Nestle and the inlant formula controversy/by
S. Prakash Sethi.
p. cm. - (Issues in business ethics ; v. 6)
Includes bibliographical references and index.
ISBN 978-94-010-4611-4 ISBN 978-94-011-1394-6 (eBook)
DOI 10.1007/978-94-011-1394-6
1. Nestle. 2. Baby foods industry - Developing countries.
3. Infants - Developing countries - Nutrition. 4. Infant
formulas - Nutrition. 1. Tttle. II. Series.
HD9015.S93N387 1994
338.7'66462'091724 - dc20 93-32157
CIP
Copyright © 1994 by Springer Science+Business Media New York
Originally published by Kluwer Academic Publishers, New York in 1994
Softcover reprint ofthe hardcover Isi edition 1994
AII rights reserved. No part of this publicat ion may be reproduced,
stored in a retrieval system ar transmitted in any farm ar by any
means, mechanical, photo~copying, recording, ar otherwise. without
the prior written permission 01 the publisher, Springer Science+Business
Media,LLC.
Printed an acid-tree paper.
Contents
Preface ix
PartI- TheSetting 1
Chapter 1: The Infant FormulaControversyatCenterStage 3
Chapter2: The Societal Contextofthe InfantFormulaControversy 13
Chapter3: The InstitutionalContextofthe InfantFormulaControversy 27
Part /I - The Gathering Storm 43
Chapter4: Sowingthe SeedsoftheControversy:The European Scene 45
Chapter5: TheControversyComesto the United States 59
Chapter6: TheActivistsThrow Down theGauntlet- The Kennedy
Hearings and itsAftermath 75
Chapter7: The DriveToward Code Enactment- The Post Kennedy Era 93
PartIII- Issuesand Institutions 109
Chapter8: Health, Medical, and ScientificAspects oftheControversy 111
Chapter9: Worldwide Infant FormulaSales, Markets, and Industry
Structure 125
Chapter 10:The Industryand MajorManufacturers Involvedinthe
Controversy 137
Chapter 11:MajorReligiousandActivist Groups Involvedin the
Controversy 155
PartIV- Escalation ofthe Conflict 169
Chapter12: WHO's InvolvementintheControversy 171
Chapter 13: Dynamicsofthe Passageofthe WHOCode 181
Chapter 14:The Sole NegativeVote bythe U.S.:The Impactof Ideology
and Domestic Politics 197
PartV- DriveToward ResolutionoftheConflict 215
Chapter 15: Nestle Coordination Centerfor Nutrition, Inc. (NCCN): Nestle's
Change in Organizational Structureand Strategiesto Deal
with the Boycott 217
Chapter 16:"Winning"the Methodists:The Last MajorBattle-groundto
Enlistthe Religious Community's Supportforthe Boycott 243
v
vi MNCs ANDTHEIMPACTOFPUBLIC ADVOCACY
Chapter 17:Nestle InfantFormulaAuditCommission (NIFAC):ANew
Modelfor Gaining External LegitimacyforCorporateActions 263
Chapter18:Settlementofthe Dispute andTerminationofthe Boycott:
Discussions Between INBC/INFACTand Nestle- UNICEF
inthe Roleofan HonestBroker 291
PartVI-LessonsLearned and Unlearned 319
Chapter 19:TheLessonsofAccountability- Third World Governments:
Expectationsand Performance- WHO's Non-Existent
Monitoring 321
Chapter20: Code Compliance bythe InfantFormula Industry:The New
Nestle- The MoreThingsChange, The MoreThey Remain
The Same 335
Chapter21:Emerging Modesof Business-SocietyConflict Resolution-
AnAssessment 355
Bibliography 385
Index 399
This BookisDedicatedtothe memoryof
FatherTheodore V. Purcell, S.J.
He was adedicated scholarand a
compassionate human being who always
stroveto searchfortruth with purityof
motivesand integrityof means.
Preface
This book has been a labor oflove, and has been lovingly labored at, for a
period that has stretched for almost 10 years. And yet, this has been by far
the most difficult, and physically and emotionally exhausting research pro
ject I have ever undertaken. The infantformula controversy has touched so
many people, institutions, and nations at somany differentlevels, thatcom
ing to grips with the scope ofthe problem, defining its dimensions, and es
tablishing causative and associational linkages becomes at once a highly
complex and a dauntingly difficult proposition.
From its very inception, in the late 1960s, when the potential association
betweenbottle-feedingand infantdiseasesand deathsfirst penetratedpublic
consciousness in a significantmanner, the issue has been highly emotionally
charged. At the same time, the infant formula controversy has been mired
in charges and countercharges ofabuse of scientific and medical research,
unethical and immoral behavior, exploitation of the poor and uninformed,
and a suspicion ofhidden agendaon the partofopposing parties. Each side
is able to parade an impressive group of scientists, public health experts,
and physicians, all with vast experience ofworking with the people of the
Third World. And yet, there has been a problem in sorting out the elusive
truths about the controversy. To wit, most ofthose who have had the best
exposure to somefacet ofthe problem are disqualified for that very reason.
Usingtheirparticularprism, they view allalternative explanationsas biased
and tainted. One group argues for an objective, nonpartisan basis for eval
uating field research data. Other groups, however, dismiss such statements
by asserting that no science can be truly objective and value neutral, and
that those advocating it, subscribe at best to a particular value orientation.
As is wont in the case ofmost questions ofpublic policy, a discussion of
the infant formula issue is further complicated by economic, social and re
ligious, and national and international political perspectives. At the institu
tional level we have the infant formula industry and its constituent compa
nies, largely multinational corporations, contending that they sell a safe
productto mothers whoare in needofit, and have, inany case, freely opted
to purchase it for their own health and/or socioeconomic reasons, and gen-
ix
x MNCs ANDTHEIMPACTOFPUBLICADVOCACY
erally under the advice and support oflocal health care personnel. The op
ponents encompass a wide variety of groups. They include scientific and
health care personnel, social and community health workers and organiza
tions, as well as national public health agencies and medical bodies. They
also include public interest groups, both religious and nonsectarian, who
gave the controversy its moral fervor and organizing skills, thereby setting
this controversy into a category unto itself.
This controversy also marked the coming of age of international social
activism where groupsfrom the United States were able to build strongnet
works with their West Europeancounterparts and also establish operational
bases inThirdWorld countries. Anaddedelementhas beenthe involvement
ofmost ofthe world's national governments and a number ofinternational
organizations, such as the World Health Organization (WHO), and United
Nations International Children's Emergency Fund (UNICEF).
I first started work on the infant formula project in early 1976 as part of
an ongoing effort to study the impact ofcorporate activities on the environ
ment and other sociopolitical institutions. My interest in these issues arose
out ofmy emotional attachment with people in the Third World since I was
born in Indiaand spent a part ofmy adult life there. I was equally attracted
to the issueforintellectual reasons. Theinfantformulacontroversyprovides
a microcosm ofthe types of issues and players that are likely to dominate
debate and action in the public policy arena in the coming decade as it per
tains to the role oflarge multinational corporations in society.
The initial effort was reflected in a joint article with Dr. James Post of
Boston University. However, after a year's work it became apparent to me
that it was impossible to undertake research as such on this issue with any
degree ofobjectivity and impartiality. Whether one liked it or not, one was
either tagged as having been co-opted by the corporate critics and thereby
labeledasan "activistscholar." Or, alternately, he/she was taggedas having
been duped by the industry and had thereby become its unwitting mouth
piece. The problem was further compounded by the fact that a substantial
portionofthe datahad tocomefrom partieswhohadacontinuingvitalstake
in the outcome ofany research in terms ofwhether it would support or un
dermine their respective positions orpreferred solutions. Forthese reasons,
I decided to refrain from writing or publishing anything on the subject until
such time that the issues had either been resolved or at least matured to a
point where reasonable people could share information, exchange ideas, re
flect on the events, and draw some conclusions as to their implications.
Late in 1983, two years after the passage ofthe World Health Organiza
tion (WHO) Code, Ifelt thatthe situationhadcalmed downto anextentthat
an attempt could be made to take a comprehensive look at the issue. I per
ceived the research design to have three important elements. The first step
had to be the development ofan analytical framework that would allow for
a dynamic study ofthe events as they would unfold in order to understand
PREFACE xi
cause-effect relationships. The situational dynamics created the two other
necessary elements ofmy research design. I had to have access to primary
data showing the internal processes by which decisions were made by vari
ousgroups asevents unfolded and various parties responded to each other's
actions-reactions. Such data would also shed light on how the group inter
actions impacted the sociopolitical environment and public perceptions and
changesinthe natureoffutureoptionsavailabletovariousparticipants. This
was especially necessary for three reasons: (I) throughout the controversy
it had been obvious to me that there was a large gap between public pro
nouncements ofdifferent parties as to what they would consider an accept
able proposition as a bargainingploy versus what were their realistic expec
tations; (2) those expectations had changed over time as a consequence of
changes in the external environment; and (3) the strategies and tactics were
pursued by various groups during different phases ofthe controversy.
I was indeedfortunate inenlistingthecooperation ofalmostall the major
groups and principal participants. I received access to most ofthe internal
information, including confidential documents, strategy papers, and records
and minutesofmeetings previouslynotmadepublic. Bythetime Iwas ready
to start work on the project, the archival data alone had become a stack of
reports and publications that occupied eight four-foot-wide drawers in two
filing cabinets. The primary dataalone, however, were notsufficienttofully
understand the dynamics of social conflict. The written record, even in its
raw form, presents a rationalized and often sanitized version of events.
However, itdoes notexplain the thoughtprocesses and reasoningemployed
by different actors as they were making real-time decisions. Thus, to sup
plement the archival data, I conducted over 250 hours of taped interviews
with more than 40 individuals representing various constituencies and insti
tutions.
My first and by far most difficult task was to enlist Nestle executives'
cooperation on this project. Moreover, given Nestle's earlier experience
withoutsiders, itwas notcertainwhetherexecutivesatNestle, S.A. inSwit
zerland, could ever be dissuadedfrom theirsiegecomplex and persuaded to
release inside corporate information orgive interviews on record. My even
tual success in securing Nestle's cooperation for this project was due pri
marily to the efforts ofthe late Mr. Rafael D. Pagan, Jr., then president of
Nestle Coordination Center for Nutrition, Inc. (NCCN), in Washington,
D.C. Early in 1984, there was visible movement toward the settlement of
the infant formula controversy, and Nestle had become more flexible and
forthcoming. It was through Mr. Pagan's efforts that the parent company's
executives were persuaded to cooperate in this project. He alsogave me his
support, starting with on-the-record taped interviews lasting more than 20
hours and spread over 12 months. I received similar cooperation from the
threeotherseniorexecutivesand topstrategistsatNCCN, namely, Dr. Thad
Jackson, Mr. John O. Mongoven, and Dr. Niels Christiansen. In addition,