23rd May 2011

MPs' committee criticises Kraft boss over refusal to attend takeover hearings

A House of Commons select committee has released a critical report about Kraft's conduct in the wake of its takeover of Cadbury in 2010.

Though couched in the careful language of officialdom, Is Kraft working for Cadbury? reveals the frustration of MPs when Kraft CEO Irene Rosenfeld turned down repeated requests to appear before the committee to answer questions about the controversial acquisition.

The areas that principally concern this Committee in relation to Cadbury are Kraft's company strategy and its intentions with regard to UK jobs, and it is Irene Rosenfeld, as its Chief Executive Officer and Chairman, in whom Kraft has invested the principal authority to make announcements on such matters. For that reason, we believe that she should have made herself available as her company's principal witness. The manner of her repeated refusal to appear before a committee of Parliament demonstrates a regrettably dismissive attitude to a National Parliament—an attitude which we trust Kraft will rapidly take action to shed.
- Is Kraft working for Cadbury? Business, Innovation and Skills Committee

Kraft's written response to the third request for Ms Rosenfeld to appear before the committee in February 2011 stated that "the repeated demands for Ms Rosenfeld to appear in person are regrettable." It went on to say that "on the experience of last year's hearing and recent comments by some Committee members, there seems to be a desire to have a 'star witness' towards whom ill-founded allegations and insults can be made, with little or no attempt to discuss the facts and look rationally into the evidence."

The MPs described this as a "total misrepresentation" of their reasons for inviting Rosenfeld, adding that: "The description of the committee's 'motive' for inviting Ms Rosenfeld in our view fell short of an explicit contempt of the House, but not by much."

Kraft had been criticised by the Takeover Panel in 2010 for promising to keep Cadbury's Somerdale factory near Bristol open, and then backtracking on this pledge a week after the takeover.

However, the Business, Innovation and Skills Committee report is positive about many of Kraft's actions since the takeover.

It would appear from the evidence given to us that Kraft is currently honouring the undertakings given to our predecessor committee and is committed to investment in Cadbury. We were especially encouraged by continued investment in Bournville and recruitment into research. Given the particular responsibility Kraft has to Cadbury employees following the Somerdale episode, we trust that this approach to investment will continue.
- Is Kraft working for Cadbury? Business, Innovation and Skills Committee

The two areas of outstanding concern for the committee are Kraft's commitment to its UK brands given that Cadbury's marketing functions have been transferred to Zurich, and the company's lack of clarity or consultation with union leaders about pay and conditions for workers.

So far, Kraft appears to have honoured most of the spirit and letter of the undertakings that it gave to the previous Business, Innovation and Skills Committee, although we are concerned about the upcoming pay harmonisation and the shift of marketing management to Zurich. However understandable the latter might be, it does not sit entirely comfortably with the commitments to manage brands out of the UK.

- Is Kraft working for Cadbury? Business, Innovation and Skills Committee

The Kraft takeover last year kicked off a government review of foreign takeover rules and even led to talk of a "Cadbury Law" to protect British firms from predatory takeovers. A proposal to raise the shareholder voting threshold to two-thirds in order for a takeover to be approved made its way into Labour's election manifesto, but there seems to be little interest from the current coalition government.

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