FT - Lex: Corporate governance

Corporate governance is often a fuzzy concept. But the current war of words at Nestlé shows just how sharply it can come into focus. Peter Brabeck, chief executive of the Swiss food giant, wants to combine his role with that of chairman. Some Swiss shareholders bridle at this concentration of power. Both sides present strong arguments. But the board is swimming against the tide. A Deutsche Bank survey says that only a fifth of continental European members of the FTSEurofirst 300 index have two such positions combined.

Nestlé's proposal to appoint two vice-chairmen as checks to Mr Brabeck's power is unusual. More unusual are reported threats of resignations and a “dark shadow” falling over the company if the management does not get its way. But the tone appears desperate and risks turning a reasonable debate into a damaging row. That is a shame, given the goodwill generated by a strong operational performance in 2004 and the promise of share buybacks. As to governance, one size does not fit all. But the onus is on Nestlé to convince shareholders there is an overwhelming need to buck the wider trend. Dissident voices show they have not done this. And an independent assessment by Institutional Shareholder Services, a US consultancy, backs the rebels. Corporate governance used to be so much “box ticking”. Whatever the outcome at Nestlé, it is good to see shareholders are ticked off about this issue.

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