Published on Wednesday, April 12, 2006 by OneWorld
Investors Target Hershey Over Child Labor on Cocoa Farms
by Abid Aslam
WASHINGTON - Investors concerned about illegal child labor on West African plantations are demanding that Hershey Co. spill the beans on where the candy maker gets its cocoa.
Rights group Global Exchange, which holds 80 shares of Hershey stock, is putting the demand to a vote at the company's April 18 annual shareholders meeting in Hershey, Pennsylvania.
The San Francisco-based rights group said its demand for disclosure is aimed at determining whether Hershey buys cocoa from Cargill Inc., Archer Daniels Midland Co. or Nestle Co. The agribusiness majors are contesting a separate federal lawsuit alleging they share some blame for child and forced labor on cocoa plantations in Ivory Coast, which alone supplies 40 percent of the world's cocoa.
''Illegal child labor is a major problem at cocoa farms in the Ivory Coast,'' said Kirsten Moller, Global Exchange's executive director.
''Global Exchange and other Hershey shareholders need to know if the company's cocoa is being purchased from these farms, and if Hershey is at risk of adverse publicity or lawsuits if there's a chance that illegal child or slave labor is involved,'' Moller added.
Hershey has stated its opposition to the resolution, saying its list of suppliers is subject to business confidentiality and that revealing it would jeopardize the company's competitive standing. The firm also has said it takes part in industry-wide efforts to ensure cocoa is free of child and worker exploitation.
Global Exchange acknowledged that the U.S. chocolate industry had agreed to undertake voluntary efforts to root out child labor on cocoa farms following revelations by West African and international anti-slavery groups that children barely old enough to enter primary school had been sent to toil as farm hands and porters.
Those efforts broke down last year, the group said in a statement, and ''the industry failed to come up with a system for monitoring and certifying that U.S. chocolate products aren't made using forced child labor.''
Ivory Coast's Child Labor Monitoring Project reported last December that children continue to be pressed into slave-like work on cocoa farms some five years after their plight, exposed by rights groups, became the stuff of award-winning journalism. Competing reports have asserted, however, that the abysmal conditions now represent an aberration rather than the norm in the war-divided country.
Global Exchange's proposal is unlikely to win a majority of shareholder votes Tuesday, not least because the Hershey Trust Co., a charity hostile to the disclosure proposal, holds around three-fourths of the company's stock.
Indeed, relatively few shareholder resolutions opposed by management at U.S. firms have garnered majority support--even at the height of the post-Enron investor backlash against financial and other shenanigans in corporate America's board rooms and executive suites.
Shareholder resolutions remain advisory--not binding--even if most shareholders back them.
Even so, the proposals have been a favored weapon in the arsenals of activist investors ranging from multibillion-dollar public and labor-union pension funds to religious and human rights groups with only a few dozen shares.
That is because companies are forced to spend time and money fighting shareholder proposals, which also can generate negative consumer and media interest.
The proposals can be such a nuisance for company management that if one merely wins enough votes to earn a spot on the agenda for next year's annual shareholder meeting, many firms opt to sit and reach a compromise with the measure's sponsors rather than face a rerun of this year's fight.
Shareholder resolutions also serve as a warning flare to the relatively small but rapidly growing community of so-called ''socially responsible'' investors seeking firms that have not run afoul of religious, social, labor, and environmental mores.
Socially responsible investment has grown faster than the entire universe of managed assets in the United States over the past 10 years, according to industry group the Social Investment Forum.
Total socially responsible assets rose more than 258 percent from $639 billion in 1995 to $2.29 trillion last year while the broader universe of assets under professional management increased less than 249 percent from $7 trillion to $24.4 trillion over the same period, the organization said in a report.
Global Exchange said it hopes Hershey and other confectioners will agree to buy their cocoa beans from farms that are ''Fair Trade'' certified--meaning that independent auditors have affixed their seal of approval to the beans as having been produced in keeping with decent labor and wage standards.
Fair trade coffee, once the domain of a handful of gadfly roasters, has become a mainstream commodity thanks to users ranging from supermarket chains to Starbucks Coffee Co., Allied Domecq's Dunkin' Donuts unit, and McDonald's Corp.
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