Child labor, bribery, a disregard for the environment and unhealthy products. One
of those issues would be enough to erode consumer and shareholder confidence in a
major transnational company. Nestle, the world’s largest food and beverage company with more than 8,000 brands, has faced
continuing criticism over the years for all four.
MBA students from Auburn University’s Harbert College of Business and other leading business
schools were asked to assess the validity of the ethical problems faced by Nestle
and offer specific recommendations for how the company should act during the National MBA Case Competition in Ethical Leadership hosted in November by Baylor University’s Hankamer School of Business.
Auburn’s four-member team placed second and earned a $1,200 award. Baylor won the
competition, while Iowa State University placed third. Other competing schools included
Brigham Young University, Case Western Reserve University, Pepperdine University,
Texas A&M, Texas Christian University, the University of Illinois, Miami, Pittsburgh
Auburn’s team of Peyton Alsobrook, Scott Dukes, Ian Mercer and Chantel Tremitiere
took a methodical approach in evaluating the claims against Nestle. Peter Stanwick, associate professor in the Department of Management, served as the team’s advisor. Teams received the case at 10 a.m. on a Thursday and
presented 24 hours later.
“We approached the case with a blank slate,” said Dukes, who earned an individual
award for best Q&A. “We didn’t make any assumptions about Nestle and whether or not
it was acting ethically. We spent our first two hours researching each of the four
claims and found that three of them were not valid.”
The Swiss-based company has received criticism for sourcing cocoa from Ivory Coast
farms that have utilized child labor, bottling water in California in the midst of
a record drought, offering bribes to Chinese medical professionals to promote its
baby formula to new mothers, and creating health problems through some products (candy)
that it remedies through others (health foods).
The Harbert College team determined that Nestle has attempted to combat child slavery
in its supply chain. Nestle was the first company to join the Fair Labor Association
in 2012. By the end of 2016, all of its cocoa farms will be FLA-certified. Dukes said
concerns about Nestle’s bottled water operations in California were also unfounded.
The team determined that the company’s operations in the state used less water annually
than two golf courses.
Dukes said they determined that Nestle’s most problematic ethical concern involved
its tactics in marketing and selling Nestle-brand baby formula in China. “Even though
most competitors were also offering bribes to Chinese doctors, the fact was a clear
violation of Chinese law and misinformed millions of young Chinese mothers,” he said.
“Our advice to Nestle was blunt: Stop! Instead, we recommended Nestle move to selling
baby formula online, direct to consumers.”
The team’s research found that online retail sales (including the sale of baby formula)
were booming in China and that, by 2019, 40 percent of the country’s retail transactions
would take place with the help of a phone, tablet or computer. “Our recommendation
allowed Nestle to simultaneously avoid unethical business practices and stay ahead
of shifting consumer demographics and trends,” Dukes said. “In the long run, this
move would encourage ethical business practices and generate more revenues for the
The team also recommended Nestle appoint a corporate-level ethics officer and offer
ethics training to each of its 340,000 employees. “Finally, we pointed out that Nestle
continues to do great philanthropic work around the world,” Dukes said. “If the company
would market its brand better, it could change the undue negative perceptions from
The second place finish at Baylor marked another strong showing from a Harbert College
of Business team in a national case competition. In September, the team of Alsobrook,
Tremitiere, Akira Powell and Beatrice Onadeko earned second place and $15,000 at the National Black MBA Association Graduate Case Competition in Orlando.
“Our high finishes are a great testament to our selection process of MBAs, and the
MBA program,” Stanwick said. “Our success in these types of competitions just reinforces
my belief that we have great MBA students and a great MBA program.”