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The Kraft takeover of Cadbury has proved to be an event which is likely to shape future public policy towards takeovers and corporate governance. It was marred particularly by the controversy over Kraft's statements regarding the future of Cadbury's Somerdale factory which was earmarked for closure. Kraft's initial indications that it would keep the factory open, which it reversed after gaining control of Cadbury, heightened the public's feelings of mistrust towards Kraft. Our Report scrutinises its handling of the closure of the Somerdale factory, sets out Kraft's future plans for Cadbury and considers the wider implications of takeover policy in light of Kraft's actions.
We are disappointed that Irene Rosenfeld, the Chairman and CEO of Kraft Foods Inc. did not give evidence in person. Her attendance at our evidence session would have given an appropriate signal of Kraft's commitment to Cadbury in the UK and provided the necessary authority to the specific assurances Kraft have now given to the future of Cadbury.
We conclude that Kraft acted both irresponsibly and unwisely in making its original statement that it believed that it could keep the Somerdale factory open. By doing so, Kraft has left itself open to the charge that either it was incompetent in its approach to the Somerdale factory or that it used a "cynical ploy" to improve its public image during its takeover of Cadbury. Its actions have undoubtedly damaged its UK reputation and has soured its relationship with Cadbury employees.
Kraft will now have to invest significant time and effort into restoring its reputation and regaining the trust of the public, its UK workforce, Government and ourselves. Kraft gave us a number of undertakings in respect of the future of Cadbury, which we set out in this Report. These commitments are now in the public domain, and therefore will be subject to close scrutiny over the next few years. We recommend that the Department for Business, Innovation and Skills monitors Kraft's compliance with its undertakings, and particularly those relating to Cadbury's world class Research and Development facilities.
In the wider public policy context, we express our concern that the takeover of Cadbury by Kraft was ultimately decided by institutional investors motivated by short-term profits rather than those investors who had the company's long-term interests at heart.
We welcome the Government's focus on the issue of 'short-termism' in decision-making on the future ownership of UK companies, and its efforts to engage with institutional fund managers as part of the process. We also welcome the fact that the Government and the Takeover Panel are considering a review of the rules and legislation governing takeovers in the UK. However, any review should not be a disguise for protectionism against foreign takeovers. It needs to address all takeover activity, whether entirely domestic or by foreign companies, to ensure that such activity is conducted in the best interests of the UK economy.
We encourage our successor Committee to take up where we have left off and conduct a detailed inquiry into these important issues and into the role of shareholders and managers of companies more generally. It is time to reconsider many aspects of corporate governance.
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