Translation - original was given in French
 

Thank you Mr Chairman, Ladies and Gentlemen.

Allow me first of all to say to the majority of you how important and right your decision is. It is reassuring and encouraging for the Board of Directors and the Executive Board, because it is in the interest of the future of your company.

The proposal you have just rejected would have deprived the Board of Directors of a vital part of its freedom to act. The principal and most important task of a Board of Directors is to determine the personal composition and structure of a company’s executive management and to do so freely and pragmatically within the scope of the law and the Swiss code of corporate governance. To voluntarily limit its flexibility would have constituted a serious strategic handicap for the future, and would have hindered the way in which the company functions. This is why we fought energetically against these proposals.

Nevertheless, I cannot deny that the result of the vote is somewhat disappointing and merits some comment on my part. A number of important shareholders were in favor of adding a clause to the Articles of Association of your Group that would have made Nestlé the only large company in the world to be operating with voluntary and severe restrictions in its corporate governance. Restrictions which are not required either by the law, any code of best practice, or the stock exchange regulations, precisely because the legislators, the head of the stock exchange and the regulators all acknowledge that the combined role of Chairman and CEO can be a perfectly justifiable, and even necessary, solution in certain circumstances. Why pick Nestlé to make an example of, when Ethos was an official and active member of the group charged with drafting the Swiss Code of Best Practice in this area and publicly endorsed the results? It is legitimate, therefore, to question the motives behind the move.

Given that the main objective of pension funds is to manage the money entrusted to them by employers and employees efficiently, in order to secure their retirement, they certainly have the right and the obligation to be concerned about the performance of their investments. But does Nestlé's performance justify the arbitrary and long-term negative effects of such a clause for our company?

Average organic growth of 5.7 percent over the last 10 consecutive years not only significantly exceeded the growth of the industry as a whole, but also refutes the claims of all those who say that Nestlé is only able to grow through acquisitions, since these only added an average of 1.7 per cent to our growth. The chart also shows you how our sales have suffered from the negative impact of exchange rates, a factor that management clearly cannot influence.

With regard to operating profit, we have consistently and sustainably improved our margins from 10.4 percent to 12.6 percent over the last ten years with the sole exception of 2001, which was due to a change in accounting rules.

This comparison shows that, today, Nestlé is the undisputed world leader in the food industry, and that the combined effects of higher sales together with a sustainable improvement in profitability year after year have resulted in the growth of operating profit surpassing in absolute terms that of all our competitors throughout the world.
I can therefore say with pride that the returns your management has delivered to the pension funds and to its shareholders are nothing to be ashamed of, and the performance of the Nestlé share bears witness to this.

I would like to add a personal word at this point. It was not my wish that the Board of Directors assign the dual responsibilities of Chairman and CEO to me. Given the circumstances, I accepted it for very precise reasons. Until now, we have worked together in perfect harmony because both the Chairman and the CEO were intimately familiar with Nestlé, its strategy and the way in which it functions. But, as you know, we are in the middle of a strategic transformation of our Group, and are currently implementing the first stage. The entire Board of Directors thus considered any lack of continuity in the execution to be detrimental for the company in the long term. The appointment of a Chairman and CEO unfamiliar with this strategy would have either deprived one of the functions of its significance and rendered it purely symbolic, or it would have endangered or delayed the implementation of this strategy.

Allow me in addition to explain why I publicly announced that I would step down, if Ethos and the pension funds received more than 50 percent of shareholder votes. Contrary to what has been reported in the press, this was not in any way meant as a threat and much less as a way of putting pressure on the shareholders, but simply the natural consequence of the proposed decision. If the AGM had voted against me, it would have been normal for me to acknowledge and accept the majority decision of the shareholders. The rules of corporate governance are clear: it is the inalienable role of the Board of Directors to decide how to organize itself. If, when faced with such a decision, shareholders are not in agreement and decide to limit the Board of Directors in exercising its main function, I am obliged to respect the wishes of the shareholders. If, therefore, things had turned out as some had wished, I would have considered the vote to be one of opposition and would have drawn the appropriate conclusions as a sign of respect for the democracy of the shareholders.

Ladies and Gentlemen, I acknowledge that the public discussion and the decision that followed it have been extremely useful, and I can assure you that your Board of Directors will now carefully analyze the opinions you have expressed in recent weeks. Your comments will also form the basis of our decisions regarding the composition of the new Board of Directors and, over the coming months, we will take into consideration all constructive recommendations for further improving our corporate governance. Nestlé has always enjoyed an excellent reputation in this area, and we are determined to maintain this reputation.

Your decision, Ladies and Gentlemen, will enable the Board of Directors to appoint me Chairman of Nestlé. I view this as a great honor, and would like to thank you for the trust you have placed in me. I will accept this mandate, but not without a certain sense of disappointment at the circumstances in which it came to pass. I do not believe that the results I have achieved during my years of operational management, or the quality of the work carried out by your Board of Directors and the Group's management team, merit the suspicion inherent in the proposals put forward by Ethos and its supporters.

My 38 years of working for your company speak for themselves. I will now endeavor, together with the Board of Directors and my management team to demonstrate by our actions the extent to which the discussion about corporate government was inappropriate and misleading. There is also a further aspect, Ladies and Gentlemen, which is at least as important and in my opinion even more so. It lies in the creation of ongoing, sustainable and profitable value for you, the shareholders. This is my both my mission and that of all the Nestlé team.

Given that the Board of Directors of Nestlé, following long and intense discussions, has arrived at the conclusion that it is preferable to combine the functions of Chairman and CEO for this transition period, I will do my utmost to prove to you that cooperative governance, based on a tradition of trust, loyalty, personal integrity and a strong corporate culture produces results that are infinitely superior to the narrow vision of those who formulated the proposal you have just rejected, and as scheduled we will continue within the Board of Directors to prepare a succession plan which will be ready in the next two to three years.