International Business Policy

An Ethical Perspective

Who Won the Danone Boycott?

Is it ethical to close a profitable plant?

Does it feel bad?

Is it wrong?

Does it harm others?

?

Here you raise an ethical dilemma!

Here you justify your interest!

Does it feel good?

Is it right?

Does it do good to others?

The chronology of crisis: Jan. 2001

Jan. 11-24 2001: restructuring plan leaked; Danone refuses comment; strikes break out in biscuit plants; politicians call for laws against firings.

Jan. 25: Danone affirms it will behave in a way both « economic and social » but refuses to outline plans until April; files judicial action to uncover source of leak.

What does Danone’s communication signal?

What is the message of his adversaries?

The chronology of crisis: March 2001

Early March: Low score for Communists in elections encourages hard-liners to make Danone an issue. Labor unrest grows.

March 29: Danone reveals restructuring plan: will close 2 factories (not seven), cut 500 jobs in France; announces extraordinary social measures. Retailer Marks & Spencer brutally closes Paris store.

What does Danone’s communication signal?

What is the message of his adversaries?

The chronology of crisis: April 2001Early April: Boycott launched by Mayor and Communists in Calais. Socialists, Greens, anti-globalists join. Business leaders and market analysts support Danone. Major media are skeptical boycott can succeed.

April 18: Danone sues Internet protestors.

April 20: Copycat boycott in Hungary.

April 23: Protestors win court protection for Internet critiques of Danone.

Questions on the latest eventsIs Danone in control or just reacting… In its actions? In its communication?

What messages is Danone creating… Explicitly? Implicitly?

The chronology of crisis: May 2001May 3: Libération reports output down and unsold inventories up at Danone plant (source: union)

May 18: Business press reports boycott has driven down Danone sales 10-20% (source: anonymous)

May 29: Danone CEO Riboud faces shareholders at annual meeting. Stock down 20% since January. Public approval of brand down 60%. All advertising for new products is suspended.

Assignment for group work

You are Franck Riboud, CEO of Danone, and you must prepare a statement for the shareholders.• The fall in your stock has scared investors and made Danone a target for predators. • Rumors of a decline in French sales in April were true. Labor unrest hurts biscuit operations. This information will not be public for several months.• However, reported Group results are superior to guidance previously provided to the markets. This offsets local impact of the boycott on French sales.

How much should you reveal to shareholders? How will you calm the crisis and move on?

Franck Riboud’s Story, May 29 2001 • “We will leave no one by the side of the road”: Restructuring will continue and will be compassionate.

• Boycott had no impact on group sales, up 7% worldwide in April despite halt to all advertising and promotion in France.

• Key quote: “The storm is over.”

The markets react

Paris stockbroker: “There were rumors that sales had been hit by as much as 10% by the boycott, and the fact that this is not the case is good news for investors.”

Deutsche Bank analysts: “Danone confirms… that there has been a very limited impact from the consumer boycott…Industrial disruption should likewise be minimal.”

Danone stock rebounds

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The media and public accept…• Boycott ends following Riboud statement

• Leading media agree with daily Le Figaro: “In this battle Danone lost its image as a socially responsible enterprise and is working to regain it. But the impact of the boycott and the labor crisis on the company's results was minimal….”

Danone’s credibility in questionJuly 2001: Danone prelim H1 data show that like-for-like growth in France fell to 0.8% from 6.3% in 2000. Analysts underline “disruptions” from restructuring 

August: CSFB says it does “not entirely understand” how Danone met predictions, adds: “We do not believe that Danone has resolved its difficulties in French biscuits”

October: Danone publicly admits boycott impact on sales, labor actions; French sales down 4% through Q3

November: Analysts again warn on “labor unrest”; stock is down nearly 25% since June, 10% since crisis peak

Danone stock affected

What did Danone lose? They wanted to please the shareholders and obtained the opposite

result

They lost the Internal social consensus and trust with employees

They weaken the internal leadership of Frank Riboud

They lost a lot of trust from financial analysis

They affected their image as a responsible company in the public

(consumers, internet users, activists, etc.)

They lost their symbol of an “economic and social project” among the

political actors

…

Did Danone really win the boycott?

What did they do to lose what they lost?

End-of-pipe communication

Danone top management took the decisions that they believe was good for them and then communicated to have these decisions appreciated by their stakeholders.

Communication is perceived as telling a story. Non-communication is perceived as hiding information

detrimental to the public Attacking your opponents may nurture them and motivate

others Winning against your opponents may mean losing against your

image and your customers

What could Danone have say? “Employees are our most important assets. They are the one who create the wealth

of our company. Our profitability first depends on them” “Danone is not used to impose inhuman restructuring. We have no such intentions” “There is a participative process taking place within the group in order to decide

about the best way to carry on our economic and social project” “We understand there can be dilemmas between profitability and employment. It is

precisely to solve these dilemmas together that we discuss them internally” “The boycott did have a genuine impact, upon our relation with our customers and

our employees. But we believe it will have a negligible impact on out shareholders.”

Communication can also be a dialogue where concerns of all actors are debated. It then participates in shaping the context in which

decisions are taken.

Communicating before deciding or after? It reveals whether you really want to involve your stakeholders

How would you react when accused of some unethical behavior? There is always some lack of ethics to be accused

of. Hence, look for what is true, not for what is false

in the accusation if you want to understand it

A justification will work if and only if there is trust

beforehand, i.e. acceptance of the lack of ethics

Don’t take things personally. The accusation may

have another target

Concluding comments

Trust is long to acquire, but quick to lose

The more the company wants to have control, the more it risks to

oppose its stakeholders, including its customers

A company cannot avoid to position itself on societal issues,

because it can become an actor of the crisis they generate

Can companies be the sole guardians of the balance between

profitability and employment?