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Cadbury defends corporate citizenship record in wake of tax revelations Cadbury defends corporate citizenship record in wake of tax revelations
(3 months later)
A former Cadbury board director has sought to defend the company's record as a good corporate citizen in the wake of revelations about aggressive tax structures used by the sweets and chocolate business before it was taken over by US food combine Kraft three years ago.A former Cadbury board director has sought to defend the company's record as a good corporate citizen in the wake of revelations about aggressive tax structures used by the sweets and chocolate business before it was taken over by US food combine Kraft three years ago.
The former senior director, who asked not to be named, said on Friday: "I believe that we always did the correct thing. But [Cadbury] was run as an international business." He conceded some schemes exposed on Friday by a Financial Times investigation looked "pretty aggressive", but were not out of line with what "a lot of companies did".The former senior director, who asked not to be named, said on Friday: "I believe that we always did the correct thing. But [Cadbury] was run as an international business." He conceded some schemes exposed on Friday by a Financial Times investigation looked "pretty aggressive", but were not out of line with what "a lot of companies did".
The investigation found Cadbury had paid an average of £6.4m a year in tax on profits averaging £100m for the decade before it was taken over by Kraft. Cadbury is now part of another business, Mondelez, after the international snacks business was spun off last year.The investigation found Cadbury had paid an average of £6.4m a year in tax on profits averaging £100m for the decade before it was taken over by Kraft. Cadbury is now part of another business, Mondelez, after the international snacks business was spun off last year.
The chocolate group's chief executive at the time was Todd Stitzer. Other key executives included finance director Ken Hanna, who is now chairman of Aggreko and Inchcape as well as being on the board of Tesco, and his predecessor David Kappler, now a director of Shire and Holiday Inn hotel company IHG. However, insiders said Cadbury's strategy and culture was largely formed by Sir John Sunderland, who spent 40 years in the business, rising to chief executive, then chairman, before his eventual retirement in 2008.The chocolate group's chief executive at the time was Todd Stitzer. Other key executives included finance director Ken Hanna, who is now chairman of Aggreko and Inchcape as well as being on the board of Tesco, and his predecessor David Kappler, now a director of Shire and Holiday Inn hotel company IHG. However, insiders said Cadbury's strategy and culture was largely formed by Sir John Sunderland, who spent 40 years in the business, rising to chief executive, then chairman, before his eventual retirement in 2008.
The latest revelations about Cadbury are also likely to embarrass Sir Roger Carr, who as president of employers' lobby group the CBI last month claimed: "We reject schemes which serve no commercial purpose other than the minimisation of tax – even though such schemes may be legal." In another speech in May he said corporate tax had become a "perfect political football" and urged the prime minister to stop "moralising" on how multinational corporations should be taxed.The latest revelations about Cadbury are also likely to embarrass Sir Roger Carr, who as president of employers' lobby group the CBI last month claimed: "We reject schemes which serve no commercial purpose other than the minimisation of tax – even though such schemes may be legal." In another speech in May he said corporate tax had become a "perfect political football" and urged the prime minister to stop "moralising" on how multinational corporations should be taxed.
Carr, who stepped down from the CBI last week, is to take over as chairman of BAE Systems next year and is departing from the same role at Centrica.Carr, who stepped down from the CBI last week, is to take over as chairman of BAE Systems next year and is departing from the same role at Centrica.
Carr, Sunderland, Hanna and Kappler either declined to comment or were not immediately available on Friday.Carr, Sunderland, Hanna and Kappler either declined to comment or were not immediately available on Friday.
The one former director who did speak to the Guardian said the reality of Cadbury as a modern multinational – including legal tax avoidance – was often overlooked by the British press and consumers who cherished a rose-tinted notion that Cadbury conducted itself in a more socially responsible manner than its competitors.The one former director who did speak to the Guardian said the reality of Cadbury as a modern multinational – including legal tax avoidance – was often overlooked by the British press and consumers who cherished a rose-tinted notion that Cadbury conducted itself in a more socially responsible manner than its competitors.
He pointed to comments from Carr, who, since agreeing the Kraft takeover, poked fun at this popular impression. "The popular myth of Cadbury among the public was an old-fashioned family business run by chocolatiers with Quaker principles – a great British business with its roots in Bournville and its heritage in Victorian England," Carr has said. "It was an Enid Blyton image that the media readily portrayed and which coloured much of the general public's reaction when the company was finally sold."He pointed to comments from Carr, who, since agreeing the Kraft takeover, poked fun at this popular impression. "The popular myth of Cadbury among the public was an old-fashioned family business run by chocolatiers with Quaker principles – a great British business with its roots in Bournville and its heritage in Victorian England," Carr has said. "It was an Enid Blyton image that the media readily portrayed and which coloured much of the general public's reaction when the company was finally sold."
However, Cadbury itself had done the most to perpetuate the impression that it had a uniquely ethical approach to business and corporate citizenship. In its 100-page 2008 "corporate responsibility and sustainability" report, signed by Carr, Cadbury said: "Ethical business sits at the heart of Cadbury. It always has. It is part of who we are, our values, our heritage, our policies and the way we behave".However, Cadbury itself had done the most to perpetuate the impression that it had a uniquely ethical approach to business and corporate citizenship. In its 100-page 2008 "corporate responsibility and sustainability" report, signed by Carr, Cadbury said: "Ethical business sits at the heart of Cadbury. It always has. It is part of who we are, our values, our heritage, our policies and the way we behave".
The business was founded in 1824 by a Quaker philanthropist, evolving to become a beloved British brand known for Dairy Milk, Wispa and Curly Wurly bars.The business was founded in 1824 by a Quaker philanthropist, evolving to become a beloved British brand known for Dairy Milk, Wispa and Curly Wurly bars.
But, according to the FT, by the 1990s Cadbury was concocting complex schemes that shuffled money around subsidiaries. These included an arrangement, codenamed Chaffinch, that knocked £17m off its tax bill between 2006-08.But, according to the FT, by the 1990s Cadbury was concocting complex schemes that shuffled money around subsidiaries. These included an arrangement, codenamed Chaffinch, that knocked £17m off its tax bill between 2006-08.
Another successful ploy between 1998-2002 involved sheltering £400m in the Cayman Islands, wiping £9m from its tax bill in one year alone. The company also used the more conventional avoidance strategy of loading its business with debt in high-tax countries and financing growth in low-tax countries such as Ireland.Another successful ploy between 1998-2002 involved sheltering £400m in the Cayman Islands, wiping £9m from its tax bill in one year alone. The company also used the more conventional avoidance strategy of loading its business with debt in high-tax countries and financing growth in low-tax countries such as Ireland.
Carr, who spent less than two years as Cadbury chairman before reluctantly agreeing to sell the business, is a member of the prime minister's influential business advisory group. As president of the CBI he was a vocal critic of politicians casting moral judgments on big businesses tax avoidance strategies.Carr, who spent less than two years as Cadbury chairman before reluctantly agreeing to sell the business, is a member of the prime minister's influential business advisory group. As president of the CBI he was a vocal critic of politicians casting moral judgments on big businesses tax avoidance strategies.
Before the G8 last month, he delivered a speech to a business school event in London in which he said: "It is only in recent times that tax has become an issue on the public agenda. Starbucks, Google, Amazon – businesses that the general public know and believe they understand, businesses with a brand that become a perfect political football, the facts difficult to digest, public passions easy to inflame."Before the G8 last month, he delivered a speech to a business school event in London in which he said: "It is only in recent times that tax has become an issue on the public agenda. Starbucks, Google, Amazon – businesses that the general public know and believe they understand, businesses with a brand that become a perfect political football, the facts difficult to digest, public passions easy to inflame."
In his valedictory remarks Carr's predecessor Sunderland wrote in the 2007 annual report: "I am confident that some of Cadbury Schweppes's longevity and success is attributable to its ethical heritage, which lends substance to the mantra 'Performance-driven, values-led'. While much has changed both within and beyond the company, the imperative of running the business the right way has never changed. Strong brands, supported by an ethical culture, have remained constant."In his valedictory remarks Carr's predecessor Sunderland wrote in the 2007 annual report: "I am confident that some of Cadbury Schweppes's longevity and success is attributable to its ethical heritage, which lends substance to the mantra 'Performance-driven, values-led'. While much has changed both within and beyond the company, the imperative of running the business the right way has never changed. Strong brands, supported by an ethical culture, have remained constant."
Sunderland, who was Cadbury chief executive between 1996 and 2003 and led the business through a series of transformative acquisitions, also used his farewell remarks to launch an attack on what he called "anti-business" forces, accusing them of seeking to hijack investors' rightful calls for corporate governance improvements.Sunderland, who was Cadbury chief executive between 1996 and 2003 and led the business through a series of transformative acquisitions, also used his farewell remarks to launch an attack on what he called "anti-business" forces, accusing them of seeking to hijack investors' rightful calls for corporate governance improvements.
"Governance has … sometimes served as a Trojan horse for anti-business sentiments. Indeed, the growth of anti-business feeling – the folly of seeing business as somehow standing apart from society, rather than being the engine that allows its needs to be met – has been an unhappy regression in British society.""Governance has … sometimes served as a Trojan horse for anti-business sentiments. Indeed, the growth of anti-business feeling – the folly of seeing business as somehow standing apart from society, rather than being the engine that allows its needs to be met – has been an unhappy regression in British society."
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