CALIFORNIA MANAGEMENT REVIEW

Vol. XXVII, No.2, Winter 1985

© 1985, The Regents of the University of California

Assessing the Nestle Boycott:

Corporate Accountability
and Human Rights
James E. Post

In October 1984, the International Nestle Boycott Committee announced

the termination of a seven-year consumer boycott of Nestle, one of the
world's largest food companies. The boycott was organized because of
Nestle's alleged marketing abuses in promoting and selling infant formula
products in less developed nations. The Nestle boycott became virtually
synonomous with the infant formula controversy, and was an important
factor in the development, adoption, and implementation of the World
Health Organization's international code of marketing for breastmilk substi-
tutes. The Nestle boycott has had a major impact on the interpretation of
corporate accountabilityand the reconciliationof human rights and commer-
cial interests.
The infant formula controversy has meant different things to different
people. To many health professionals and public health administrators, it
was a crusade for improvement in infant and young child health. To some
activists, it was a campaign against the power and influence of multinational
business corporations. To church leaders and members, the conflict was
an opportunity to raise moral consciousness about the problems of world
hunger. To leaders in business and government, at the national and inter-
national levels, it has sometimes seemed a holy war against the infant
formula industry, if not a challenge to free enterprise and capitalism itself.
To the optimists, the emergence of the World Health Organization Code
of Marketing for Breastmilk Substitutes has been an opportunity for indus-
try and government to collaborate on the improvement of the human
condition. To the pessimists, includinga few in the Reagan Administration,
the Code has seemed a dangerous and precedent-setting foray into inter-
national regulation. Few issues have given more credence to the proposition
that political meaning, like art, is to be found in the eye of the beholder.
The infant formula controversy has drawn all these people together and
Portions of trus manuscript were Originally presented at Harvard Law School as part
of the 1983-84 Human Rights Speaker Series.

113

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114 JAMES E. POST

has created an extremely difficult setting for businesses, governments,

and international agencies to fashion "sensible policy."
Consider these efforts:
• Since 1975, the international infant formula industry has written a number
of voluntary marketing codes that would curb promotional and sales
abuses. To fashion a "sensible code," drafters had to deal with the
instincts of industry members to compete in any possible way; legal
constraints imposed by the U. S. antitrust laws that limit the degree and
type of cooperation in which American companies can engage; and critics
who were charging "public relations whitewash" for anything less than
strict marketing controls. Each code effort fell short of endorsement
by either industry members, interested government officials, or industry
critics. The net result was a failure of industry self-regulation on an
issue that seemed a perfect candidate for such an approach.
• Governments and governmental agencies have also failed to produce
sensible policies that could survive the gauntlet of industry and critics'
concerns. The United States Congress investigated the marketing and
promotion issue on several occasions, and while it provided a valuable
record of information about the issue, it was unable to generate any
legislative or regulatory solutions. U.S. actions that would affect the
marketing behavior of U.S. firms in developing countries were challenged
on legal and political grounds. Extraterritorial effects, it was claimed,
went beyond the legitimate scope of congressional authority. Moreover,
to impose restraints only on U.S. companies, while foreign competitors
operated unrestrained, would harm the U.S. companies while not solving
the problem in the developing nations. Thus, the Congress was unable
to offer policy options that would resolve the perceived problem within
a framework of political and legal constraints.
• The governments of developing nations have experimented with actions
to influence both the supply of and demand for infant formula, always
at the risk of antagonizing either businesses, which fear government
activism, or the public health community, which is often skeptical of
their motives. While there have been a few notable exceptions, most
national governments have been cautious and reserved.
• The World Health Organization (WHO) succeeded in creating an inter-
national code of marketing, but it encountered such ferocious resistance
in so doing that there was virtually no political energy left to assist
nations in the implementation of the code. Thus, the international agency
which is arguably in the best position to assist industry and national
governments in creating workable and appropriate marketing code pol-
icy, is widely perceived as having abandoned the issue. Industry leaders,
national governments, and critics who campaigned for the WHO Code
are all agreed that WHO has been ineffectual in transforming the code
into a living document.

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 ASSESSING THE NESTLE BOYCOTT 115
Despite the many difficulties, the controversy and the boycott have
produced a number of actions that public health officials believe have im-
proved the situation of infants in the developing world. The controversy
has brought the attention of health professionals throughout the world to
critical issues in maternal and child health; has stimulated health ministries
in many nations to make commitments to new educational and service
programs; and, most importantly, has developed a medical consensus about
the desirability of breastfeeding as the best way to provide infant nutrition.
The WHO Code, in tum, has led health professionals, hospital admini-
strators, and industry officials to reexamine and change those practices
that undermine or damage a mother's opportunity to breastfeed her child.
The infant formula controversy and the Nestle boycott are also note-
worthy for the precedents they have established in the area of corporate
accountability. The development of an international code of marketing
created a framework in which corporate responsibility could be defined
and evaluated. Nestle's various approaches to dealing with the boycott
provide instructive lessons in "issue management" and public affairs. The
establishment of the Nestle Infant Formula Audit Commission is an experi-
ment in corporate accountability procedure and practice.
Finally, the infant formula controversy has opened new ground in the
discussion of human rights and commercial interests. This theme, which
has been a crucial one in the infant formula code debates and boycott
campaign, has broad application to other controversies. Human rights
concerns are an increasingly prominent part of the business environment.
The consumer boycott of Nestle provides an important case study of the
manner in which conflicts between human rights concerns and commercial
interests ebb, flow, and sometimes produce important institutional
changes. '

From Boycott to Code

Evolution of the Issue-To understand the significance of the World
Health Organization Code of Marketing for Breastmilk Substitutes, it is
important to understand what occurred before the Code's adoption in 1981
and, indeed, before the controversy began in the early 1970s. As early
as the 1930s, physicians working in tropical environments recognized that
bottlefeeding of infants posed a risk of disease to the infant. Sanitation and
refrigeration are not generally available to the population in many such
countries. Water supplies are unpurified, thereby increasing the probability
that a formula mixed with local water will produce diarrhea and disease in
the bottlefed child. Poverty encourages the overdilution of powdered for-
mula, thereby reducing the amount of nutrition the child receives from
each bottle. Once a mother's ability to breastfeed "lets down," the baby
must be fed in an alternative way. If the mother is too poor to afford
formula, which is an expensive product, there is a temptation and need to

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116 JAMES E. POST

place other products in the babybottle. These products may range from
powdered whole milk (whichis unsatisfactory for a baby's digestive system)
to white powders such as corn starch.
By the late 1960s, medical authorities from the developing world were
reporting increased bottlefeeding, a decline in breastfeeding, and a dramatic
increase in the number of malnourished and sick babies being brought to
hospitals and clinics too late for a "cure." Some pediatricians and experts
in tropical medicine were callingbottlefeeding a major publichealth problem
in the developing world. Their professional concern was for the babies,
but their anger was directed at the infant formula companies whose pro-
motional activities were encouraging mothers of all economic and social
strata to bottlefeed.
In one respect, the infant formula controversy represents an unusual
situation in which physicians have turned into public advocates. Their
professional concern was heightened by the recognition that there existed
an alternative form of infant feeding, whose safety and adequacy had been
demonstrated repeatedly. A mother can safely and adequately breastfeed
a child in conditions of poverty and inadequate sanitation, even if she herself
is undernourished. However, safety and adequacy cannot be guaranteed
or achieved with any degree of consistency when bottlefeeding is attempted
under the same conditions.
Exacerbating the problems confronting the mother in a risky environment
were the promotional efforts of the infant formula companies. Promotion
of bottlefeeding and infant formula products was rampant and unchecked
before 1970. No organized complaints about commercial promotion and sale
had been raised, and the industry operated in carte blanche and caveat
emptor fashion. Mass media promotion was frequent and intense, featuring
billboards, radio jingles, and other devices. To further persuade mothers,
the companies promoted their products through posters, baby books, and
samples distributed through the health care system itself. The advertising
images of robust, smiling children contrasted sharply with the reality of
malnourished babies. The advertising created an idealized image of what
infants should look like and a clear concept of how that ideal could be
achieved by even the most destitute of families. By making these images
visible with posters in health clinics and hospitals, companies also implied
the endorsement of the health profession for their products and their
technology.
The most insidious commercial practice involved "milk nurses." These
were women employed by the companies on a sales commission basis.
They dressed in nurses' uniforms and literally prowled the halls of maternity
wards encouraging mothers of newborns to allow those babies to be fed
with formula. A commitment from the mother started the baby on the
formula path which, if not quickly reversed, resulted in the mother having
a lactation "let down" that made it impossible for her to breastfeed. When

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 ASSESSING THE NESTLE BOYCOTT 117
this occurred, the baby was effectively "hooked" on bottlefeeding, the
industry had a new customer, and the milk nurse had another sales com-
mission.
Concerned physicians-such as Dr. Derrick Ielliffe, now at UCLA and
formerly the director of the Caribbean Food and Nutrition Institute-had
persuaded a United Nations agency, the Protein-Calorie Advisory Group,
to place the issue of formula promotion and its connection to infant malnutri-
tion on the agenda of several international meetings in the early 1970s.
Broad public awareness did not occur until the press began to carry stories
about the problem several years later. A journalist named Mike Muller
wrote a series of articles in The New Internationalist, and a pamphlet
entitled The Baby Killer (1974), which was published by War On Want, a
British charity organization. The Baby Killer detailed the results of Muller's
research in Africa and concentrated on the marketing activity of Nestle,
which was the industry's largest member. The pamphlet was subsequently
published in Switzerland, Nestle's home country, under the title Nestle
Kills Babies.
Nestle sued the Swiss group that published the pamphlet and the case
came to trial in 1975. Publicity surrounded the trial and the world press
carried numerous stories about the underlying issues as well as the actual
proceedings. Recognizing an industry-wide problem, rather than just a
problem for Nestle, a group of companies representing about 75 percent
of the world's infant formula sales formed an association called the Inter-
national Council of Infant Food Industries (ICIFI). Their first significant
act was to announce a code of marketing conduct that addresed the concerns
of critics.
Three noteworthy provisions were contained in the ICIFI Code:
• Commission payment schemes were banned for milk nurses.
• Milk nurses were required to wear an ICIFI pin or badge on their
uniforms so as to inform mothers of their real status.
• Language was adopted that encouraged members to reduce mass media
advertising, although no ban was placed on media promotion.
However, the weaknesses of the ICIFI Code were so apparent, and so
serious, that one of the foundingmembers, Abbott Laboratories, withdrew.
Abbott promptly developed its own marketing code, which contained sub-
stantially stronger language, including a ban on milk nurses and mass
advertising.
The codes proved no impediment to competitive conduct. Manufacturers
were able to continue behaving in substantially the same manner as before.
Medical promotion to clinics and hospitals continued, as did the display of
calendars, charts, posters, and so forth. Some companies even deviated
from their own codes. Most important, nothing in any of the codes re-
stricted the distribution of free samples of infant formula. During the 1970s,

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118 JAMES E. POST

sampling-which advertisers know is the most effective means of getting

people to use a product-grew dramatically as a competitive tactic. By
providing large quantities of formula to hospitals and clinics, the companies
secured a means of reaching new customers.
Through the 1970s, the definition of the political issue became more
refined. At U.S. Senate hearings that occurred in 1978, Senator Edward
M. Kennedy, chairman of the Senate Subcommittee on Health and Human
Resources, opened the proceedings with the question: "Can a product,
whose use is permissible and without harm in one social environment, be
safely used in the environment of the developing nations?" Implied in that
question was the concern to know whether there existed any legitimate
market for formula in the developing world, and whether it could be reached
without the predicted and foreseeable consequence of consumer misuse
and infant harm.
The Kennedy Hearings were a pivotal point in the history of the issue,
signalling an end to the consciousness raising that had dominated until that
time and a beginning of the search for effective solutions. Those solutions
were not found in the U.S. Congress. The Senator's staff had diligently
studied the possibilities of legislative or executive agency action. They
were limited at best. The Congress did tie certain foreign aid and Agency
for International Development funding to a requirement that recipient na-
tions develop pro-breastfeeding programs. But it was also recognized that
the behavior of a global industry could overwhelm any individual nation's
commitment to act unless a countervailing political pressure existed. That
countervailing force came to be the World Health Organization and the
pressure would be the Code.
The Nestle Boycott-The boycott of Nestle began in the United States
in mid-1977. From the conclusion of the Nestle trial in Switzerland at the
end of 1975, it had been apparent that the U.S. was a media-oriented
country. Hence, the story of infant formula marketing-a story of "com-
merciogenic malnutrition" in the words of Dr. Jelliffe-would be taken
more seriously. The Infant Formula Action Coalition (INFACT) was estab-
lished in Minneapolis and its small band of members began a campaign to
build public support for a boycott of the world's largest seller of infant
formula products.
INFACT's campaign had two noteworthy successes within a short period
of time. The organization was able to enlist the support and assistance of
the National Councilof Churches which, through its own corporate respon-
sibility arm, Interfaith Center on Corporate Responsibility (lCCR), had
been pressuring the three U.S. infant formula manufacturers through
shareholder resolutions. In addition, INFACT found an interested staff in
the legislative offices of Senator Edward Kennedy. INFACT's personnel
worked with Kennedy's staff in the months leading up to the hearings,
doing the myriad tasks that hearings require with the knowledge that the

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 ASSESSING THE NESTLE BOYCOTT 119
hearings would provide an incomparable opportunity for national press
coverage of the issue. As in the Nestle trial in Switzerland, the company
played into the hands of its adversaries. Oswaldo Ballorin, manager of
Nestle's Brazilian operations, claimed that the boycott was actually an
indirect attack on the free world's economic system. Kennedy exploded
in controlled outrage, the TV cameras whirred, and the vignette played
on national news that evening. The U.S. boycott, born only six months
earlier, had won a major victory.
The boycott campaign won its greatest battles for publicity in the U.S.
but it won the battle for policy action in Geneva. Without the concerted
lobbying of boycott supporters in Geneva, it is doubtful that an international
code of marketing could ever have been developed. Followingthe Kennedy
hearings, WHO was approached and asked to convene an international
meeting to follow up on the Kennedy initiative. The Director General, Dr.
Halfdan Mahler, agreed. In October 1979, an international meeting of
experts on allsides of the controversy was held in Geneva. The recommen-
dations that resulted from the often acid debate included a formal call for
WHO to take the lead in developing a code of infant formula marketing.
WHO's staff was eager to undertake the effort for a number of reasons.
They were concerned with the issue itself and believed that a marketing
code might conceivably be a device that could be developed for such
sensitive areas of commercial conflict as the promotion of tobacco and
alcohol in third world nations. With a first draft in hand by January 1980,
there was optimism among WHO staff that a final version might be ready
by the May 1980 meeting of the World Health Assembly (governing body
of WHO). However, their optimism quicklyvanished. A series of consulta-
tions with outside experts, industry, and government officials produced
major disagreements over the code's design and terms. A second draft
fared no better, and it was evident that no code would be ready by May
1980. Work continued on the drafting, however, and further consultations
with all parties produced an increasingly precise and acceptable document.
The Carter Administration was involved both formally and informally
throughout this process, giving encouragement to WHO at the staff level
while carefully trying to walk a policy tightrope between industry and
boycott interests. Although President Carter was defeated in November
1980, the staff work continued and produced a fourth draft by year's end.
By January 1981, when Ronald Reagan was inaugurated, the executive
board of the World Health Assembly, which included a U.S. representative,
had approved a final draft. This was the draft that would go to the full
World Health Assembly in May for adoption.
The WHO Code-The Reagan Administration was not eager to challenge
the code, but the industry saw an opportunity to scuttle the effort. Lobby-
ists from the three U.S. companies moved to influence the new Administra-
tion. Throughout the Spring of 1981, tensions built as the industry pressed

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120 JAMES E. POST

its case to the highest levels of the Administration. Support for the code
was considerable at both the State Department and the Department of
Health and Human Services. Presidential advisor Elliot Abrams was dis-
patched to Geneva to negotiate with Dr. Mahler. The Administration
vigorously argued against a mandatory code of conduct that would require
member governments to implement its provisions, even though it was
clear that a mandatory code was favored by the health ministries of some
developing nations themselves. The U. S. indicated that it would vote
against the Code if it was mandatory. However, Abrams told Mahler that
the U.S. would vote for the code if it was merely a "recommendation" to
member governments. Dr. Mahler agreed, knowing that a consensus of
nations was a highlydesirable outcome. Abrams returned to the U.S. with
an agreement. Then, only a few days before the actual vote was to occur
in Geneva, with the WHO now officially on record as favoring a recommen-
datory code, the U. S. delegates received instructions directly from the
White House to vote against the code. The vote was 118 nations in favor;
1 opposed; 3 abstentions. The U.S. stood alone in its opposition.
The Reagan Administration's vote against the code generated a wave
of criticism. Congressional leaders denounced the Administration's capitula-
tion to the American industry's lobbying efforts. Cartoonists and editorial
writers for newspapers throughout the country poked at the logic of the
Administration's reasoning. One cartoon showed three little pigs (for the
three U.S. companies) sucking at the breast of the Reagan Administration.
The text read: "Mother's Milk!" According to Newsweek, the code vote
represented the Reagan Administration's first foreign policy disaster. The
business press was more favorable to the Administration, with the Wall
StreetJournal running an approving editorial. A few publications speculated
that this might presage the Administration's line of thinking on other issues
of international commerce. Indeed, the infant formula code vote was the
first in a line of Administration actions to oppose such international codes
and arrangements as The Law of the Sea Treaty, the United Nations Code
on Transnational Corporations, and the UNCTAD Code on Technology
Transfer.
The firestorm of criticism created new momentum for the boycott cam-
paign. The boycott was a means by which public dissatisfaction with the
Reagan Administration's vote could be dramatized. INFACT developed
the theme in its mailings, and pressed the point that it is easier to pass a
law or a code than it is to make them work in practice. Thus, it was
important to sustain the boycott until it could be determined whether
Nestle would meet the new standard and implement changes in its market-
ing behavior. Ironically, Nestle was the only company in the industry to
publicly speak in favor of the WHO Code before its adoption. Management
had publicly committed the company to implement the Code. But for the
Reagan Administration's action, with which Nestle had no part, the boycott

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 ASSESSING THE NESTLE BOYCOTT 121

might have ended by mid-1981. Instead, public support remained high and
INFACT and the boycott supporters pressed the company to transform
the Code into company policy.

Marketing Since the Code

The development and adoption of the WHO Code of Marketing coincided,
and probably prompted, a number of major changes in the marketing
behavior of the infant formula industry. By 1981, the manufacturers had
eliminated many of the worst promotional practices that had been wide-
spread a decade before. Milk nurses, mass media advertising, and blatant
misrepresentation of the benefits of formula feeding were much rarer
occurrences by 1981 than they had once been. There have continued to
be disclosures of milk nurses soliciting sales improperly and occasional
newspaper displays or billboard ads, but on the whole, the state of infant
formula marketing in the developing world is much better than that which
existed at the time of the Kennedy hearings in 1978. The years of conflict
have produced positive results.
Ironically, the infant formula industry has not really suffered a loss of
sales revenues or profits. The sheer increase in absolute numbers of new
births ensured that there would be a market for formula products, even
if it were a smaller percentage of total births. It is important to recognize
that even mothers who breastfeed their babies for a period of time may
convert to formula feeding before the baby reaches an age at which it can
be sustained by solid foods. Physicians distinguish therefore between the
incidence of breastfeeding (i.e., any breastfeeding for any preiod of time)
and duration of breastfeeding (i.e., length of time the baby is breastfed
either exclusively or partially). By emphasizing longer duration of formula
feeding, the companies have adapted to pressures on this issue and still
preserved their market. In a country such as Thailand, for example, which
is industrializing at a rapid rate, a high incidence of initial breastfeeding is
followed by a rapid decline in exclusive breastfeeding. In such situations,
formula companies can make money and sell formula without destroying
the legitimate place of breastfeeding.
The size of the infant formula industry has not diminished during this
controversy. In 1978, during testimony at the Kennedy Hearings, I esti-
mated that the globalmarket for infant formula products was approximately
$1.5 billion, of which the developing nations accounted for about 40 percent
of $600 million. 1 (The U. S. market then amounted to about $300 million.)
In 1983, the global market probably exceeded $4 billion, with developing
nations accounting for about fifty percent of the total. (The U.S. market
is now approximately $1 billion.) This growth does not mean that the WHO
Code has failed. Rather, it simply means that there has been continued
population and market growth while, at the same time, there has been an
improvement in the quality of competitive conduct.

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122 JAMES E. POST

Current Trends'<>Three trends characterize infant formula marketing

since the WHO Code's adoption. First, there seems to have been a virtual
flooding of the market by formula companies. Data from a number of
African and Southeast Asian countries indicate that more retail outlets are
carrying formulas than ever before, and that this expansion has been
encouraged by manufacturers and their local distributors. Shelf presence
is certainly an important device for boosting sales and given the strictures
on direct consumer advertising in the Code, expanded availability provides
the kind of visibility the manufacturers continue to seek.
The second trend of note is price competition. Prior to the Code, there
was relatively little attention by manufacturers to price competition. Their
preference was to compete via advertising. Evidence from a dozen develop-
ing nations indicates that there is aggressive pricing and more efforts to
induce brand switching among formula users than previously reported.
This is important because the blurring of pricing factors can confuse cus-
tomers about the interchangeability of formulas, humanized formulas, and
full cream milks.
The third, and by far the most significant, trend is the promotion of
formula products through the health care system. The Code basically
encourages manufacturers and sellers to focus their marketing attention
on health care professionals and away from consumers. The competitive
strategies of company after company have adjusted to the focus on health
care professionals and produced new pressures on nurses, doctors, and
health care administrators to endorse products, permit their presence in
clinics and hospitals, and afford opportunities for company names to be
made visible to new mothers.

Nestle and the WHO Code

For more than three years, Nestle has been involved in an effort to clarify
and give practical meaning to the WHO Code. Having publicly announced
its commitment at the time of the World Health Association's vote in 1981,
the company has since taken a number of important steps to achieve its
implementation. Two deserve discussion insofar as they are precedents
in the modem history of corporate accountability. The first of these involves
development of a set of company policies and instructions to field personnel
based on the WHO Code. The second step involves the creation of a
special group of outsiders, known as the Nestle Infant Formula Audit
Commission, to evaluate the company's compliance with its policies and
the WHO Code.
The Nestle Instructions-Nestle has worked for more than two years
to transform the WHO Code into a set of workable instructions and policies
for its field management. The task is difficult for several reasons. The
Code itself is vague, and some say contradictory, in places. Moreover,
the Code is a politicaldocument, born of a compromise and hence, imperfect

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 ASSESSING THE NESTLE BOYCOTT 123
from nearly everyone's self-interested vantage point. Any interpretation
is bound to be faulted by parties who found the underlying compromises
unsatisfactory. Not surprisingly, Nestle has developed various "interpreta-
tions of convenience" in areas where it believed the Code went too far,
and critics have pressed for more restrictive interpretations where they
believe the Code and Nestle have not gone far enough. The entire process
has produced a set of instructions that have helped transform an imperfect
Code from a symbol to a set of working rules and guidelines that are also
imperfect, but in different ways.
A point-by-point comparison of the Nestle instructions and the WHO
Code (and WHOIUNICEF Notes) shows an overall similarity, but with a
number of serious differences. The differences are the stuff of which
lawyers and law school examinations are made. All loopholes are not
created equal. Some are small, and allow for the possibility of an improper
sample or illustrated baby book to reach a mother. Others are large, and
allow a virtual fleet of infant formula trucks to deposit their supplies at the
loading docks and maternity wards of hospitals and clinics.
Two examples illustrate the point. Article 5.1 of the Code states that
"there should be no advertising or other form of promotion to the general
public of products within the scope of this Code." The statement seems
clear and unequivocal. Presumably, any action or information that has the
effect of advertising a product covered by the Code is prohibited. Nestle's
instructions elaborate this point in some detail and specifically ban the
distribution of such items as gift packs, calendars, and baby albums which
are known to have had an advertising effect. The instructions go on,
however, to say that "generic information designed to describe the proper
use of infant formula shall not be used as advertising or promotion and
must not be aimed at the general public." The instruction continues, "it
may however be distributed to mothers by health workers or displayed
by them . . . " irrespective of its effect on mothers. Nestle does not
communicate with mothers directly, but through the intermediary approval
of a health worker. The burden of determining whether there is an advertis-
ing or promotional effect is left on the individual health workers or adminis-
trator, many of who probably do not understand the value to an advertiser
of having a familiar corporate logo displayed in a hospital setting.
Article 7.3 provides another example of the differences that result when
motives rather than results are the basis for determining appropriate be-
havior. The Code states: "No financial or material inducements to promote
products" should be offered by manufacturers to health workers or mem-
bers of their families. The clarifying notes published by WHO and UNICEF
state that manufacturers and distributors should not provide inducements
"of any kind, be they of a personal or professional nature" [emphasis in
original]. The Nestle instructions retain the "inducements to promote"
language and leave open a number of ambiguous possibilities: an inducement

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124 JAMES E. POST

to do something other than promote, or a gift that is not an inducement-

i.e., nothing is expected or required in return. Again, the motive of the
giver and the receiver seems more important than the effect and is, natural-
ly, impossible to verify in an objective way. Given the importance of the
health sector to current marketing strategy, this could well become a
"mega-loophole."
To its credit, Nestle has continued a dialogue with WHO, UNICEF, and
the boycott groups (International Nestle Boycott Committee, INBC) about
the terms of the instructions. The process has not been a smooth one.
Real differences of interpretation have existed, although, in retrospect,
considerably more progress has occurred than anyone is likely to have
admitted during the course of the discussions. The negotiations which
produced an official suspension of the boycott in February 1984 turned on
further revisions of Nestle's policy (and instructions) in four key areas,
includingeducational materials, gifts to health professionals, warning labels,
and the provision of supplies to hospitals. The dialogue which began after
the WHO Code was adopted in 1981, has now produced a set of field
policies which are probably the best in the industry.
The Nestle Audit Commission-Effective implementation of the in-
structions cannot rest on the assumption that policy statements will auto-
matically take effect. There are entrenched economic interests in any
company, and this is even more so in a multinational firm operating in
more than 140 nations. The corporate culture at Nestle has been profoundly
affected by ten years ofconflictand a seven year product boycott. Employee
turnover and morale is known to have been affected, and management
attention to the boycott has cost the company dearly in terms of other
business needs and decisions. One factor that encouraged the company
to act to end the boycott is that Nestle's new senior management has
wanted to tum from this issue to other, more pressing business problems. 3
Boycott supporters have rightly been concerned that a loss of top manage-
ment attention will lead to weak follow-up by managers in the field.
The single most important action that eluded boycott supporters was
creation of a reliable mechanism for enforcement of the Nestle instructions.
There is little evidence of changes in the management evaluation systems,
reward and compensation systems, or promotion and advancement criteria
that are known to influence effective social policy implementation.
One of the most interesting organizational developments that occurred
is Nestle's creation of an independent audit commission. The Nestle Infant
Formula Audit Commission (NIFAC) has developed under the leadership
of former United States Senator and Secretary of State (during the Carter
Administration) Edmund Muskie. The "Muskie Commission," as it is often
called, was created for two purposes. One was to provide visible evidence
to boycott supporters that the company was prepared to permit its behavior
to be scrutinized and examined by outsiders. A second purpose seems to

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 ASSESSING THE NESTLE BOYCOTT 125
have been the creation of a symbol of Nestle top management commitment
to the Code and their intention to insure that every field manager under-
stood that his or her action would be subjected to this scrutiny. In this,
NIFAC appears to have an important internal role in implementing the
Nestle instructions as well as the more apparent external role in responding
to boycott pressures.
Is NIFAC a satisfactory mechanism for guaranteeing implementation of
Nestle's instructions? The answer hinges on a careful consideration of
three issues: the scope of NIFAC's activities; the people who constitute
the membership; and the approach the Commission has adopted.
The role of Senator Muskie himself very much defines the scope of
NIFAC's activities. The Senator is unmistakably the dominant force on
the Commission, and he has clearly put his personal reputation at risk in
assuming this position. Not the least of the consequences is that he is
characteristically bold in speaking his mindin public, withinthe Commission,
and to Nestle's management.
On the substantive side, the nine members of the commission have
reviewed more than eighty specific cases of alleged violations of the com-
pany and WHO code policy. These have ranged from various advertise-
ments and promotional activities to problems with educational materials
and the provision of gifts and product samples to health workers. NIFAC's
process of review is careful, thorough, time-consuming, and provides the
company an opportunity to respond to charges as well as adjust its behavior
in the field. Many of the early incidents reviewed by NIFAC were clear
violations of the WHO Code. NIFAC's reports so stated, usually with the
notation that Nestle had eliminated the practice or otherwise amended its
behavior. The number of new violationsappears to have diminished, leaving
the commission with issues that Nestle wishes to either dispute or with
issues that are more subtle and difficult under the code.
The scope of the commission's mandate has been an issue since its
earliest days. An initial problem involved the commission's freedom to
examine reported violations against the terms of the WHO Code, and not
just the language of the Nestle instructions. This was resolved by Nestle's
agreement that NIFAC had the power to compare the Nestle instructions
to the code, and evaluate complaints against both. More recently, the
commission has had to confront the question of whether or not it had
fact-finding powers that extended beyond the review of complaints. In this
regard, too, the result has been a broad interpretation of the commission's
scope of activity. Recently, the commission has reported on investigative
trips by members and the commission staff attorneys to a number of
developing nations. Such fact-finding signifies a more active role than may
have originally been envisioned by Nestle. It is too early to assess how
effective this activity will be in actually encouraging compliance with the
instructions by field managers.

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126 JAMES E. POST

The Commission has not formally addressed such questions as the pro-
priety of Nestle's lobbying of national governments on issues involving the
Code, although it may have been discussed informally. Symbolically, how-
ever, the Nestle public relations apparatus has spoken of the "broad role"
played by the Commission in implementing the Code and responding to
the underlying marketing issues. The Commission's existence is widely
known in the developing world, although its mandate is described in varying
ways by government officials-a fact which may signal some continuing
confusion about the scope of NIFAC's charge.
The members of NIFAC certainly believe that they are making a good
faith effort to implement the Nestle instructions and through them, the
Code. The members include several leaders of church organizations which
formally supported the boycott. A number agreed to join in order to observe
more closely Nestle's stated commitment to improve its marketing practices.
Others joined because they were asked to serve and believed the issue
sufficiently important to accept the risk of criticism. Not surprisingly, the
commission members have walked a tightrope to not appear to be apologists
for Nestle, yet wishing to acknowledge the company's progress in imple-
menting its commitment to the WHO Code.
NIFAC has been criticized for various reasons, including the relatively
limited public health and developing nation experience of its members.
One aspect of the boycott settlement allows the International Nestle
Boycott Committee to nominate several candidates for positions on the
audit commission. If NIFAC chooses to broaden its membership by adding
experts in public health, developing nations, and/or corporate social policy,
the additional expertise may be helpful in analyzing the more subtle and
complex issues likely to face the commission in the future.
NIFAC's procedures are a matter of special concern. The quarterly
reports issued by the commission paint a picture of thorough investigation
and painstaking review of the facts involved in each complaint. However,
there are times when the commission's interpretations of the WHO Code
language have differed from those of others. In its 5th Quarterly Report,
for example, the Commission stated that it interpreted the WHO Code
statement that supplies should be provided only "for infants who have to
be fed on breastmilk substitutes" (Article 6.6) to "include situations in
which a mother chooses not to breastfeed." (p. 2) This interpretation was
at odds with the Code and interpretations thereof by WHO and UNICEF.
The result was a Commission position that expanded the meaning of "real
need" far beyond that originally intended by Code drafters. To date, no
mechanism has been devised to reconcile NIFAC's interpretations of code
language with interpretations of others, including international agencies.
Another concern is the analytical approach reflected in the commission's
decisions. These decisions, while appropriately detailed, occasionally dem-
onstrated the interpretive gymnastics that obscure the underlying issue.

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 ASSESSING THE NESTLE BOYCOTT 127
Excessive legalism will leave the WHO Code meaningless, especially if
there is pressure by the company to have NIFAC endorse "interpretations
of convenience." The Nestle Commission faces the risk of sacrificing the
spirit of the Code for too legalistic interpretation of the terms. Their work
need not become slipshod to reconcile the spirit of the code with the letter
of the Nestle instructions. The challenge for NIFAC is to continuously
remind Nestle management that they have committed themselves to make
the WHO Code a "living document," not a search for loopholes and
legalisms. That will be the test of how well the audit commission enhances
corporate accountability.

Human Rights and Commercial Interests

Throughout the seven years of the Nestle boycott, sponsors and supporters
understood that it was a means to an end." In the early years it was an
effective tactic to build public awareness of the tragedy of infant malnutrition
in the developing world. Following the Kennedy hearings, the boycott
helped sharpen and define the issues for the World Health Organization's
consideration. Subsequently, the boycott was a source of leverage in mov-
ing the code drafters toward more restrictive language and provided the
grassroots public support that created a positive vote for the Code among
World Health Association members. For the past three years, the boycott
has helped keep alive public concern for the underlying issue and helped
put pressure on Nestle to implement a new standard of ethical conduct.
Nestle executives repeatedly miscalculated the resolve of the boycott
supporters, in part because they misunderstood the motives that brought
boycott leaders and supporters to the issue. Such miscalculation led the
company to play into the hands of critics on a number of occasions, including
the famous charge at the Kennedy hearings that the boycott was really a
conspiracy of church organizations to undermine the free enterprise sys-
tem. On such occasions, the company seized defeat from the jaws of
victory!
There are other lessons to be drawn from the infant formula controversy
and the Nestle boycott. The conflict has become a popular case study in
the business school curriculum because it demonstrates the need that
companies have to constantly preserve and enhance their legitimacy in the
public eye. The discussion of legitimacy leads quite naturally into a discus-
sion of issue management, and the consequences of mismanaging a public
issue. The latter point is especially clear when Nestle's responses are
compared to those of certain of its industry peers.
Societies often have difficulty in shaping "sensible" policy solutions
to complex policy issues. The reason that children die in developing nations
is not because infant formula is a bad product. Rather, there is an environ-
ment of poverty, illiteracy, inadequate sanitation, unhealthy water, and
limited health services that create dangerous conditions for the use of

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128 JAMES E. POST

formula. Marketing did not create these conditions, but marketing was a
more actionable aspect of the problem than poverty, water, or education.
Moreover, the manufacturers were placing their products in the stream
of commerce without attempting to find out who actually used them, under
what circumstances, and with what consequences. When this point was
developed at the Kennedy hearings-and each of the four industry execu-
tives admitted that their firms did no post-marketing reviews-a theme
for policyaction emerged. One lesson for managers is that when a problem
of human misery is brought to the attention of the political system, some
action is better than no action. Because business corporations are respon-
sive to external pressure, action targeted at them has a better chance of
producing change than action aimed at such underlying conditions as poverty
and illiteracy. A marketing code will not alleviate the problems of poverty,
illiteracy, and poor sanitation, but it can help to ensure that companies do
not exploit such conditions to their own advantage.
When human rights and commercial interests intersect, priorities have
to be established. These priorities may take the form of socially approved
tradeoffs, as is the case with product liability concepts such as strict liability
or assumption of risk. Priorities can also be articulated in the form of a
hierarchy of public policy interventions. This approach was evident jn the
infant formula controversy. The first priority for action was protection of
infants who were being breastfed by curbing the promotional pressures
that could be placed on mothers of newborns. A second priority was to
provide support services for mothers who had chosen to breastfeed, as in
the efforts to provide more maternal and child health services, extend
maternity leaves, and require employers to provide nursery facilities in
the workplace. The third priority was promotion of an optimal pattern of
feeding behavior. The efforts of governments to promote breastfeeding
through education and public communication programs exemplifies this
approach to the reconciliation of an infant's right to good nutrition and a
company's right to sell its products. In Figure 1, a simple comparison is
drawn between human rights and commercial interest considerations of
each approach.
The burden on companies is greatest with the protective approach,
which has the highest payoff to potential victims. The supportive and
promotive approaches, in contrast, have less direct effect on commercial
interests but also a much lower payoffto potential victims. Not surprisingly,
when industry interests are strong and linked to powerful political interests,
government actions are more likely to be channeled toward the support
and promotion approaches rather than the protection approach.
The Nestle boycott case illustrates how human rights and commercial
interests are traded offin different political settings. At the level of national
governments, where Nestle has had longstanding relationships with gov-
ernment officials and the health community, there was virtually no legisla-

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 ASSESSING THE NESTLE BOYCOTT 129
Figure 1 . Approaches to Reconcile
Human Rights and Commercial Interests

Human Rights Commercial

Policy Approach Interests Interests

Protective Potential victims are Substantial restriction on

Action freed from risk of harm. the competitive freedom of
the company.

Support Public is assisted by Actions are not directly

Action resources that lessen the targeted at commercial
risk of harm, or improve interests; indirect costs may
opportunities to correct the have long term competitive
consequences of risk. effects.

Promotional Public is encouraged to Behaviors encouraged by

Action behave in a way that has commercial interests may
been determined to be be target of promotional
best in reducing or elimi- message. Less punitive
nating risk. than protective action, by
altering the environment
(e.g., demand).

tive or regulatory action of the protective type. Government policies have

favored support and promotion actions, usually in the form of education
programs. Those few countries which had taken aggressive protective
action (e. g., Papua New Guinea, whichrestricted the distribution ofbottles)
had a much less cordial relationship with the business community. When
the World Health Organization became involved, however, the mix of
actors and the balance of influence shifted away from economic interests
and toward human rights and public health interests. This changed balance
of power helps account for the development of a marketing code and the
restrictive language that characterizes the protective provisions of the
code.

Conclusion
The end of the Nestle boycott brings to a close an important chapter in
modem business history. The boycott helped create an awareness about
the side effects of normal marketing and promotional practices. Whilethere
can be no conclusive evidence that the lives of specific individual babies
were saved as a result, it is clear that hospital practices have been altered,
promotional practices of industry changed, and public awareness of the

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130 JAMES E. POST

benefits of breastfeeding has increased. According to experts in health

ministries and international agencies, these changes are improving the
condition of children in developing nations.
The creation of an international code of marketing is an impressive, if
still imperfect achievement. Although many of the industry members are
not willing to comply with the code's terms, the actions of Nestle (which
remains the industry leader) have charted a new course toward responsible
marketing of infant foods. This company, which in the 1970s abandoned
leadership on this issue, has now reassumed that position. Its commitment
to the WHO Code, and its willingness to be held accountable to that
standard of marketing conduct, has been exemplified through the Nestle
policy and instructions and through the creation of the Nestle Infant Formula
Audit Commission.
Finally, the Nestle boycott and the infant formula controversy have
created some important institutional precedents involving organizations in
the private and public sectors. These include:
• Physicians and health workers led the campaign to improve infant health
by generating a broader public conern through the media. Physicians
for Social Responsibility has played an analogous role in generating broad
public support for a nuclear weapons freeze. Dr. Stephen Joseph of
UNICEF has said that the infant formula campaign is a virtual paradigm
of grassroots politics in the international health arena. If this is true,
the future may well involve more publicissues being raised and promoted
by scientists in universities, government, and industry itself.
• The creation of an international marketing code under the aegis of a
prominent international agency was a factor in convincing the pharma-
ceutical industry to develop its own code of conduct governing the sale
of pharmaceutical products in developing nations. Various officials at
WHO had expressed a desire to use the infant formula code as a model
for the development of a pharmaceutical code. The drug companies
appear to have acted in order to forestall such actions.
• WHO gave consumer activist groups, such as INFACT, the boycott
organizer, official status as non-governmental organizations (NGOs) in
order to allow their participation in the formal discussions of the code.
This signalled a clear intention that consumer interests be treated equally
with commercial interests in the development of international health
policy.
• The creation of the International Baby Food Action Network (IBFAN)
as a global monitoring organization has already become the model for
pesticide monitoring in developing nations.
• The creation of the Nestle Infant Formula Audit Commission is an
experiment in corporate accountability that may see application in other
firms, industries, and controversies. If the commission proves success-

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 ASSESSING THE NESTLE BOYCOTT 131
ful, it may become an accountability device to be endorsed by consumer
groups in other settings.
• UNICEF was encouraged to become a "facilitator" during the finalnegoti-
ations between Nestle and the International Nestle Boycott Committee.
This is a new and risky role for an international agency, but it was an
unquestionably critical one in the process of conflictresolution. Ironically,
at the very time when the United Nations itself seems less able to settle
political conflicts among nations, its member agencies may be able to
play important roles in creative positive-sum results in narrower con-
flicts.

References
1. James E. Post, Testimony in Marketing andPromotion ofInfant Formulain Developing
Nations, Hearings Before the Subcommittee on Health and Scientific Research of the
Committee on Human Resources, 95th Congress 2nd Session, May 23, 1978 (Washington,
D.C.: U.S. Government Printing Office), pp. 215-241.
2. j.E, Post, R.A. Smith, and G. Solimano, "Marketing Infant Foods in Four Developing
Countries: Trends Since the WHO Code," presented at the annual meeting of the American
Public Health Association, November 1983.
3. In 1984, Nestle attempted to acquire Coopervision, a maker of soft contact lenses, and
Carnation, a major food company. At the time of this writing, the Coopervision acquisition
appears to have failed. The Carnation acquisition is still under review by the Federal Trade
Commission.
4. An alternative view is provided by Oliver Williams, "Who Cast the First Stone?" Harvard
Business Review (September/October 1984), pp. 151-160.

Copyright © 2001 All Rights Reserved