Cadbury Company Business Ethics: Repeating the Mistakes of the Past

By the 1900’s, the British chocolate industry was dominated by Cadbury, Fry, and Rowntree, which were three Quaker-owned firms. In response to the exponential increase of consumer demand for cocoa products across Western Europe and the United States, these companies quickly became dependent on contract labor from West African colonies, where cocoa beans were produced and exported to Europe. Between 1901 and 1908, Cadbury had purchased £1.3 million worth of cocoa supply from the Portuguese colony of São Tomé.[1]Despite Portugal’s official abolition of chattel slavery in its colonies, native laborers in São Tomé were subjugated to slavery-like conditions, under which the annual mortality rate was as high as 20%. Although Cadbury became aware of its inadvertent contribution to these rampant human rights violations as early as 1904, the company’s failure to publicly raise this issue for six years sparked considerable controversy over the British chocolate industry’s business ethics. Following a week-long public trial to determine whether the firm was aware that it had been purchasing slave-produced cocoa, British consumers and humanitarians alike heavily criticized Cadbury’s lack of business ethics, tainting its reputation and demonstrating strong public intolerance for such exploitative practices. Unfortunately, such egregious labor rights violations remain pervasive today in the international chocolate industry, as best reflected in the case of Cadbury. Similar to how concerns regarding Cadbury’s sales and supply chain discouraged the company’s executives from responding quickly to slavery on São Tomé in the 1900’s, the incentive system of global financial markets today continues to pressure Cadbury and other public companies to maximize profits for investors at the expense of their workers and even cocoa farmers. 

            While Cadbury became aware of ongoing slave labor on São Tomé in 1904, the company officials’ concerns about profitability significantly delayed their decision to report the horrific labor conditions there and cut their chocolate supply from the island. William Cadbury, grandson of the firm’s founder, clearly bided his time, as he took seven years to take action and make his report on slave labor conditions in São Tomé public. As stated by historian Lowell Satre, Cadbury executives only chose to release their findings when it became evident that a media outlet would publish a story about their inaction, making them fear “that [the] article might force them to give up São Tomé cocoa.”[2]Furthermore, during the trial to settle Cadbury Brothers’ lawsuit against a newspaper that accused them of slave labor exploitation, William Cadbury answered evasively when lawyer Edward Carson asked “what the effect might have been on chocolate sales if the Daily News had covered the cocoa controversy as vigorously as it had reported alleged Chinese slavery in the Transvaal’s mines.”[3]His answer that consumers would have continued to buy Cadbury products if they knew all that the firm had done for São Tomé’s workers was far from believable, as the company received severe criticism from many consumers and suffered a public relations nightmare immediately following the trial. 

            In part due to the incentive structure of modern-day capital markets and corporate finance, multinational chocolate manufacturing companies today continue to engage in appalling labor exploitation as a means of increasing their enterprise value and returns for shareholders. Under the currently prevailing system of global corporate finance, the monetary compensation of a firm’s management team is directly tied to the company’s financial performance. Senior executives and employees of large, publicly traded companies are often rewarded with stock options that enable them to purchase shares of the company’s stock at a specified strike price. Such options are more profitable for the individual when the current stock price is high, while the company’s stock price is heavily dependent on the firm’s ability to meet the expectations of both investors and securities analysts. For this reason, managers of major companies frequently face earnings pressure, which is the pressure to meet securities analysts’ earnings forecasts, and “may [consequently] make business decisions to improve short-term earnings.”[4]

Mondelēz International’s 5-Year Stock ChartThis chart (created by myself) demonstrates the major impact of meeting (or failing to meet) earnings forecasts on a company’s stock price, illustrating the “earnings pressure” that managers may face.

Embroiled in a series of recent public controversies, Cadbury’s management team has demonstrated their inclination to prioritize immediate profit maximization over the conditions of their workers and even cocoa farmers time and time again. In 2011, a 26-year-old factory worker for Cadbury Egypt ” lost half his thumb while operating a machine which should normally be run by three persons,” after which he immediately lost his job. This was the same factory that removed five union leaders in 2012 following protests over the company’s refusal to pay a government-mandated wage increase.[5] In 2017, Cadbury stirred further controversy when it announced that it would remove the Fairtrade certification from its chocolate bars in favor of its own sustainability program.[6]Although the company promises to continue meeting the requirements associated with the Fairtrade logo, such as paying farmers a minimum price of cocoa, this move critically reduced the transparency of Cadbury’s practices and set a poor precedent for other corporations that may opt out of the Fairtrade scheme.  As such, Mondelēz International, the company that now owns Cadbury, was ranked among the lowest of the 15 major chocolate brands in the Green America 2019 Scorecard due to “insufficient measures for ensuring human rights, fair wages, sustainability and transparency in their cocoa supply chains.”[7]


Green America’s Ratings of the 15 Largest Global Chocolate Brands: As confirmed by this chart, Mondelēz International lacks the same level of transparency and commitment to labor rights as many peer companies.

In spite of the national backlash against Cadbury’s delayed response to slave labor in São Tomé in the early twentieth century, multinational chocolate corporations today still perpetuate various forms of labor exploitation as a means of enhancing profitability levels. Although both governments and international human rights organizations have played a key role in establishing universal labor rights, the incentive structure of modern-day corporate finance has increased the pressure on such large firms, including Cadbury, to maximize their economic value and shareholder returns at the expense of their own workers. Cadbury and Mondelēz International’s recent public controversies demonstrate the need for humanitarian organizations, as well as the local governments in the regions where these corporations operate, to monitor such companies’ business practices more closely and actively punish unethical behavior. 

[1]Catherine Higgs, Chocolate Islands: Cocoa, Slavery, and Colonial Africa (Athens: Ohio University Press, 2012), 151. 

[2]Lowell Joseph Satre, Chocolate on Trial: Slavery, Politics, and the Ethics of Business (Athens: Ohio University Press, 2005), 81. 

[3]Higgs, Chocolate Islands, 151.

[4]Yu Zhang and Javier Gimeno, “Earnings Pressure and Long-Term Corporate Governance: Can Long-Term-Oriented Investors and Managers Reduce the Quarterly Earnings Obsession?,” Organization Science 27, no. 2 (2016): 1. 

[5]UFCW, “IUF Workers Being Abused at Mondelez International,” UFCW Safety & Health, last modified March 26, 2013, accessed March 25, 2020, http://safetyandhealth.ufcw.org/. 

[6]Zlata Rodionova, “Cadbury withdraws from Fairtrade chocolate scheme but keeps logo on packaging,” The Independent (London), November 28, 2016.

[7]Green America, “Child Labor in Your Chocolate? Check Our Chocolate Scorecard,” Green America, last modified October 16, 2019, accessed March 25, 2020, https://www.greenamerica.org. 

Bibliography

Green America. “Child Labor in Your Chocolate? Check Our Chocolate Scorecard.” Green America. Last modified October 16, 2019. Accessed March 25, 2020. https://www.greenamerica.org.

———. “2019 Chocolate Scorecard.” Chart. Green America. October 16, 2019. Accessed March 25, 2020. https://www.greenamerica.org.

Higgs, Catherine. Chocolate Islands: Cocoa, Slavery, and Colonial Africa. Athens: Ohio University Press, 2012.

Rodionova, Zlata. “Cadbury withdraws from Fairtrade chocolate scheme but keeps logo on packaging.” The Independent(London), November 28, 2016.

Satre, Lowell Joseph. Chocolate on Trial: Slavery, Politics, and the Ethics of Business. Athens: Ohio University Press, 2005.

UFCW. “IUF Workers Being Abused at Mondelez International.” UFCW Safety & Health. Last modified March 26, 2013. Accessed March 25, 2020. http://safetyandhealth.ufcw.org/.

Zhang, Yu, and Javier Gimeno. “Earnings Pressure and Long-Term Corporate Governance: Can Long-Term-Oriented Investors and Managers Reduce the Quarterly Earnings Obsession?” Organization Science27, no. 2 (2016).

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