Hershey Shareholders Allege Company Uses Cocoa Produced Through Unlawful Child
Labor in Africa
Public pension fund seeks court order to inspect Hershey's books; shareholders
claim board has long known of company's dealings with suppliers utilizing
illegal child labor in Ghana and the Ivory Coastand committing human
trafficking violations; suit filed by Grant & Eisenhoferin Delaware Chancery
WILMINGTON, Del., Nov. 1, 2012
WILMINGTON, Del., Nov. 1, 2012 /PRNewswire/ --A public pension fund has filed
suit today against Hershey Company (NYSE: HSY) to inspect the company's books
and records, contending that the Pennsylvania-based confectioner uses cocoa
produced as a result of unlawful child and forced labor in the West African
countries of Ghana and the Ivory Coast.
The demand to inspect Hershey's corporate records was made by Louisiana
Municipal Police Employees' Retirement System, and comes one day after
Halloween, when candy sales and chocolate consumption are at their highest
levels, particularly among children. The court filing marks the beginning of
what could be a major shareholder challenge to the business practices of
Hershey, the largest chocolate producer in North America. The company sells
chocolate in some 70 countries worldwide with over $6.8 billion in net sales
in the past fiscal year.
LAMPERS is represented by noted shareholder and corporate governance law firm
Grant & Eisenhofer. The firm filed the complaint in Delaware's Chancery Court.
In seeking a court order compelling Hershey to make its corporate records open
to shareholder inspection, LAMPERS maintains that the company's board has long
known about the use of "tainted cocoa," yet has persisted in using ingredients
from suppliers in West Africa, where illegal child labor practices are
rampant, including the use of children under 10 to harvest cocoa in the field.
Shareholders contend that the board has consistently permitted Hershey to
engage in unlawful acts in violation of its certificate of incorporation under
Delaware law, and consequently has breached its fiduciary duties.
"That one of the world's leading confectioners ─ whose primary market is
children ─ could exploit child laborers to meet its bottom line is an
outrage," said Grant & Eisenhofer co-managing director Jay Eisenhofer, who is
counsel to LAMPERS. "Rather than open its records to scrutiny, Hershey over
the past decade has thrown up multiple roadblocks to reasonable examination of
its conduct regarding serious questions about illegal child slave labor and
trafficking in its supply chain."
Mr. Eisenhofer added, "Speaking as a father whose children just returned from
trick-or-treating with a cornucopia of candy, much of it made by Hershey, it's
a shock to the conscience that Hershey would be less than forthcoming about
the use of illegal child labor in bringing its products to market.
Shareholders believe such conduct is not what Milton Hershey and his wife, who
were well-known for philanthropy for disadvantaged children, would envision
for the company."
Reports of Abusive Child Labor Practices in West Africa
The complaint notes that as far back as 2001, reports on the systemic use of
child labor, forced labor and human trafficking on cocoa farms in West Africa
raised awareness of the U.S. House of Representatives to the problem. The
House passed a proposed amendment to the FDA and Related Agencies
Appropriations Act that would require "slave-free" labeling for cocoa
Before the Amendment was presented for a Senate vote, major cocoa producers ─
including Hershey ─ promised to correct these human rights abuses without need
for legislation. Later that year, Hershey and the companies signed the
Harkin-Engel Protocol, a compact to eliminate illegal child labor in high
cocoa producing countries in West Africa.
The complaint notes that despite the adoption of the Protocol in 2001,
numerous reports have revealed that its signatories have failed to comply with
their obligations and that forced labor and illegal child labor remain
prevalent within the industry.
Shareholders point to one study on West African child labor, conducted by
Tulane University Law School through a grant from the U.S. Department of
Labor, that found in 2011 that a majority of cocoa farmers and related
suppliers in Ghana and the Ivory Coast employing children are having them
engage in hazardous illegal work conditions. The study determined in 2010 that
there was substantial evidence that West African countries violate human
trafficking laws. The Ivory Coast and Ghana were both mentioned as
destinations for trafficked children.
Hershey's Commitment to Children in Question
Grant & Eisenhofer's complaint details Hershey's tacit support of child labor
law violations in some West African countries ─ despite the company branding
itself as a protector of disadvantaged children, thereby continuing founder
Milton Hershey's century-old legacy of commitment to consumers, communities
The complaint alleges that Hershey has steadfastly refused to disclose the
names of its cocoa suppliers, although its 2011 Corporate Social
Responsibility Report includes Ghana and the Ivory Coast as "Major Sourcing
Countries." In 2006, a separate shareholder group requested that management
report on all sources of cocoa purchased, but Hershey declined to disclose
information on its suppliers. According to the complaint, two years later, the
board acknowledged that problems continued, noting that instances of illegal
child trafficking had been found in its supply chain.
Plaintiffs argue that the Harkin-Engel Protocol has done little to eliminate
child labor law violations from the West African cocoa trade. Hershey and
other signatories swore commitment to implementing industry-wide standards by
2005 that cocoa products would be produced without illegal child labor.
However, the company now claims it will take until 2020 to honor its
obligations, announcing earlier this month that it will require eight more
years to make headway in solving the problems of child labor and human
trafficking on West African cocoa farms.
Hershey has previously conceded its difficulty in determining whether its
suppliers are making illegal use of children, maintaining in its CSR Report
that "many cocoa-growing communities are located in remote and often
difficult-to-access areas." According to the complaint, Hershey has contended
that West African children are often involved in daily farming activities,
which are difficult to monitor.
Mr. Eisenhofer stated, "Hershey's own report essentially admits that many
children continue to work on these cocoa farms. And yet the company turns a
blind eye on studies showing that an estimated two million children work
illegally for long hours, improperly supervised, with dangerous tools on these
farms. Reports indicate that many of the farms are not family operations, but
rather large plantation-like operations, and that many of the children working
the cocoa harvest are victims of human trafficking."
In the complaint, Grant & Eisenhofer argues that Hershey's continued delays in
certifying its products as slave-free has resulted in an erosion of the
company's reputation. This past August, a group of 65 retailers sent a letter
to Hershey's board voicing concerns over the company's inadequate efforts to
address child and slave labor practices within their supply chain.
Shareholders contend that Hershey's conduct is beginning to harm its business
relationships, which could ultimately cost the company millions in profits.
Hershey Denies Latest Shareholder Requests
Grant & Eisenhofer issued its initial demand letter to Hershey on behalf of
shareholders earlier this month, requesting that the company allow inspection
of the minutes of any board meeting during which there was discussion of
unlawful labor or trafficking in the company's supply chain, as well as
compliance with the Harkin-Engel Protocol. The law firm also requested a
complete list of suppliers from which Hershey has purchased cocoa over the
past 10 years.
The complaint states that Hershey denied the requests. The company replied in
an Oct. 12 letter that the demand was based on speculative assertions, and
that the company does not "directly purchase any cocoa beans from West African
farms," but that the "overwhelmingly vast majority of the cocoa materials
purchased by Hershey . . . are processed cocoa products such as cocoa liquor,
cocoa butter and cocoa powder which are purchased from large multi-national
companies." The company further tried to deflect accountability by arguing
that the cocoa beans it purchases from West Africa come through third party
suppliers. Hershey continues to claim that it is doing its part to address
potential human rights violations by committing to use only independently
"certified" cocoa by 2020.
Mr. Eisenhofer challenged Hershey's justifications for refusing to allow
inspection of the corporate records.
"Astonishingly, Hershey's board continues to pass the buck," he said. "That
Hershey buys most of its cocoa products from other suppliers doesn't change
the obligation it undertook in 2001 to certify that its products weren't made
by slave labor. The argument that Hershey's records cannot be made available
because the company doesn't directly purchase beans from West African farms is
absurd. Even indirect purchases of cocoa products support farms operating
illegally on the backs of child labor."
He continued, "The fact that Hershey cannot commit to using 'certified' cocoa
until 2020 ─ 19 years after signing the Harkin-Engel Protocol ─ is tantamount
to an admission that it currently doesn't use 'certified' cocoa, and is in
violation of the law. We hope the court will grant our request to inspect
books and records, so we can move to determine whether the board breached its
fiduciary duties, and the extent to which the company is violating
international child labor, forced labor and human trafficking laws and
The case caption is: Louisiana Municipal Police Employees' Retirement System
v. Hershey Co.
Note: Grant & Eisenhofer P.A. represents institutional investors and
shareholders internationally in securities class actions, corporate governance
actions and derivative litigation. The firm has recovered more than $13
billion for shareholders in the last five years and has consistently been
cited by RiskMetrics for securing among the highest average investor recovery
in securities class actions. Grant & Eisenhofer has been named one of the
country's top plaintiffs' law firms by The National Law Journal for the past
seven years. For more about Grant & Eisenhofer, visit www.gelaw.com.
Allan Ripp 212-262-7477 email@example.com
Ivan Alexander 212-262-7482 firstname.lastname@example.org
SOURCE Grant & Eisenhofer, P.A.
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