International investors are rallying behind the banner unfurled last week by The Ethos Foundation and other large Swiss pension fund managers.

Ethos and its allies oppose the Nestlé board's intention to vest its two most senior management roles, chairman and chief executive, in one man - the company's current ceo Peter Brabeck [WAMN: 24-Mar-05].

Institutional Shareholder Services, an influential proxy advisor to a number of institutional investors in the USA, last Thursday urged its clients to back the dissident Swiss pension funds' campaign to veto the dual role at Nestle's annual meeting in April.

Argues ISS head of global research Stanley Dubiel: "We want to send a message to the board that they are taking a step back from best practice. A company of [Nestlé's] size and international nature should be striving to achieve best practice."

The Nestlé board - which, Brabeck apart, consists entirely of recently appointed directors from outside the company - has not taken kindly to investors' objections, threatening to resign en bloc if its plans are thwarted.

Until now it has been customary at the food and beverage giant for the incumbent ceo to replace an outgoing executive chairman. But Rainer Gut (72), the current occupant of Nestlé's chair who takes mandatory retirement next month, insists that no other director is capable of succeeding Rabeck.

That fact alone should set alarm bells clanging, believe many observers.

David Herro, chief investment officer, international at Chicago fund manager Harris Associates, said: "Whether in the short term, the company needs some accommodation, we're willing to listen to that. But over the medium-to-long term, we think we have to stick to principle here."

Brabeck would do well to heed this advice - for it was Herro who deflated a not dissimilar display of hubris by the brothers Charles and Maurice Saatchi, thereby sundering the siblings from their eponymous agency empire back in December 1994.

Data sourced from Wall Street Journal Online; additional content by WARC staff