A day after Halloween – when candy sales and chocolate consumption are at their highest levels, particularly among children – a public pension fund, Louisiana Municipal Police Employees’ Retirement System (LAMPERS), has filed a lawsuit against Pennsylvania-based chocolate making company, Hershey, for using unlawful child and forced labour in the West African countries of Ghana and the Ivory Coast.
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 public pension fund system is demanding a court order to inspect Hersey’s records to ascertain if the candy-maker knew its suppliers in Ghana and Ivory Coast used child labour.
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.
“There are substantial grounds to believe, therefore, that Hershey’s chocolate empire is built on a foundation of West African child labor,” the pension fund said in the complaint.
LAMPERS is represented by noted shareholder and corporate governance law firm Grant & Eisenhofer, who filed the law suit in Delaware Chancery Court, where the Hershey, Pennsylvania-based company is incorporated. The case is Louisiana Municipal Police Employees’ Retirement System v The Hershey Co, Delaware Court of Chancery, No. 7996.
If the court forces Hershey to turn over the documents, the pension fund could look for evidence to bring a lawsuit against the company and its directors for not properly overseeing the business and they could be held liable for damage caused to the company’s reputation.
Hershey, in October, promised to start using certified cocoa — which is produced according to certain social, economic and environmental standards – for all of its chocolate products by 2020.
A report submitted by Tulane University under contract to the U.S. Department of Labour identified that some 1.8 million children, ages 5 to 17, work on cocoa farms in Ivory Coast and Ghana. The study also found evidence of child-trafficking, forced labour and other violations of internationally accepted labour practices.
“That one of the world’s leading confectioners – whose primary market is children – could exploit child labourers to meet its bottom line is an outrage. 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 labour and trafficking in its supply chain,” said Grant & Eisenhofer co-managing director Jay Eisenhofer, who is counsel to LAMPERS.
“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,” Eisenhofer added.
Activists have long pushed companies to fight child labor in the cocoa industry. The most common tasks carried out by children on cocoa farms are filling plastic bags for nurseries, breaking up pods and transporting plants, according to the Fair Labor Association.
Under local law, carrying heavy loads is one of the worst forms of child labor, and the use of machetes and knives to break pods is a hazardous task, the FLA said. According to a government survey in 2008, about 89 percent of Ivory Coast children were involved in growing cocoa.
However, in an e-mailed statement, Hershey said it “has been supporting cocoa-growing communities for more than 50 years. We have been involved in on-the-ground programs, working with public and private partners, to help eliminate inappropriate labour practices in cocoa communities.”
Its spokeswoman, Leigh Horner, also said Hershey “is engaged with the U.S. Department of Labor and the United Nations’ International Labor Organization in programs to address these labor issues.”
The 118-year-old maker of Hershey’s Kisses, Reese’s Peanut Butter Cups, Kit Kat and Almond Joy, sells chocolate in some 70 countries worldwide with over $6.8 billion in net sales in the past fiscal year.