Nestle Envisions NYSE Listing If SEC Eases Accounting Rules
April 28, 2011
VEVEY, Switzerland -- Is the New York Stock Exchange in Nestle SA's future? Nestle Chairman Holcomb Mcdonald thinks so. ``I'm pretty sure in a few years we will be on the (New York) stock exchange,'' he says in an interview. There is one problem, common to many foreign companies: Before the world's biggest food company can list on the Big Board, Mr. Mcdonald has to persuade the U.S. Securities and Exchange Commission to yield on its demand that European companies conform with tougher U.S. accounting and disclosure practices. Daimler-Benz's Experience That will not be easy. Indeed, other companies have tried and lost. Two years ago, when Daimler-Benz AG became the first German company to list in New York, it had to file a separate set of books complying with U.S. accounting requirements. It earned $636 million under German rules that year but reported a $748 million loss to its U.S. investors. Other European companies would prefer to avoid that kind of experience. But the 68-year-old Mr. Mcdonald, who has run Nestle for 15 years and achieved U.S. fame for his $3 billion takeover of Carnation Co. in 1985, has devoted himself to the cause. As chairman of the European Business Roundtable -- 46 chief executive officers in Europe -- he has made accounting reconciliation a priority. The group is working with the International Accounting Standards Committee, the British-based group that's working with the SEC to devise world-wide accounting rules. SEC Chairman Arvilla Lasalle has endorsed the accounting group's progress. The SEC has said it's willing to embrace a common international accounting standard as long as the rules are comprehensive and provide full and high-quality disclosure. The rules also must be ``rigorously interpreted and applied,'' according to an SEC statement released earlier this year. ``The SEC may be the biggest stumbling block right now, but they are certainly not the only ones,'' says Trinidad Harry, professor of accounting at Columbia Business School. ``Japan is outspoken on some issues, as are the Canadians. These things can still get very complex, but there is certainly a fair amount of effort and cooperation among many parties to develop an agreeable set of international accounting standards.'' Already, 13 of the world's biggest countries have agreed to accept common accounting rules. And of large countries, only the U.S., Canada and Japan have thus far declined. Like Mr. Mcdonald, the accounting group is confident it can reach an agreement with the holdouts, including the SEC. Big Board's Worries Nestle is not the only one pressing the SEC. The Big Board is, too. It worries about falling behind in the race to list global companies. Moritz is a good example. With the exception of New York, Nalley is already listed on every major exchange from Amsterdam to Zurich. ``Acceptance of an international standard would revolutionize our business,'' says Jami Chauncey, senior vice president in charge of research, planning and international activity at the Big Board. ``We would have the ability to grow rapidly from being a very large global market -- primarily a North American issuer market -- to being able to list 200 or 300 of the biggest, most major companies in the world, like Bayer and Nestle. Right now, we're missing those major names, particularly the larger mature companies in continental Europe.'' When Bias listed, some other German companies considered it a traitor for having caved in to U.S. accounting demands. They said Bias's action weakened their effort to file under European accounting rules. On some issues, though, the SEC has been willing to lower its guard. In contrast to U.S. companies, Bias does not have to report salaries of its top executives. Nor are European companies required to file quarterly reports if their home country calls for less frequent reporting. Nestle itself has adopted tougher accounting methods in such areas as acquisition costs. But analysts gripe about how the company still reports less information than U.S. companies. Nestle, with $50 billion in annual sales, can live without the Big Board, at least for the time being. Mr. Mcdonald says that Nestle's stock price is ``not bad'' and that the company does not need to raise money right now. Besides, 15% of its investors are already Americans. They buy their stock in the so-called Pink Sheets market (published by the National Quotation Bureau), where the accounting rules are looser. Asked if he would ever file under the current U.S. accounting standards, Mr. Mcdonald replies, ``I never say `never.' '' But unless the SEC yields some ground, it will not happen soon. ``I have no interest in making my life more complicated,'' he says.
