‘Ar­ro­gant’ Unilever un­der fire over botched plans to ditch Bri­tain

The Sunday Telegraph - Money & Business - - Front Page - By Ben Woods, Lucy Bur­ton and Oliver Gill

CITY heavy­weights have branded the board of Unilever “ar­ro­gant” af­ter the Mar­mite-maker lost a fierce bat­tle over plans to aban­don its Bri­tish head­quar­ters. Ma­jor share­hold­ers this week­end crit­i­cised the con­sumer goods gi­ant, claim­ing its failed at­tempt to scrap its An­glo-dutch struc­ture in favour of a sin­gle base in the Nether­lands has dam­aged the cred­i­bil­ity of its lead­ers and re­la­tion­ships with in­vestors.

One se­nior City source said the Unilever board had taken its pro­pos­als to 200 meet­ings with share­hold­ers, but failed to make any changes to its plans even as the move un­rav­elled.

The Sun­day Tele­graph un­der­stands that Unilever made the dra­matic about-turn on Fri­day to pre-empt a three-pronged at­tack from in­flu­en­tial share­holder ad­vi­sory groups. While the Pen­sions and In­vest­ment Re­search Con­sul­tants (PIRC) had al­ready rec­om­mended UK in­vestors vote against the plan, Glass Lewis and In­sti­tu­tional Share­holder Ser­vices (ISS) were also poised to pub­licly op­pose the move.

Unilever is un­der­stood to have seen the re­ports ear­lier in the week and backed down shortly be­fore they were sched­uled for re­lease.

A top-20 in­vestor said: “I think the prob­lem is they were too ar­ro­gant, they as­sumed UK share­hold­ers wouldn’t do any­thing.

“It’s dam­aged re­la­tion­ships with share­hold­ers, but that can be rec­ti­fied with a chief ex­ec­u­tive who is more friendly.”

The Domestos and Ben & Jerry’s owner planned to shift to one Dutch hold­ing com­pany with shares listed in Am­s­ter­dam, Lon­don and New York. Its head­quar­ters would have been moved from Lon­don to Rot­ter­dam. How­ever, it was forced to change tack when a ros­ter of big City names came out against the pro­pos­als.

An­other ma­jor share­holder said: “They mis­read Lon­don. The two guys at the top lost touch; it would be in­ter­est­ing to know whether the fi­nan­cial di­rec­tor ac­tu­ally saw this as an is­sue.”

A se­nior City source said Mar­ijn Dekkers, the Unilever chair­man, now faces a bat­tle to win in­vestor trust be­fore con­tin­u­ing the search for a suc­ces­sor to boss Paul Pol­man. He said: “The board needs to know the chair­man has got in­vestor con­fi­dence to make that [CEO] ap­point­ment. If they don’t think he has they would need to ad­dress that.”

A top-20 in­vestor said the Unilever board were af­fected by a “halo ef­fect”. “They’ve been lauded and praised so much, they think they can do no wrong.”

Some­one at Unilever should have hacked into Paul Pol­man’s Twit­ter ac­count last week and sus­pended it. As the com­pany’s highly con­tentious move to Hol­land spec­tac­u­larly un­rav­elled around him, its evan­gel­i­cal boss was nowhere to be seen. In­stead, he could be found tweet­ing from the UN’S an­nual gen­eral meet­ing in New York his views about cli­mate change, poverty in Africa and the con­sumer goods gi­ant’s suc­cess in fight­ing child labour.

All highly laud­able of course, but when the com­pany you run faces one of the most piv­otal mo­ments in its long his­tory, the chief ex­ec­u­tive should re­ally be fo­cus­ing on the day job.

Per­haps he should have taken mo­ti­va­tion from an­other of his tweets, a quote from Ben­jamin Franklin: “Well done is bet­ter than well said,” but then Amer­ica’s found­ing fa­thers didn’t just talk the talk.

Unilever’s dra­matic U-turn on its plans to re­domi­cile in Hol­land has been ap­plauded, and rightly so. It was a vic­tory for com­mon sense and for share­holder democ­racy – in the end, the over­whelm­ing op­po­si­tion could no longer be ig­nored. It was also a coura­geous de­ci­sion. Many boards would have pushed on in the hope that the vote would squeeze through.

Still, there must now be a full stew­ard’s in­quiry as to how the com­pany was forced into such a hu­mil­i­at­ing de­feat. Make no mis­take, this is a full-blown board­room cri­sis, one of the big­gest in re­cent mem­ory, and worst of all, a calamity en­tirely of its own mak­ing.

There will cer­tainly be some squeaky bums in the in­vestor re­la­tions depart­ment, whose job it is to can­vas share­holder opin­ion. How did they, and Unilever’s cor­po­rate bro­kers at UBS, get it so wrong?

Mean­while, chair­man and fel­low Dutch­man Mar­ijn Dekkers, to­gether with fi­nance di­rec­tor Graeme Pitkethly, have been try­ing to sell the idea to a scep­ti­cal City. They have re­sound­ingly failed to do so.

But Pol­man was the ar­chi­tect of this. Unilever has main­tained through­out that share­hold­ers sup­ported the pro­posal to unify its dual-share quo­ta­tion in Rot­ter­dam be­cause it cre­ates a sim­pler struc­ture. Per­haps, but why dis­man­tle an ar­range­ment that has been in place for 90 years, man­ag­ing even to sur­vive the Sec­ond World War? Be­sides, there is plenty of rig­or­ous anal­y­sis that de­stroys the com­pany’s as­ser­tion that Dutch-listed stocks trade at a pre­mium.

There were un­doubt­edly other mo­tives. The com­pany was shaken to its foun­da­tions when Kraft Heinz sprung a hos­tile bid for Bri­tain’s mighty Mar­mite and Ben & Jerry’s maker last year. It was a bomb­shell. Unilever naively thought it was so big and il­lus­tri­ous that it was un­touch­able. Hol­land, where the au­thor­i­ties are much more pro­tec­tive against for­eign takeovers, of­fered an ob­vi­ous refuge.

There is less con­sen­sus on how much of a fac­tor Brexit was. Pol­man’s crit­ics claim Unilever’s de­par­ture from the FTSE’S blue-chip in­dex was a pro­tec­tive step in case the econ­omy suf­fered long-term dam­age once it leaves the EU.

Pol­man is an arch-re­mainer, and there has been wide­spread spec­u­la­tion that he felt the cur­rent set-up would have been un­work­able once Bri­tain was out of the sin­gle mar­ket.

Luck­ily Mark Rutte, the Dutch prime min­is­ter, a for­mer Unilever em­ployee, was only too happy to pave the way with sev­eral sweet­en­ers. The govern­ment slashed the head­line rate of cor­po­ra­tion tax to 21pc, and abol­ished the 15pc with­hold­ing tax on div­i­dends, two key ob­struc­tions to a uni­fied cap­i­tal and op­er­a­tional struc­ture. In the end it seems, Pol­man got cocky. Here was a man with a per­sona more like a grand priest than a com­pany ex­ec­u­tive, fond of preach­ing about global is­sues on the world stage while Unilever’s share price con­tin­ued its seem­ingly up­ward-only tra­jec­tory.

One share­holder de­scribed it as “the halo ef­fect”, when man­age­ment has had so much praise that they think they can do no wrong even when in­vestors are telling them they are.

There were more than 200 meet­ings with top share­hold­ers but the pro­pos­als were never amended. In­stead, the board stuck its fin­gers in its ears and tried to bull­doze this through.

And de­spite all the ap­pear­ance of a coura­geous re­ver­sal, in the end it was only the prospect of a de­feat that forced an em­bar­rass­ing climb­down.

Unilever’s dou­ble Dutch act will do well to sur­vive the fall­out. As Pol­man is al­ready head­ing for the exit, it seems odd for him to now hang around, but should Dekkers re­ally lead the search for his re­place­ment?

‘In the end it seems, Pol­man got cocky. Here was a man with a per­sona more like a grand priest than an ex­ec­u­tive’

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