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