Unilever’s Polman goes two months after HQ debacle
Long-serving boss of the consumer goods giant championed responsible corporate behaviour
UNILEVER’S long-serving boss Paul Polman is retiring just two months after a damaging row with British investors, which has threatened the legacy of his decade-long reign at helm of the consumer goods giant.
The maker of Dove soap and Magnum ice creams has named company lifer Alan Jope, who currently heads its €21bn (£18bn) personal care business, as Mr Polman’s successor.
The appointment of the Scottishborn director has been seen as a move to reassure the City following its headquarters debacle, during which it was argued the UK’s interests had been marginalised by Unilever’s Dutchleaning international board. The headquarters move would have meant the company left the FTSE 100 index, potentially forcing many British funds to sell their stakes.
Chairman Marijin Dekkers claimed that Mr Polman’s retirement was not related to the failed attempt to shift Unilever’s headquarters to Rotterdam, highlighting that the process to search for a successor had begun last year, led by headhunters at Egon Zehnder. “The appointment of Alan Jope as the successor of Paul has nothing to do with the simplification process,” he said.
Investors yesterday said that they were not surprised by the timing after making it known that a change of leadership should be “accelerated” following the headquarters debacle. Mr Dekkers said that the Unilever boss informed the board of his decision on Wednesday afternoon.
The humiliating decision to scrap the move to Rotterdam stains the reputation of the industry leader who had become known as much for his “hippy” approach to sustainable capitalism as running a global multinational.
Yesterday the 62-year-old tweeted: “It’s been a great honour to lead this team for the past 10 years and together build a #sustbiz that has made a difference to millions of lives.”
Mr Polman, who had famously considered becoming a man of the cloth before entering the business world, runs marathons to raise money for Kenya’s visually impaired and was a regular at the World Economic Forum in Davos, sharing platforms with Al Gore, the Prince of Wales and Bono on responsible corporate behaviour.
Mr Dekkers said that the chief executive’s “role in helping to define a new era of responsible capitalism, embodied in the Unilever Sustainable Living Plan, marks him out as one of the most far-sighted business leaders of his generation”.
The Dutchman raised eyebrows early on in his leadership by remarking he was not a “slave” to shareholders. His deep-rooted belief in long-term investing paved the way for his robust defence from US bidder Kraft, which he argued would destroy Unilever’s value and its ingrained commitment to sustainability.
He was supported by investors for his stern rebuttal of Kraft’s band of Brazilian cost-cutters, and he has been vindicated: Kraft’s shares have almost halved since its retreat while Unilever’s have risen by 13pc. Mr Polman did acknowledge the audacious takeover bid was a wake-up call and he was jolted into action to vow to boost profit margins and launch a €5bn share buyback.
Columbia Threadneedle, which was a vocal critic of Unilever’s plan to establish its base in Rotterdam, said that Mr Polman’s tenure “has been an unqualified success; he leaves with close to a 300pc return for shareholders”.
Mr Jope’s hiring has led to speculation about whether Unilever will now pursue a spin-off of its slower-growing food business. He will be paid a fixed salary of €1.4m, excluding bonuses.
When is a forecast not a forecast? When it’s a Bank of England Brexit scenario. The Bank has come under widespread criticism for saying that the UK economy will contract by 8pc in the event of a disorderly Brexit, which would be the worst slump since the Second World War. Unemployment will rise to 7.5pc. House prices will fall 30pc. A pound will be worth less than a dollar. Interest rates will rise to 5.5pc. The seven seals will be opened. A pale horse will appear and its rider will be Death.
Except – and this really is a rather crucial point – the Bank didn’t say that these things will happen. What it did was model a range of Brexit scenarios. The worst-case scenario is a disorderly Brexit in which the UK falls out of the European Union without the softening effect of a transition period. The scenario has been deliberately engineered to be as bad as possible.
We know this because on the same day that the Bank produced its Brexit scenarios it also produced the results of the latest stress tests with which it assesses the resilience of UK lenders. The stress tests are also worst-case scenarios. There is no point testing whether British banks can handle the UK economy catching a slight sniffle; you want to know that they can deal with full-blown pneumonia. And the full-blown pneumonia in the bank stress tests is the same as the doomsday Brexit scenario.
One of the elements of the scenario that people have latched on to is that it assumes interest rates will rise to 5.5pc and there will be no fiscal stimulus. There is a theoretical reason why the Bank might raise rates to mitigate the supply side shock in the event of a no-deal, no-transition Brexit. But would they really hike into the teeth of an economic gale? One thing’s for sure, no Chancellor would just sit on their hands in such a situation.
In other words, some of the elements of the scenario are plausible but unrealistic. The Bank is straining credibility in order to produce as bad an outcome as possible. Which is exactly what you want a responsible regulator to do in order to ensure that, 10 years after the financial crisis, banks can withstand the worst. And it is also why Mark Carney was so keen to stress that this was not a forecast, accusing one journalist at the press conference of dropping the “f-word”.
Which would suggest that Carney doesn’t deserve the opprobrium being flung at him from every point on the political spectrum.
Well, not so fast. Because the Bank must have known that its scenarios would be interpreted as forecasts and could have done more to mitigate the confusion by, for example, not releasing them on the same day that the Treasury was releasing its own Brexit forecasts.
It will have known that there would have been confusion because it has happened before. In September Mark Carney briefed the Cabinet on the Bank’s preparations for Brexit. He told the assembled politicians, some of whom are reasonably clever, that UK banks could withstand house prices falling by 35pc. Lo and behold, the politicians took this as a warning that house prices would fall by a third in the event of a no-deal Brexit.
This time the Bank has even managed to confuse Paul Krugman. When the Nobel Prize winning economist, who is no fan of Brexit, is saying that the Bank of England has “really gone pretty far out on a limb here”, you have a problem.
To be misunderstood on such an important point once may be regarded as a misfortune; to be misunderstood twice begins to look a lot like carelessness.
‘The Bank is straining credibility to produce as bad an outcome as possible’