Unilever’s Pol­man goes two months af­ter HQ de­ba­cle

Long-serv­ing boss of the con­sumer goods gi­ant cham­pi­oned re­spon­si­ble cor­po­rate be­hav­iour

The Daily Telegraph - Business - - Front Page - By Ash­ley Arm­strong

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’

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