Damien Phillips says that like voters, shareholders must look beyond CEO rhetoric.

As UK voters went to the polls last month to cast their ballots on an issue of critical importance for the third time in two years, they faced a minefield of claim, counter-claim, spin, evasion and even outright disinformation before forming their judgement. Even for seasoned journalists with access to information in real time, it can be a full-time job separating fact from fiction.

Yet for shareholders in major multi-nationals, assessing the performance of the senior leadership in those companies they own and checking the high rhetoric of CEOs versus the real action on the ground can be an even greater challenge. Information is often diffuse, with corporate action taking place across multiple continents and it can be difficult to piece together the complete picture from disparate sources. Added to this, shareholders must contend with the same well-oiled PR machines seen in the world of politics, attempting to carefully manage public perceptions.

It might be argued that no more stark is the gulf between image and reality than that of Unilever. Its CEO, Paul Polman, has been called a "sustainability evangelist" and lauded by the business press as a saviour of the world. He is a Board Member of various organisations advocating for action on climate change and poverty, and was recently granted the UN Foundation's "Champion for Global Change Award". His self-proclaimed personal mission as CEO is to galvanise the company "to be an effective force for good".

Unfortunately, despite introducing ground-breaking sustainable packaging for its products, Unilever's record under Polman has struggled to live up to these goals. Since Polman was hired in 2009, Unilever has faced charges of environmental degradation, mercury poisoning of its workers, country-wide sexual harassment, and developing country exploitation.

In India, Unilever's first human rights report found hundreds of cases of poor health and safety conditions in factories, with only 13 per cent of cases resolved. Yet only after seven years as CEO did Polman direct Unilever to finally settle a dispute with workers over mercury poisoning and corporate negligence on "humanitarian considerations" after it had sold a stockpile of crushed glass tainted with mercury. The Indian Government found that the exposure hadn't just hampered the lives of workers, but had also taken a toll on their new-born children".

An exposé by investigators for The Irish Times found female Unilever employees in Kenya, paid ?3 a day to pluck tealeaves, were having to spend a quarter of their wage to bribe their supervisors to avoid sexual harassment. A report published by the Netherlands-based Centre for Research on Multinational Corporations claimed that "the existing system of checks and balances has failed to stop abuses of workers on Unilever's Kenyan estate".

Addressing a packed gathering of students at the London School of Economics in 2016, Polman claimed "We could be the generation, in the next 15 years, that solves the issue of poverty". And yet, back in India, where Unilever buys tea from producers in Assam and Tamil Nadu, but does not own the estates ? it has been claimed that "workers are kept permanently on rolling short-term contracts, denying them health and pension benefits, and are often exposed to dangerous pesticides while working".

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In a move which some might consider hypocritical Polman, as an "Oslo Business for Peace Award" recipient, directed Unilever to launch a lawsuit against 'Just Mayo' in 2014 after losing market share to the small vegan food startup. It later had to drop the suit amid "consumer backlash over its David vs. Goliath nature" and a public relations quagmire which exposed Unilever's vulnerability to nimbler rivals.

With what might be regarded as a less than stellar record on Polman's own terms, what about Unilever's business performance? The economist Milton Friedman once argued that the primary social responsibility of a CEO is to his stockholders, customers and employees. In his view, business's primary aim must be "to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game".

Unfortunately, a series of poor decisions have failed to produce the long-term growth promised at the start of Polman's tenure. Its profits have fallen, its business has stagnated, and it has regularly revised growth projections downward.

In 2014, Unilever hit a five year low in sales growth. In the UK in 2016, Polman's decision to raise prices for all Unilever goods by ten per cent in the wake of Brexit prompted Tesco to pull its products from the shelves, caused Unilever stocks to fall by three percent and went down like a cup of cold sick with British consumers.

In January 2017, a suffering share price and elusive growth were blamed on "tough market conditions". After Polman rejected a $143 billion takeover bid from Kraft Heinz in February 2017, Unilever stocks immediately fell five percent and it was forced to announce a strategic review aimed at improving earnings to "accelerate delivery of value" for its shareholders. With Unilever's profit margins half those of Kraft Heinz, commentators suggested the business could be run more efficiently.

Commenting on the review, the respected British investor Neil Woodford felt that, "If it requires people to come in from the outside with a crazy takeover bid for the focus to change, that implies that the current management were not doing their jobs properly."

As Neil Woodford acknowledged, this is a contentious view as "the City loves Paul Polman". Yet adoration for a CEO does not reflect good management practices, genuine advances in sustainability, shareholder returns or promised long-term growth. As Unilever's Board considers the succession of its chief executive, its shareholders should consider looking beyond the high-minded rhetoric and asking whether they need a new CEO who can back their words with action.


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