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The Unilever Saga: Seven Lessons For Ethical Leaders

 

In some ways, it was a classic case of angels versus the bad guys.

On one side was Paul Polman, CEO of Unilever—long admired as the closest you get to being an ethical leader while running a huge multi-national.

On the other side, a well-resourced group of ruthless deal makers, hell bent on cost-cutting as a core strategy for making money. For once the angels won.

But what lessons can an ethical leader of a business draw from this takeover that failed to take over? Equally, what should shareholders and other stakeholders such as employees conclude about having, or not having an ethical leader at the helm?

Lesson No 1: Being ethical is only partly a protection against predators.

For all Polman’s excellent track record of thinking long term, and investing in building brands, this may not have been enough to save his company from being eaten by a slash and burn predator.

After trouncing the unwelcome predator, Polman is now embarking on much bolder effort to slash costs which he’d at least begun before the latest bid. That exercise is likely to be far more vigorous. Rather him do it though than someone else from outside.

Lesson No 2: Being ethical and thinking long term can pay off if you’ve prepared the ground carefully enough.

From the moment he headed up the company in 2009, Polman went out on a limb and chose to reject the conventional pressures from the market to issue regular updates on how well the business was doing. He put his shareholders on notice.

He declared they should no longer expect to see quarterly annual reports from the company, along with earnings guidance for the stock market. Unilever, he explained, was now taking a longer view. The then new CEO went a step further. He urged shareholders to put their money somewhere else if they don’t “buy into this long-term value-creation model, which is equitable, which is shared, which is sustainable.”

Later he pointed out they’d been successfully replaced by more insightful ones who apparently accepted the brand building and long term approach. His courage seemed to have paid off.

“I don’t call it courage. I just call it leadership.”

At the same time, he defined courage as:

“The ability to put the interests of others ahead of your
own and be able to absorb personal risks”

Lesson No 3: Heading up a large company is no protection from being in the crosshairs of an unwelcome bid. 

It’s clear Polman and his team rather basked in the knowledge of Unilever’s sheer size. They would be less than human if they had not felt some sense of security in scale.  Who after all, would dare to take on such a leviathan?

That was a miscalculation and in that sense being ethical became almost a liability. Explaining the reason for its bid, and how savings could be generated, Kraft could pay lip service to the ethics, while licking its lips at the potential savings.

Lesson 4: Stems from the ancient Arab adage “trust in God but tether your camel.”

Being ethical, profitable, and committed to sustainability was not nearly enough to deter an avaricious bidder driven by the likes of Warren Buffet and the Brazilian head of Kraft.

Together, or separately they may yet return to the fray. Polman created a formidable counter task force consisting of Morgan Stanley, UBS, Deutsche Bank, law firm Linklater and the PR company Tulchan Communications. If nothing else he’s identified a future defence team to be called on as necessary. He’s also given it invaluable practice at working together and in how to be defensive in an aggressive way.

For example, he soon learned Kraft was using PR experts Finsbury. This was owned by the world’s largest advertising agency, WPP. An uncompromising e-mail gunned over to the head of WPP, Martin Sorrel, bluntly reminded the advertising boss that Unilever was one of his company’s largest clients. Finsbury duly vanished from the battlefield.

Lesson 5: Be sure to build good links with the politicians

This is ABC advice for any leader of a multi-national. But for one who aims to run an ethical business, it has particular resonance. The amount of political support for fending off a predator can prove critical.

For example, UK politicians began getting edgy about the fallout for UK jobs from this latest bid, for HQ location and the company’s R&D commitment. Ever since there’s talk about a government re-think of its approach to foreign land grabs that gobble up successful UK companies in their prime.

Also “losing” another high-profile company, after previous takeovers such as Arm Holding, to a foreign bidder could be bad for the country’s morale when it needed a boost. Downing street began to examine the bid, including discussing it with Unilever’s head of communications.

Unilever naturally has good links with politicians. It targets them to influence, direct and shape policies. The company takes an active stance, like all other multinationals with huge market power, aiming to create a more favourable business climate.

It belongs to various lobbying groups and for example, the company has a long-term partnership with the UK Department for International Development. This was formed in 2014 with much publicity, to create jobs, improve water and sanitation and develop sustainable supply chains in developing countries. A community commitment of this sort would probably not survive under new Kraft management When the bid for Unilever was withdrawn, not just Unilever breathed a sigh of relief. It was almost audible from Downing Street too.

Lesson 6: Take promises from predatory bidders with a pinch of salt

Kraft would apparently have been willing to make all sorts of promises to promote its bid; apart from its share price offering, which under close examination proved rather less enticing.

Indeed Kraft made highly specific promises to Polman and his stakeholders. For example that it would retain the company’s name, its R&D Investments and its headquarters in the UK and the Netherlands.

Not really believable.

Kraft’s record of meeting its obligations is hardly encouraging. In 2010 for instance, the food group was publicly censured by the UK Takeover Panel for going back on its promise to keep Cadbury’s Somerdale factory open.

One vocal critic of the closure called Kraft’s U-turn “remote, smug and worst of all duplicitous”.

Lesson 7: Better to have an ethical leader at the helm than just a deal maker

Unilever’s Polman may not wear a halo. Yet he’s highly respected for his ethical approach to business. What other leading CEO would have signed up to the United Nations Human Rights charter, with all its multi-faceted obligations for the entire company, and its enormous and complex supply chain?

Investors around the world are increasingly looking to direct their resources towards ethical orientated companies. For instance, the FTSE 100-listed wealth manager reports investor interest in environmental, social and governance issues has multiplied in recent years.

Unilever is up there with the best of those companies with a social commitment and had the withdrawn bid come down to shareholders’ votes there’s a fair chance many would have rejected it.

Andrew Leigh
Andrew Leighhttp://www.ethical-leadership.co.uk
ANDREW is author of Ethical Leadership, (Kogan Page 2013) and writes regularly at www.ethical-leadership.co.uk. He believes business needs to re-discover the importance of ethics and integrity. As an expert on leadership Andrew writes regularly on ways to help managers be more effective as ethical leaders. His blog stays close to the zeitgeist with a unique perspective on many aspects of leading organisations ethically, including compliance, and engagement. Andrew is a joint founder in 1989 of Maynard Leigh Associates (www.maynardleigh.co.uk) pioneers of using ideas from theatre in business. He was a hands-on practising manager for many years in the public sector, ending his time on the front line running a division with over 1000 staff. Andrew also spent several years as a business and financial journalist, including time at The Observer newspaper. He has written over 20 books on management, leadership teams and so on. Originally trained as an economist, he is a Chartered Fellow of the Chartered Institute of Personnel and Development. He is available for speaking engagements, interviews, feature articles and consultancy.

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