StGeorge-Dragon

A GREEN SHOOT AT LAST! UNILEVER CHIEF SPEAKS OUT ABOUT INVESTORS.

Paul Polman says customers come before shareholder value.

The veil of silence lifts at last?

Polman, CEO of the consumer products giant Unilever, where the author started his career, made what could be a ground-breaking statement last week.

Reported in the "Guardian" newspaper on April 6, Polman is quoted as saying, "I do not work for the shareholder, to be honest, I work for the consumer, the customer. I discovered a long time ago that if I focus on doing the right things for the long term to improve the lives of customers and consumers all over the world, the business results will come....I'm not driven and I don't drive the business model by driving shareholder value. I drive this business model by focusing on the consumer and customer in a responsible way, and I know the shareholder value can come".
"Its easy to be a short-term hero. Its very easy for me to get tremendous results in the very short term, get that translated into compensation and be off sailing in the Bahamas. But the goal for this company - and its very difficult to do - the goal is to follow a four or five year process. We need to change the strategy and the structure as well as the culture".

Only a week before, Richard Lambert, the director general of the Confederation of British Industry, asserted to a business audience that too much focus on the short term and too much pay for executives was turning bosses into "aliens". This prompted a wider debate about whether changes were needed in the current way the stock market operates.

As if there was much need for debate! The UK stock market and other investors have, over a period of more than 20 years, virtually ruined the UK large corporate economy. That period has seen a massive sell-off of technology companies and the failure and break-up of many others. More than 80% of large British companies originally quoted on the senior stock exchange no longer appear. They have been bought, broken up or failed, driven by relentless pressures from institutional investors, and latterly by the destructive activities of Hedge Funds and private equity investors.

During this time, there has been virtual silence from the CBI and the leaders of large companies, most of whom are also members of the same CBI. It is to some degree understandable that business leaders have not spoken in public - they know that to be publicly critical of the investment banks was tantamount to the kiss of death, risking adverse press publicity and almost certainly ending the possibility of getting another top job. When the author and John Roberts, then of Judge Business School, Cambridge, interviewed top managers for a research study, the criticism of the financial markets and its associated governance industry was very vocal. But the same managers were quite vehement that they could not be publicly identified.

Maybe Mr. Polman has been helped by the fact that Unilever is an Anglo-Dutch company and the Dutch stand no nonsense from so-called "investors" in the City of London.

When the author, an ex-director of Redland plc, a large company subject to foreign takeover in the middle of a major turn-round strategy, co-authored "Having Their Cake" in 2003, they pointed out very clearly exactly what Mr Polman and Mr Lambert are now saying - and much more.

The reasons for the turn-round? Redland plc had indulged in a sequence of takeovers that destroyed massive amounts of value. All of this to the accompaniment of paeans of praise from investors, who then abruptly withdrew their support when the realised the damage, and were not willing to support a long-term turn-round of a fundamentally sound company.

It seems such a pity that since that time, many a good company has been ruined by an unholy alliance of investors and top managers.

Many managers have earned huge amounts for satisfying the whims of investors and even those who have quietly done their business have been rewarded by the rising tide of executive pay.

Time to stop the rot, tear managers away from the clutches of the City and back to join colleagues in their companies and severely clip the wings of the investment markets, which are a blight on the UK economy.