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| Unilever board cannot wash its hands of Rotterdam HQ mistake | Unilever board cannot wash its hands of Rotterdam HQ mistake |
| (about 1 month later) | |
| Even as it executed a humiliating U-turn, the board of Unilever could not bring itself to admit it made a crass error in proposing to move the headquarters to the Netherlands. | Even as it executed a humiliating U-turn, the board of Unilever could not bring itself to admit it made a crass error in proposing to move the headquarters to the Netherlands. |
| Instead, it comforted itself with the idea there was “widespread support for the principle behind simplification” – a line that ignored the heart of the quarrel. This affair was about practicalities, not principles. Unilever never made a good case for picking Rotterdam over London. | Instead, it comforted itself with the idea there was “widespread support for the principle behind simplification” – a line that ignored the heart of the quarrel. This affair was about practicalities, not principles. Unilever never made a good case for picking Rotterdam over London. |
| The choice was made after 10 months of boardroom contemplation. The board then defended its stance for seven more months before Friday’s capitulation. | The choice was made after 10 months of boardroom contemplation. The board then defended its stance for seven more months before Friday’s capitulation. |
| Unilever scraps plan to move HQ from London to Rotterdam | Unilever scraps plan to move HQ from London to Rotterdam |
| Marijn Dekkers, Unilever’s chairman, who will be lucky if he hangs on to his job, boasted last week that more than 200 meetings had been held with investors. Yes, Unilever has wasted a lot of time trying to force its shareholders to swallow a rotten plan. | Marijn Dekkers, Unilever’s chairman, who will be lucky if he hangs on to his job, boasted last week that more than 200 meetings had been held with investors. Yes, Unilever has wasted a lot of time trying to force its shareholders to swallow a rotten plan. |
| Fund managers’ unhappiness wasn’t hard to detect from the off. There was a mighty clue that the City was not in a cooperative mood when Unilever suffered a 36% rebellion in May against its pay policy. | Fund managers’ unhappiness wasn’t hard to detect from the off. There was a mighty clue that the City was not in a cooperative mood when Unilever suffered a 36% rebellion in May against its pay policy. |
| But the board ploughed on, provoking near-daily public rebukes in the past fortnight from investment firms. By the end, Unilever almost had a full house of rejections from the old-school London club of big fund managers – Aviva Investors, Columbia Threadneedle, L&G, M&G and Schroders. | But the board ploughed on, provoking near-daily public rebukes in the past fortnight from investment firms. By the end, Unilever almost had a full house of rejections from the old-school London club of big fund managers – Aviva Investors, Columbia Threadneedle, L&G, M&G and Schroders. |
| The company faced several problems. The first was the likely ejection of its shares from UK indices – notably the FTSE 100 – if the corporate domicile switched to the Netherlands. Tracker funds feared becoming forced sellers and Unilever had no real counter to the point. Its argument, in effect, amounted to inviting such funds to think of the greater good of all shareholders. That was never going to fly: funds are not paid to vote against their own interests. | The company faced several problems. The first was the likely ejection of its shares from UK indices – notably the FTSE 100 – if the corporate domicile switched to the Netherlands. Tracker funds feared becoming forced sellers and Unilever had no real counter to the point. Its argument, in effect, amounted to inviting such funds to think of the greater good of all shareholders. That was never going to fly: funds are not paid to vote against their own interests. |
| Unilever’s board seemed to have hoped the index-compilers at the London Stock Exchange would be flexible for a business as big and famous as theirs. That always looked a long shot, as it proved. | Unilever’s board seemed to have hoped the index-compilers at the London Stock Exchange would be flexible for a business as big and famous as theirs. That always looked a long shot, as it proved. |
| The main boardroom failure, however, was the loose and breezy explanation for choosing Rotterdam. | The main boardroom failure, however, was the loose and breezy explanation for choosing Rotterdam. |
| Attempting to deflect the charge that Unilever was fleeing from Brexit, Dekkers and Paul Polman, its chief executive, pointed out that two of the three operating divisions would still be in the UK and more employees would be in the UK than in Netherlands. But surely that was an argument for favouring London if it would still be closer to the on-the-ground action? | Attempting to deflect the charge that Unilever was fleeing from Brexit, Dekkers and Paul Polman, its chief executive, pointed out that two of the three operating divisions would still be in the UK and more employees would be in the UK than in Netherlands. But surely that was an argument for favouring London if it would still be closer to the on-the-ground action? |
| Besides, London is home to Europe’s biggest capital market, which is usually an important consideration for large international companies. Picking Rotterdam just looked perverse. | Besides, London is home to Europe’s biggest capital market, which is usually an important consideration for large international companies. Picking Rotterdam just looked perverse. |
| Or perhaps the motive was protectionist. Polman had described the takeover approach from Kraft Heinz in January 2017 as “a near-death experience” for the company he has led for a decade. As he prepared for retirement, did he regard the Netherlands, with its stricter takeover rules, as a safer home for his successors? | Or perhaps the motive was protectionist. Polman had described the takeover approach from Kraft Heinz in January 2017 as “a near-death experience” for the company he has led for a decade. As he prepared for retirement, did he regard the Netherlands, with its stricter takeover rules, as a safer home for his successors? |
| The board’s biggest tactical miscalculation was to think it could clear two high voting hurdles | The board’s biggest tactical miscalculation was to think it could clear two high voting hurdles |
| Unilever denied protectionism played a role but, again, its pleas were unconvincing. Polman banged on about takeover rules in almost every interview he gave after the encounter with Kraft. In the process, he annoyed many UK fund managers who would happily have stayed loyal if the Kraft scrap had gone the distance. | Unilever denied protectionism played a role but, again, its pleas were unconvincing. Polman banged on about takeover rules in almost every interview he gave after the encounter with Kraft. In the process, he annoyed many UK fund managers who would happily have stayed loyal if the Kraft scrap had gone the distance. |
| Or perhaps favouring Rotterdam just revealed national bias in the boardroom. It was impossible to ignore the fact that Dekkers and Polman are Dutch and Mark Rutte, the Dutch prime minister, is a former Unilever executive. The whole thing just looked too cosy. Unilever was even prepared to jump before Rutte had got his controversial tax changes, which would have benefited foreign shareholders in a Dutch-domiciled Unilever, through parliament. | Or perhaps favouring Rotterdam just revealed national bias in the boardroom. It was impossible to ignore the fact that Dekkers and Polman are Dutch and Mark Rutte, the Dutch prime minister, is a former Unilever executive. The whole thing just looked too cosy. Unilever was even prepared to jump before Rutte had got his controversial tax changes, which would have benefited foreign shareholders in a Dutch-domiciled Unilever, through parliament. |
| The board’s biggest tactical miscalculation was to think it could clear two high voting hurdles. Unilever needed a 75% majority of the UK votes but also a simple majority among all UK shareholders by number. In the latter poll, everyone would get one vote whether they owned 100 shares or 100,000. Small private shareholders are hard to read and, since there are 36,000 of them, versus only 8,500 institutions, Unilever didn’t really know what it was up against. | The board’s biggest tactical miscalculation was to think it could clear two high voting hurdles. Unilever needed a 75% majority of the UK votes but also a simple majority among all UK shareholders by number. In the latter poll, everyone would get one vote whether they owned 100 shares or 100,000. Small private shareholders are hard to read and, since there are 36,000 of them, versus only 8,500 institutions, Unilever didn’t really know what it was up against. |
| In the end, one has to diagnosis a bad case of corporate hubris. Boards of companies the size of Unilever are used to getting their own way. They have huge lobbying power and can usually rely on timid fund managers to fall into line. So one can see this a rare – and very healthy – example of institutions and ordinary shareholders biting back. | In the end, one has to diagnosis a bad case of corporate hubris. Boards of companies the size of Unilever are used to getting their own way. They have huge lobbying power and can usually rely on timid fund managers to fall into line. So one can see this a rare – and very healthy – example of institutions and ordinary shareholders biting back. |
| It is also a triumph for common sense. Unilever’s arguments were shockingly thin. Its star-studded, and highly paid, board says it “will now consider its next steps”. | It is also a triumph for common sense. Unilever’s arguments were shockingly thin. Its star-studded, and highly paid, board says it “will now consider its next steps”. |
| They should try apologising for the waste of time and undoubtedly substantial advisers’ fees. Then ask whether new non-executive directors are required. | They should try apologising for the waste of time and undoubtedly substantial advisers’ fees. Then ask whether new non-executive directors are required. |
| Unilever | Unilever |
| Nils Pratley on finance | Nils Pratley on finance |
| Netherlands | Netherlands |
| Europe | Europe |
| London Stock Exchange | London Stock Exchange |
| London | London |
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