Paul Polman might be accused of biting the hand that feeds him. The chief executive officer of consumer products giant Unilever NV is tilting at the tenets of modern capitalism – by ending quarterly earnings reporting, trimming hedge funds from the investor base, and treating thousands of small tea farmers with the same regard as shareholders.
Since taking over Unilever in early 2009, the soft-spoken executive has also overseen a share-price doubling by the Anglo-Dutch giant, which generates $68-billion in annual revenues, and owns such bellwether brands as Dove, Hellmann’s, Becel and Lipton Tea.
The 56-year-old, Dutch-born Mr. Polman insists he is not a revolutionary but a counter-revolutionary who wants to restore the concept of long-term, sustainable value. He was in Toronto recently to give the Thomas J. Bata Lecture on Responsible Capitalism hosted by York University.
Aren’t you trying to destroy capitalism from the inside?
Not at all, it is going back to what capitalism is supposed to be. If you go back to Adam Smith, his thoughts were that capitalism was intended for the greater good. When our generation grew up after the Second World War, our parents wanted the same kind of thing; they wanted us to go to university and have a better life. Most of them were working for the greater good of society.
So what went wrong?
We’ve had enormous growth in world population and the re-balancing of the wealth economies – and that’s put huge pressure on our planetary boundaries. And we’ve also been fooling ourselves in what value creation is.
As a CEO, haven’t you prospered from this value creation?
Certainly, capitalism has done positive things – since the 1970s, it has lifted 600 to 700 million people out of poverty and it has given us education, health care, and opportunity for me to be sitting here [as CEO]. But in 2008, we found the way we were doing it – high levels of public and private debt and over-consumerism – is not sustainable. And the financial sector has got out of hand. For example, the real estate value of New York is more than total value of all U.S. manufacturing assets. There is something wrong there. You have to put the financial world at the service of real economy again.
What went wrong with capitalism?
In the 1980s, Milton Friedman came out with theory that said the purpose of business is business and created a very narrow definition of shareholder value creation. And people like Chrysler’s Lee Iacocca, Coca-Cola’s Roberto Goizueta and General Electric’s Jack Welch were exemplifying that idea.
What is different now?
We see the challenges now. When everything was fine and stock markets went up 15 per cent a year, no one asked the questions. But we are in a time when the boundaries are more transparent [between business conduct and share performance]. If you do not do something about [a lapse], the consumer will reject you. Look at the significant market capitalization wiped out from the [BP] oil spill in the Gulf of Mexico, just because of the desire to save costs – to the horsemeat scandal created from a desire to meet short-term numbers. Or manipulating Libor rates to hit profit numbers.
Aren’t you acting like the classic European – top-down, and not shareholder-driven?
I don’t know what the classic European is because there are 550 million of us. The point is if you are single-mindedly focused on any one value driver, you will not be successful. If you only focus on being sustainable, it would be wrong; if you focused just on on shareholder value maximization, that would be wrong. The challenge in this new world is to balance it all.
How did you create change at Unilever?