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CEO of Unilever Paul Polman: ‘Capitalism is in crisis and increasingly social cohesion will be the biggest challenge. Unfortunately, the Occupy Wall Street movement represented frustration without solution, but we have to take the signs seriously. We cannot run away from them.’ (Kevin Van Paassen/The Globe and Mail)
CEO of Unilever Paul Polman: ‘Capitalism is in crisis and increasingly social cohesion will be the biggest challenge. Unfortunately, the Occupy Wall Street movement represented frustration without solution, but we have to take the signs seriously. We cannot run away from them.’ (Kevin Van Paassen/The Globe and Mail)

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Paul Polman: Rebuilding capitalism from the basics Add to ...

When I arrived, the company had come down for 10 years and had become very internally focused. I needed a way to be accepted – as the first CEO from outside [he had worked at Nestlé and Procter & Gamble]. And I needed a more successful business model. It happened at the height of the 2008 crisis which was a great moment to galvanize change, and we said let’s get back to our roots. After all, [people at Unilever] were founders of the sustainable agriculture initiative – marine stewardship for a sustainable fishery, the roundtable for sustainable palm oil, this company is full of that. But somehow we had missed the connection to driving the business in a sustainable way, which can mean sustainable profit.

Was there one defining moment?

I went back into the origins of Unilever, to discover that [founder] Lord [William] Lever invented the bar soap in Victorian Britain because cholera was such a problem. One of two babies did not make it beyond year one. The problem he tried to solve involved hygiene. In the origins of many companies, people were working in the interests of society, not in the interests of shareholders alone. Focusing only on shareholder value is a very destructive concept.

But why end quarterly reporting of profits?

We don’t make our investment decisions on a quarterly basis. and I personally don’t think it is useful that I have to explain that Easter was a little early this year or Ramadan a little later, or it was a cold month for us so we didn’t sell as much ice cream. I don’t think many of our investors want to know that.

We do revenue reporting quarterly, but we report earnings at mid-year and at the end of the year. As a result, our discussions have become more mature. Our shareholder base has changed and we see less volatility in the stock.

Are you successful in banishing hedge funds?

When I joined Unilever, hedge funds were 10 per cent of the shareholder base, and I said that was probably not a good fit with our strategy. Now they are less than 5 per cent. [These statements] were the first things I did; I figured if I did it the first day I was hired, they were not going to fire me. Some people said there was something I had to hide or the new CEO just wanted to set a lower base line. You have to sit through that kind of [criticism]. Now our business communication has become more strategic.

In this volatile environment, the average tenure of a CEO is three to three-and-a-half years, and there is a disproportionate effort by CEOs to satisfy current shareholders. But who are they? You can easily become [distracted] if you listen to all of them, so you have to spend far more time selecting the right shareholders.

What’s wrong with hedge funds?

Everyone has a purpose in society, and there are long-term hedge funds – but you have to find shareholders who fit the philosophy of your company. Look to the Far East where we have 60 per cent of our business. The family companies there take a long-term perspective, and they aim for higher invested capital and continuous growth. I made the same kind of decisions – to double capital spending, and increase R&D, and did it at the height of a recession when everyone was talking cuts, cuts, cuts. You cannot save your way to prosperity.

So you are not trying to destroy capitalism?

I’m trying to make it work. What will happen with the 50 to 60 per cent of youth unemployed in Spain or Greece – or with your children or my children who don’t get a job? What will they think of society? What will they think of capitalism? Capitalism is in crisis and increasingly social cohesion will be the biggest challenge. Unfortunately, the Occupy Wall Street movement represented frustration without solution, but we have to take the signs seriously. We cannot run away from them.

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