Paul Polman wanted to be a priest, then a doctor. His fallback was business, where his drive and determination have taken him to the top. He is now running Unilever, the Anglo-Dutch consumer products group.
The multinational — which produces household brands including Sunsilk shampoo, Axe deodorants, Persil laundry tablets and Magnum ice cream — generates about €50bn a year in revenues and reaches 2.5bn people a day.
How does he lead? For a moment, the 61-year-old Dutchman professes to be uncomfortable. This sits oddly with the same chief executive who this year fought off a $143bn hostile bid from Kraft Heinz of the US, with a counter-attack that galvanised everyone from investors to Bono, the U2 frontman.
Since he took the helm nine years ago, Mr Polman, an earnest man who speaks in torrents of words, has waged a public campaign for CEOs and shareholders to improve people’s lives by providing employment and sustainable manufacturing. By eroding poverty, wealth creates consumers, which is convenient. But in Mr Polman’s world view the two can be combined, as at Unilever’s origins in the 1880s when William Hesketh Lever established a soap manufacturer with a social mission.
“The [purpose] of Lord Lever when he made his Sunlight bar soap, was to address the issues of hygiene in Victorian Britain,” he says. “The reason I believe business should be around is to serve society.”
Mr Polman’s aim soon after he took over in 2009 was to double the company’s revenues while halving its environmental impact. Though the hunt for his successor has begun, he intends to remain in post throughout 2018.
He may not be a clergyman, but his tendency to preach makes him the capitalist with a moral compass. Mr Polman knows his style — sometimes hectoring — can annoy people. But he cannot resist trying to convert them.
“You have to watch it that you don’t steamroller people,” he acknowledges. Unless you persuade the people under you to follow you, there is no point in being a leader. His father used to say: “If you want a lot of people under you, you could be a tender in a graveyard.”
His biggest leadership moment came in February, when Kraft Heinz, the US food group, made a play for Unilever — a daring move that came out of the blue. Kraft Heinz is controlled by Warren Buffett’s Berkshire Hathaway investment group, and Brazilian investor-led 3G Capital, the private equity group, which has elevated serial dealmaking and ferocious cost-cutting to a fine art.
Mr Polman finds it hard to contain his disdain for the 3G Capital way of doing business, tending to refer to the group as “these people”. “No question that any bank is just drooling over these people to give them $50bn, $60bn. No question that the financial market allows you to leverage up your balance sheet five, six times,” he complains.
The approach became public on the FT’s Alphaville site on a Friday morning. By Sunday evening, the bid was dead. It was an unusual public defeat for 3G. How did Mr Polman achieve it? “We have a board that is very supportive and understands our business model.” Chaired by Marijn Dekkers, former CEO of Germany’s Bayer pharmaceutical group, the board dismissed the offer as too low and making no strategic sense.
In Mr Polman’s words, the bid was “clearly a clash between a long-term, sustainable business model for multiple stakeholders and a model that is entirely focused on shareholder primacy.” Mr Polman and finance director, Graeme Pitkethly, set up a sub-group to move quickly and reply to Kraft Heinz. “We made very clear that we were not interested. They didn’t hear us for some reason. We sent letters. They didn’t read them for some reason.”
The reason I believe business should be around, is to serve society
Advisers were hired. “You get 20 lawyers around you and 50 bankers, and basically the lawyers all tell you what you cannot do. They never tell you what you can do. And the last thing you want to hear is what you cannot do.”
Mr Polman knew that, without decisive action, activist investors could pile into Unilever on the Monday, giving succour to Kraft Heinz — “these people have a history of not giving up”.
Neither the UK nor the Dutch governments played much of a role. “It was the weekend; [the bid] was public on Friday and stopped on Sunday. That’s not exactly the speed with which governments work,” he says.
It then became apparent to Mr Polman that Mr Buffett did not seem aware that the offer would have to go hostile to succeed — the Sage of Omaha has always publicly opposed hostile takeovers.
“Unknown to us at that time, Warren wasn’t actively involved. With the confidence he has, probably, in those people, he had delegated [the bid] to these people — that would be my best interpretation,” says Mr Polman.
Mr Buffett was duly bombarded. “Warren was approached by probably more people than he expected,” says Mr Polman, declining to say who did so. “As soon as Warren discovered that this was a hostile takeover, the tone of the conversation became different.”
In its statement “amicably” agreeing to desist, Kraft Heinz said it had “the utmost respect for the culture, strategy and leadership of Unilever”.
Even if the bid had not been killed off, Mr Polman is convinced it would have faced huge opposition from Unilever’s supporters among charity workers, unions and shareholders. A YouGov petition with 100,000 signatories was ready. Bono, the rock singer and campaigner, had already called Mr Polman offering to write a song, he says.
With hindsight, Mr Polman says the Kraft Heinz bid may have been averted if he had communicated Unilever’s financial targets better. He says he was “very conservative” in the investor seminar of November 2016, which suggests he could have gone further. After the bid he raised Unilever’s profit margin target from 16 per cent to 20 per cent by 2020, launching a €5bn buyback and increasing the dividend, which contributed to a rise in the share price.
But the tension between balancing short-term investor expectations and the longer-term has not gone away. Nor have demands on his time. His biggest weakness is an inability to turn down worthwhile projects — that day, he met President Santos of Colombia to talk about investing in former Farc-controlled regions.
“When there are so many issues that need to be addressed, and when you are in a position to do something about that, I feel that sense of duty.”
How to lead: three questions to Paul Polman
Who is your leadership hero?
The many people who are driven by a strong purpose to truly dedicating their lives to others, often at the expense of their own—– doctors fighting Ebola in east Africa, or those working with deaf and blind people are good examples.
If you were not a CEO, what would you be?
CEO is just a title and irrelevant. I would look for where I could make the biggest contribution to drive more sustainable and equitable growth.
What was the first leadership lesson you learnt?
The first lesson comes on the day you are born and breathing on your own — that you are dependent on the environment you live in. The most useful lesson comes when you realise that it’s not about yourself, but putting yourself to the service of others.
Ask an outsider
Scott Moeller
Expert on mergers and acquisitions
Any well-run publicly listed organisation should be prepared to see off a hostile takeover, with defence plans in place ready to activate quickly, writes Professor Scott Moeller, director of the M&A Research Centre at Cass Business School.
The obvious advice is to implement those plans immediately. But because hostile takeovers are rare (less than 3 per cent of public target offers are hostile, according to Mergermarket), companies often have no plans ready. Many may think, somewhat hubristically, “it won’t happen to me”.
But then it happens. And what if the hostile bidder also makes its offer public? Your shareholders will demand a statement — and guidance — from you.
“I would try to gain back some control of the situation by assembling quickly a team that includes the board, specialist hostile defence advisers (investment banker, lawyer and PR) and key senior executives,” says Prof Moeller. “Then communicate your defence externally. Fast.”
Copyright The Financial Times Limited 2017
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