Unilever should snub the “crazy cost-cutters”

Unilever could soon dispose of some of its best-known brands in a bid to appease shareholders. But should it listen to them?

When Unilever rebuffed Kraft Heinz's takeover bid, shareholders were "split down the middle", says Rob Davies in The Guardian. Half believed the company "should have held talks" about a deal. A "sizeable faction" now wants to see "radical plans to boost their returns". Hence Unilever could soon dispose of some of its best-known brands.

But it's not obvious that Unilever should listen to these shareholders, says former city minister Paul Myners in The Sunday Telegraph. Institutional shareholders are "obsessed with their own short-term interests". They hold such small portions of companies that they "don't care much about any of them". Instead, Unilever needs to be allowed to focus on getting the "best for the business over the long term".

That means not sacrificing the company's "core strengths", particularly its "iron-clad balance sheet", says Richard Buxton of asset manager Old Mutual, in The Sunday Times. And it means ignoring calls to boost profit margins by "cutting research and development" or "screwing over staff", says Jim Armitage in the Evening Standard. Those kind of "short-term hits" give brief boosts to profits but in the long term "you lose loyal customers and sales". While chief executive Paul Polman may be right "to want to placate short-termist investors with some action, he should try to get away with as little as possible not all his shareholders are crazy cost-cutters".

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Ben Judge

Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.

Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.