Unilever and the erosion of shareholder democracy

The way Unilever went about planning the vote on moving its head office out of the UK wasn’t normal and it wasn’t right, says Merry Somerset Webb.


Paul Polman: disenfranchising the likes of you and me
(Image credit: © 2018 Bloomberg Finance LP)

Plenty has been said about the Unilever debacle you can read most of the opinion on it in this week's magazine, out on Friday but the key point to come out of it for us is the importance of boosting the rights around and the enthusiasm for old fashioned shareholder democracy.

CEOs of big companies can easily fall into feeling that the firm they have been hired to run belongs more to them than to its shareholders. Very little good can come of this as Unilever's board and in particular its boss, Paul Polman, have found out.

In the immediate aftermath of the proposal to move the company's head office and domicile to Rotterdam, UK fund managers (ie, the representative shareholders for most of the rest of us) reported their concerns about the plan being entirely dismissed (a "dialogue of the deaf" says Neil Collins in the FT). No matter what they said or how often they said it (there were 200 meetings between Unilever and top shareholders) there seemed little sense that the board had any plans to listen.

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However, worse than how Unilever was treating its institutional shareholders was how it intended to treat ordinary investors who hold the individual shares (as opposed to units in funds that hold the shares).

In order for the scheme to have gone ahead, 75% of the shares had to vote, but a majority of all shareholders had to vote in favour. That was a tough call, but one that the firm had clearly decided to make a little easier for itself. How? By effectively disenfranchising the likes of you and me (I hold Unilever shares).

If, as I do, you hold your shares on a platform, it is the platform who is the owner on the shareholder register. Look down a lot of registers at the moment and you will see Hargreaves Lansdown at the top, for example. That's not because Hargreaves Lansdown loves the stock, but because the retail investors that use the HL platform love it and own it.

However, Unilever was planning not to give each retail shareholder their votes, but to treat the listed shareholder as the actual and only shareholder. This isn't normal (platform investors can usually vote at AGMs etc if they ask their provider) and it isn't right, either.

We should all be pleased that the UK often utterly useless institutional shareholders made such a fuss about Unilever's plan to move 12% of investors went public with their disapproval, but a good many more must have told the board they were going to vote against it (otherwise the plan would surely not have been pulled).

More of that kind of activism would be good (there's still a fair amount of work to be done on pay, for example ). But for a shareholder rebellion to really represent the kind of shareholder democracy I want to see (the one that will save capitalism!), it needs to include the ability for retail investors to rebel as and when they want as well. This one did not.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.