There is not much gain for any big corporation or its chief executive to upset a sitting Prime Minister and government. Hence the announcement that Unilever had picked Rotterdam over London as its global headquarters was closely co-ordinated with Number 10.
The result of such co-ordination is what is to be expected. As bland as possible a statement. An attempt to shift the focus from the HQ decision to an overall restructuring of the company. A couple of inoffensive reasons given for the decision. And, most important, a statement that fools nobody and that nobody believes – yet another small step in the erosion of trust in both politicians and corporations.
First the ‘official’ reasons. The Dutch BV represents 55 per cent of the issued share capital – a majority. The shares traded in the Netherlands are more liquid. It would be quite incredible if management thought that anyone – anyone at all – can listen to those stated reasons and react in any way other than laughing their head off.
Management probably has no illusions about the credibility of its statement. But, hey, it’s a small price to pay to keep the PM on side. After all, nobody ever believes spun corporate statements anyway.
Downing Street, on the other hand, sincerely thinks that they can maintain the facade. Not to do so would be disastrous since one would then have to talk about some of the real reasons.
Brexit and its impact on the UK as an attractive business location would have to be discussed – again. But that’s not the subject I want to focus on here.
Unilever under Paul Polman has taken the lead in trying to marry a consumer goods business with broader sustainability goals and learning how to deliver on social and environmental responsibilities. They were willing to give up a bit of margin and performance to achieve these goals. The result – a hostile bid from Kraft-Heinz that, eventually, failed. But management was spooked.
It is therefore not surprising that one of the reported reasons for choosing the Netherlands for their HQ is that Dutch law allows for greater defences against hostile takeover. This contrasts with the UK approach that can essentially be summarised as who pays wins.
Unilever has tried to show broad focus on multiple stakeholders in its approach to governance and business strategy. It is the sort of company that any country should be proud to host and the sort of governance approach that we recommended in our report on corporate governance. In that report we also said:
“Of course, there is little point in working hard to create a stakeholder economy if companies that build such businesses are then subject to takeover by companies that have a different philosophy and may be based offshore where UK governance standards may not apply. Decades of work might be undone in a matter of months.”
We recommended changes to the rules for merger and acquisition activity.
Of course, little can be expected to be done by this government in this regard. So the gradual erosion of UK economic strength will continue. Unilever is now gone. GKN is fighting for its life. The takeover of AstraZeneca was prevented – but only just. We’ll see who’s next in the line of fire while we all sit around to see our industrial base get eaten.
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