The gospel according to Paul

IRONIES ARE rarely so pointed as this. As chief executive for ten years of Unilever, an Anglo-Dutch consumer-goods group, Paul Polman was a champion of business ethics and corporate sustainability. But after shareholders revolted against a plan to move the group’s headquarters to Rotterdam, his own position became, well, unsustainable. He will leave his post at the end of this year.

The company says Mr Polman was always set to leave at some point in 2019. But to announce his retirement only a month in advance strongly suggests an accelerated schedule. It is a shame that he is leaving on a low note. Mr Polman has been one of the most interesting and distinctive chief executives of a large multinational anywhere in the world.

By coincidence, the day after the announcement, Mr Polman was speaking at the Drucker forum in Vienna, an annual gathering for management theorists. He stuck resolutely to his favourite themes, citing the need for companies to husband the planet’s scarce resources. Unilever’s sustainable-living plan has extremely ambitious goals, such as cutting the group’s environmental impact by half by 2030 and improving the health and well-being of more than 1bn people by 2020. Mr Polman emphasised that companies should be run for the long term, not for the short term. That is the reason why, on his first day in the job, he scrapped the practice of reporting quarterly profits.

Mr Polman argues that businesses are returning too much cash to shareholders via share buy-backs and dividends, meaning they are not investing enough for the future. He believes that if you could get the big fund managers (such as Fidelity and BlackRock), the big asset owners (pension funds and foundations) and a few “high-net-worth” people in a room, it might be possible to sort things out. The solution would start by creating better incentives for fund managers: judging their record over a period of three to five years rather than on the next quarter. That, in turn, would allow them to back companies that have long-term investment plans.

He has not been immune to short-term pressure. In 2017 Unilever attracted a bid approach from Kraft Heinz, a firm with a reputation for cost-cutting. Mr Polman saw off that challenge, but followed up by announcing his own efficiency plan and the sale of the group’s margarine business.

Having banged on about these themes for a decade, Mr Polman has become rather like one of his company’s products—Marmite, a salty yeast spread that is either loved or loathed. All told, however, shareholders can hardly complain that Mr Polman’s focus on sustainability has dented returns. Unilever’s shares have risen by more than 150% since he took office, easily beating London’s FTSE 100 index. And although the switch may be a little hasty, Mr Polman is handing the reins to Alan Jope, the man who has been running the group’s largest division, its beauty and personal-care business. So he has also fulfilled another important duty of a chief executive—ensuring that a capable successor is on hand.

As for Mr Polman’s broader campaigning, plenty of investors will be sympathetic. Fund managers that control almost $90trn of assets have signed up to an initiative called the “principles for responsible investment”, which focuses on environmental, social and governance issues. Companies often take a more active stance than governments do in these areas. Shell, another Anglo-Dutch company, has just said it will link executive pay to a reduction in carbon emissions (see later story).

Mr Polman was ahead of the game in realising that, more than ever before, consumers identify with the brands that they buy. They are reluctant to support those that are not perceived to share their values. Any brand focused on younger consumers will have to bear this trend towards “woke capitalism” in mind. Employees, too, are more likely to work for companies whose values they share.

That said, any future boss tempted to follow Mr Polman’s lead should study his record carefully. It is perfectly reasonable to run a company on the basis that other stakeholders (workers, consumers, etc) matter, as well as shareholders. But that does not mean you can appear to ignore your shareholders altogether. You need to take them with you on every step of the way. And if they think a chief executive is railroading them, as Unilever investors clearly did about the move to the Netherlands, they will rebel.