Unilever focuses on long-term investors

Unilever.pngIts now 18 months since Jack Welch publicly abandoned his views on the importance of shareholder value, and said it was “a dumb idea for executives to focus so heavily on quarterly profits and share price gains“. This was very significant, as Welch was generally credited with popularising the idea in a 1981 speech, when head of General Electric.

Since then, a growing number of companies have followed his lead. DSM were one of the first, 6 months ago, when they launched their ‘value creation for people, planet and profit’ strategy. Now Unilever, the global consumer products giant, with a market capitalisation of $35bn, has taken the concept a step further.

Interviewed in the Financial Times, CEO Paul Polman noted they have stopped giving earnings guidance for the next quarter. And he added that “we certainly don’t want to attract the investor base that wants higher and higher and quicker results against targets that we put out every 90 days.

This is a quite striking reversal of previous priorities. Polman went on to put forward a radical alternative statement of the basis for investment in Unilever:

Unilever has been around for 100-plus years. We want to be around for several hundred more years. So if you buy into this long-term value-creation model, which is equitable, which is shared, which is sustainable, then come and invest with us. If you don’t buy into this, I respect you as a human being, but don’t put your money in our company.”

This sounds very close to the outlook that helped to build the world’s major chemical companies in the first place. The blog will continue to follow developments with interest.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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