Unilever CEO’s brave dismissal of short-termism

Picture 1 I posted here a few months ago on the obsession with short-terms results, calling it "The tyrany of growth".

Well, how refreshing to see Unilever's CEO Paul Poleman now speaking out against the short-termism of the stock market, at the Davos Summit. According to The Times he made an "impassioned plea to
fellow business leaders yesterday to ignore the demands of short-term
shareholders and lead from the front on sustainability and climate change."

What I love about Poleman's speech is that he pulled no punches. He told the audience that he didn't mind if hedge funds sold Unilever’s
shares because of worries over short-term profitability. The quote of the day: “These hedge funds would sell
their grandmother if they could make money.
They are not people who are
there in the long-term interests of the company.” 

This is is one of the rare business leaders who walks the talk. Many moan about the pressure of short-term reporting. Few have the courage to do what he did last year and stop providing earnings
guidance to investors. This resulted in a short-term 6% fall in the share
price.

 Picture 2
Here's some more of what he proposed:

1. His job as CEO is to ensure
long-term success, not to focus merely on shareholder value. Again, I like his boldness when he said: “We want to be in business for the
next 500 years.”

2. This long-term focus required costly actions to ensure it had a sustainable business, for
example in terms of palm oil supplies.

3. It's time to move beyond “shareholder value” as the guiding principle behind
corporate leadership, requiring CEOs to have courage to move out
of their “comfort zone”. Another Davos dude, SAP's CEO Leo Apotheker, later proposed the alternative of "stakeholder value”.

4. There were “socially aware” investors that companies could attract to replace the short-term hedge funds.

Hat's off to Poleman for doing what CEOs should do and leading the way to a better future. And extra marks for doing this in a ballsy, uncompromising way.

Unilever has for a long time not got the PR it deserved, given the many leading initiatives it has taken in corporate social responsibility, such as reaching 120 million people in India with an education programme about the importance of washing hands with soap. Perhaps Poleman's more outspoken style will start to fix this.