5 Minutes with Paul Polman
Insightful excerpts from a Financial Times (Dec 2017) interview with Unilever CEO Paul Polman (full interview)
It's a good time of year to take in deep wisdom and reflect on the work ahead. I like to take time to read (or reread) long form writings from key leaders in my own life.
I strongly recommend this insightful interview with one of today's most important leaders. Polman has been a champion of responsible leadership, the Sustainable Development Goals (SDGs), and is the chief architect behind Unilever's highly acclaimed Sustainability Living Plan aiming to cut environmental impact in half while improving the lives of billions of people.
At the end of the day people will follow you or people will be energized by you if they buy into your vision or purpose. So the most important thing is to be true to yourself. That’s why I would say to be a great leader — you, first and foremost, have to be a great human being. And sharing that purpose and sharing the values.
On the role of business in society
I wanted to be a priest. I could have done that. I wanted to be a doctor. I could have done that. Circumstances didn’t lead me to it, so my fallback option was business. I wasn’t really motivated to this.
But the more I went into business the more I saw the possibilities. So many of the issues that society faces is through interfaces with the citizens of this world — that’s why I like consumer goods.
So the reason that I believe businesses should be around, and the reason businesses have been created, is to serve society. I think more and more people are starting to realize that the financial markets need to change and that we need to move them to the longer term.
Then we have the challenge to make our economic system more inclusive. The inclusive, decarbonising, circular economy. Wealth isn’t spread equally any more. In our business . . . If you have a lot of money you’re not going to eat six pieces of bread and put six times the peanut butter on there. You’re not going to drive two cars. You’re not going to wash your hair twice as much because you are richer. So when the broad part of the population doesn’t participate, these markets don’t grow.
Not enough leaders out there are willing to make courageous choices to work on these enormous, systemic things that need to change.
On better business
I actually am a capitalist and I believe in shareholders. But I believe in them as a result of what I do, not as a reason for what I’m doing. The same with profits — profits alone cannot be an objective. It has to have a purpose.
On the state of financial markets and short-termism
[The thing that] is happening is that most funds have now become index funds and passive investors. The average holding period in a company now is 4.5 months.
It used to be that a shareholder had a liability towards a company he invests in, now shareholders come and go. Look at Nestlé, they have an activist, you look at P&G, they have an activist. Pepsi has an activist. GE has an activist. Kraft has an activist. Everybody. In fact, if you don’t have an activist you feel like you’re doing something wrong these days.
"Activist" refers to activist investors, usually private equity firms and hedge funds that comes in and take small equity positions in order to exert influence on a company to extract more "value" (read: profit). "Activist hedge funds now manage more than $129 billion in assets, compared with just $29 billion 10 years ago" (The Week, 2015).
So they [the activists] come in either 1% or 1.5% because the rest [other investors] have become passive. These people start to enter into companies, make it very uninteresting for anybody else to be on the boards and soon they dominate it. And they start running it for the short-term.
On the near-takeover by Kraft-Heinz (the bid was rejected and would have been largest in food industry history)
A company like ours continuously invests for long term, compounded growth. Take any 10, 15, 20-year period and you’ll see