Finance

Revisit of the barbarians

February 20, 2017

Senior executives in both private and public organizations constantly have to evaluate the legitimacy of their current value proposition. A value proposition is multi-dimensional. When it's out of balance, new force fields are established and the organization can not stay in it’s present comfort zone. This is what happened last weekend to Unilever. The take over bid of Kraft is a blessing in disguise. It not only alarmed the management of Unilever and it’s shareholders. It also made other stakeholders –public and private-  aware of the value that Unilever generates for them. A call to action. 

This weekend the Dutch business community was alarmed by the take over bid of Kraft for Unilever. In the Dutch and British communities it was as if a fox had forced his way into the hen house. 55 hours after the first broadcasting and social media information a Kraft spokesman gave the following statement:

‘Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction. It is best to step away early so both companies can focus on their own independent plans to generate value.’

The interesting word in this sentence is the word 'value'. What does value in the statement of Kraft refer to and does it bear the same meaning as the value the Unilever management, the Dutch government and the UK prime minister Theresa May referred to in their reactions to the offer? Probably not. There seems to be more at stake than the value of the shares of Unilever.

Why did they react at all? Surely not because of the alleged price level of the shares and the interests of shareholders. They reacted because there is more at stake than shareholder value. What they talk about are jobs and a whole network of affiliated business interwoven with Unilever; and representing much more than shareholders value. 

The question is whether or not the management of Unilever is legitimized by shareholders and stakeholders in their strategies and actions to create value.
In 1988 Barbarians at the gate was published by Brian Burrough and John Helgar. It is about the RJR Nabisc take over by KKR. One of the questions asked in this insightful book is ‘Why did these people care so much about what came out of their computers and so little about what came out of their factories?’ 

Profit, people and planet

Unilever is a company that cares about sustainable growth. The CEO of the company, Paul Polman, embodies the Unilever way of creating value not only looking at the profit footprint of the company but also at the people and planet sides.
To do business you need creativity, ideas, money, dedicated people, sound operations and consumers to buy whatever you offer to the market. To stay in business you need clients, you have to make profit and, what is just as important, you need legitimization of stakeholders.

It seems that Unilever in it’s present shape covers most of these elements succesfully. Perhaps it is possible to boost the value of the shares a bit more. Perhaps it is possible to grow parts of the business in other directions by chopping the company into pieces.

By doing so other value than shareholders value will be destroyed; social fabric, networks between science and research and development, public-private collaboration for better infrastructure that will be beneficial for both companies and communities.

These are the values that the Dutch and UK communities refer to when they react to the take over bid. A bonus for shareholders does not take into account a downside for stakeholders.  

 
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