Former CEO Paul Polman: Standing Up to Shareholders
A version of this article was originally featured on Forbes.com
In 2015, The Brave Leaders Project founder Margareta Barchan sat down with Paul Polman, who was then CEO of consumer goods giant Unilever and Chairman of the World Business Council for Sustainable Development. At Unilever, Polman had been at the helm of an internal revolution, by introducing the company’s Sustainable Living Plan and telling shareholders they should no longer expect quarterly earnings updates. In the interview, he spoke at length about the future of sustainability and the importance of courageous leadership. The interview with Polman became the main inspiration for Barchan to start The Brave Leaders Project, which is why we decided to feature it here.
In 2019, Paul Polman stepped down as Unilever CEO and co-founded Imagine, a benefit corporation aimed at harnessing the power of business as a force for a more sustainable future.
Source: Stefan Schäfer, Lich / Wikimedia Commons
You’ve spoken often on the need for a sustainable future. Have you ever thought of this in terms of courage and brave leadership? Do you think it takes courage to advocate on behalf of sustainable development and social responsibility in most companies and organizations?
For sure, the big changes we need to make out there clearly don’t happen by themselves. If they were so easy or obvious, someone would have done them already. So the big changes we need to make to transform this world, if you want to, are changes that will be made against the odds — lots of naysayers and skeptics.
So to fundamentally make these changes, you need to have a certain level of courage, especially at the CEO level. There’s no doubt about that. And we certainly need more courageous leaders. If you define courage as the ability to put the interests of others ahead of your own and be able to absorb personal risks and attacks... [then] you have to fight your way through that. That’s one of the reasons why these changes don’t happen so fast.
So you decided to stop the quarterly reporting when you became CEO of Unilever. What kind of courage does that take?
Well, first what we said was, in order to solve issues like food security or climate change, you need to have longer-term solutions. You cannot do that on a quarterly basis. They require longer-term investments.
It’s the same for companies. A lot of companies are driven by the short-termism of the markets. [They] make short-term decisions that often go against the long-term viability of the company. Before I came, we were making a lot of short-term decisions to make the quarterly numbers, [and these decisions were] actually driving the company, over time, downwards.
It’s very easy to show more profits, if that’s what you want, by cutting investments in training and development of your people or your IT systems. And you can do that for a few years but in the long term, you erode your company. So what I said when I came here is I need to create this environment for the company to make the right longer-term decisions. So we stopped giving guidance. We stopped doing quarterly reporting. We changed the compensation for the long term.
I don’t know if that’s courageous or not because, at the end of the day, I felt we had to do this to be a long-term viable concern. I don’t call it courage. I just call it leadership, which is doing these harder right things versus the easier wrong. It’s easy to make a lot of these decisions, but they are ultimately wrong for the long term.
But when I did it, our share price went down 8%. A lot of people were worried that I was doing that because bad news was coming — a new CEO, a company that historically hadn’t done so well. I was not worried about that myself, because I figured, at the end of the day, the numbers are going to show what they are and you will win confidence over time, which has happened. But it took a while. So there are some pressures.
“There are not many CEOs who disinvite shareholders”
What did you say to the shareholders?
We spent a lot of time thinking about what’s happening in this world and the role of companies, and to basically communicate out there that we have obligations towards multiple stakeholders.
I also made it very clear that certain shareholders were not welcome in this company. That created quite some noise. I said we have a certain strategy that is for the long term. If you, as investors, don’t have that, we respect you — I obviously respect people — but we don’t want you here. And there are not many CEOs who disinvite shareholders. So I got a lot of flak and critique for that.
But I don’t have any space for many of these people who really, in the short term, try to basically speculate to make a lot of money. We want people who want to be long term with us and build this company over the long term.
I continue to spend a lot of time making that clear to our shareholders. I will have discussions with them that I’m not just working for them. Slavery was abolished a long time ago.
You must have wrestled with the question of whether this is the right thing to do or not. What made you finally go ahead?
Well, it’s not only myself, because you cannot run a company of this size and magnitude, for yourself or with your own beliefs. But my bigger fear was: Is the organization ready for it? Do they really understand what we are trying to do? Or is what we’re trying to do really the right thing, coming in from the outside? When I joined here, I was the first CEO from the outside, so I did not really know this company very well, other than the outside-in perspective.
So the fear was more how can I do the right thing? Or am I sure this is the right thing, because I think so? So you have to have a certain level of humility and humanity, I think, to make these decisions. And you have to be sure that your awareness and your engagement that you have with society is based on not just your own program or hobby horse or preconceived notions, but it’s really based on a solid foundation of wanting to serve society, not to serve yourself.
Say something about an issue you’re focused on now.
We’re doing a lot on climate change and calling for prices on carbon and trying to get the COP 21 [the upcoming Conference of the Parties to the 1992 United Nations Framework Convention on Climate Change] in Paris to be successful, working a lot with these governments. As a CEO, you need to get into the topic. You need to be knowledgeable about it. You need to have a point of view. You need to be sure that your company deserves a seat at the table by doing things that might otherwise be a little bit more progressive.
So yeah, that requires a little bit more courage, because sometimes you don’t have all these answers. You don’t necessarily know all the time if it’s right or not. If you have all these answers or if all the facts are there, the decisions are easy. Then you don’t need courage.
So courage often you need because there’s a high level of unknown and there’s a high level of skepticism as a result. And there’s probably a lot of vested interests that will work against you. Climate change is a good example. A lot of the carbon-based industry will be very much against you. So you have to find a way to enroll, to change, to make them part of it, or not, but to create a majority to move things forward. Often it’s the vocal minority versus the silent majority that gets all the voices in the newspapers. So you have to change those dynamics.
Were you as concerned about the long-term perspective when you were working for Procter & Gamble and for Nestlé. Were you committed to the long-term perspective already before?
When we grew up in the ’60s, we were basically children from the Second World War, and we had seen our parents, at least I had, take a longer-term view of peace in Europe. They wanted to be sure we could go to universities and make the system work, not having to go through the miseries that they went through again. So I think there is longer-term thinking I have always personally believed in.
Unfortunately, in the ’80s and ’90s, shareholder primacy and Milton Friedman [libertarian economics] took over. We became a very self-serving society, especially the financial sector, which basically lost its bearings by thinking that they were the center of gravity versus a supporting function to make the world function, to be honest. So that, I think, led to an economic system that probably did more damage than good. And it became clearer in 2008, when we had the crisis.
But I always felt that we need to work for people who cannot help themselves as much or who are in situations you don’t want to find yourself in. So it’s always good to invest in education and good governance and rule of law, which are all long-term things, to make societies function.
“Sometimes even your own convictions are wrong”
Do you worry that even your best intentions could lead to bad outcomes?
Oh, absolutely. My biggest doubt is, when you have to make a decision based on a sense of purpose or values — Do you have the right values? What gives you the right to believe that what you’re doing is right? That is where I have my biggest doubts, always because it should not be about yourself. And sometimes even your own convictions are wrong.
So my biggest doubts are, as we are pushing all these things, is it my own agenda or is it something that is needed for the company long term? And that’s always a very fine line, because we are all products of things that have influenced us and given us a certain perspective across our whole life. So your doubt is more towards yourself—Is it arrogance? Is it ego? Those are the worst things that creep into a person. And then it blurs decision making. Often it leads to the wrong decisions.
That’s why people sometimes say you overstay, or that’s why I would never write a book when I’m doing these jobs, because most of that, to me, is like justifying what you’ve done. Too much of it is related to ego. So you have to be very humble if you do this, and you have to be very engaged and once more very aware of what happens around you, so that it doesn’t become you. So that’s the biggest doubt: Is it me, with my own biased-ness? Or is it really for the interest of the common good, where we work transparently, where we hold each other accountable, where we take responsibility, but for the greater good, not for your own?
If you were to put your hand on your heart and picture Unilever in 2020, would you see that you’ve reached all of the goals in the Unilever Sustainable Living Plan?
We won’t. And I knew that. I say it unashamedly because, first of all, if you take a 10-year horizon, things change. We now, for example, are putting much more emphasis on livelihoods [in addition to environmental concerns]. There are 200 million people unemployed, many young people; over two and a half billion people in marginal jobs. Social standards are not in the value chain what they should be. So we are putting now a much higher emphasis on livelihoods and social compliance. And that wasn’t in the original plan we started in 2009-2010. So because the world changes, things change.
Some goals have been achieved very easily, but they were perhaps too easy, and we’ve set the ambitions higher again. Now we have expanded our goals to use the size and scale of this company to be more transformative, not only ourselves, but to change things out there in the areas of water, sanitation, hygiene or livelihoods or climate change.
But we were 10% sustainably sourced in 2009, which was one of the highest among companies. We were always number one on the Dow Jones Sustainability Index. Now we are 60% sustainably sourced, not yet at 100%. So it took us 150 years to get to 10%, took us five years to do five times more. We’re creating jobs in the value chain. We are moving to green energy now. All of our European and U.S. operations have green energy. All of our factories are zero waste, things that people thought were impossible because we set this objective so high.
So my philosophy has always been it’s not exactly hitting all these things. It’s a mindset. And if you can create a significant enough shift in people’s mindsets, you also can drive a significant shift in people’s behavior. So we, for example, said that we want to double our turnover and decouple that from environmental growth. We are probably not going to hit this doubling of the turnover within this timeframe because the economies have slowed down, the currencies have collapsed. I can give you a lot of reasons. But at the end of the day, we have grown quite significantly, about 30%, from a company that was declining. I would say we would have never been able to grow 30% if we hadn’t put this vision out there that we can double, that we create a mindset of growth.
We have humanized the company. We’ve brought it a little bit closer to reality, to the real society. Leading to a lot more partnership [with organizations advocating for human rights and sustainability].
I know you have been very much engaged with young people in and outside of Unilever. Do you think they’re more likely to have the mindset to do things differently?
Absolutely. I’ve never met CEOs who want more unemployment or more pollution. There are not many around. At least I don’t meet them. But the young people care even more.
So I reach out to a lot of networks. For example, we’ve created this young social entrepreneurs award in Unilever, where we have 800 social entrepreneurs participating with us in our value chains, making it better. And what you find is a lot more creativity, a lot more engagement. They have a better understanding of technology, so they can put different models out there that we can think about. And they do care, because, outside of Europe and the U.S., 50% of the population is below 25 years old. And they know they’re 100% for tomorrow.
Do you think we’re close to the tipping point where people will realize that we need to do things differently, regardless of courage or conviction?
Absolutely. So the cost of not doing things is going to be higher than the cost of doing things very soon. In fact we are starting to see that already in some areas. You don’t need to have a purpose for that. You could just look at your balance sheet. And climate change would be an example of that. It’s cheaper to attack now. The longer we wait, the more it will cost us.
But ultimately, human beings are survival animals. They will do anything to survive. So we will become more creative then and find solutions, but it’s better to be in charge yourself and do it properly than to be reactive to the environment in which you live. But yeah, at the end of the day, you still need a lot more vanguards or courageous leaders that are willing, at risk to themselves, to drive changes faster than otherwise would happen.
I’m not worried that it wouldn’t happen eventually. What I’m more worried about is that, even today, a billion people go to bed hungry not knowing if they’re going to wake up the next day, or two million children every year die because of diarrhea and pneumonia. So I’m not so worried that ultimately we find solutions. My problem is why don’t we find them now? You need courageous leaders to speed it up, to make it possible.
Read more inspiring stories like this one in our book, Brave Leaders: Finding The Guts To Make Meaningful & Lasting Change.