The View | Unilever’s David vs Goliath battle was a victory for minority shareholders, but was it the best outcome?
Stephen Vines says while shareholders’ quest for short-term profit is understandable, the long-term well-being of the company, as well as the greater public good, could at stake
Yet again, a victory for minority shareholders has been hailed as being a good thing. However, the recent rather significant “victory” of the minorities over the board of the Anglo-Dutch consumer goods giant Unilever raises as many questions as it answers.
Unilever’s board had been trying to streamline its complex corporate structure arising from the merger, 89 years ago, of a British soap maker and a Dutch margarine company. The aim was to consolidate the company in the Netherlands.
It is not certain what would have been the outcome of a vote on the plan to move its place of domicile to the Netherlands because the board withdrew the proposal after its biggest shareholders indicated they would oppose the plan. Moreover, the regulatory obstacles to success are high, requiring more than 75 per cent UK shareholder and 50 per cent Netherlands’ shareholder approval. After the big institutions made clear their opposition, voices of smaller stakeholders were lost in the thunder so we will never know what they wanted.
However, it is highly likely that they would also have opposed the board’s proposal because it was pretty clear that minority shareholders would gain no financial advantage from the move because, unlike in a merger situation where a premium is customarily offered by the buyer, nothing of this kind was on offer here.
On the contrary, many of Unilever’s large institutional shareholders stood to make a loss if the company was obliged to depart from the benchmark FTSE100. This is because they have a mandate to track the index in some way or another, so a lot of major stakeholders would be forced to sell their shares, thus bringing down the price.
