7 takeaways from the Unilever U-Turn

During these last months, we have followed up the battle for changing the governance and structure of Unilever. This case offers 7 takeaways for IR departments that we think are worth sharing.

The actions carried out by the Unilever board, some UK institutional investors, government lobbyists and the economic and conventional press have seasoned one of the stories that have captured great interest among the specialists in the corporate governance sector during this year.

Unilever is one of the world’s leading consumer goods companies. It was formed by the merge of operations of Dutch Margarine Unie and British soapmaker Lever Brothers in 1930. Since then, the Anglo-Dutch consumer goods group has operated as a dual-listed company. In this case, it consists of Unilever PLC, based and listed in London, and Unilever N.V., based in Rotterdam and listed in Amsterdam. The two companies operate as a single business, with a common board of directors, adopt the same accounting principles and pay dividends to their respective shareholders on an equalized basis. N.V. and PLC.

On 15 March 2018, the board of Unilever announced the intention to simplify the Unilever Group’s dual-parent structure under a new single holding company that should be based in Rotterdam. This process was termed as “Simplification”. The Extraordinary General Meetings to approve this change were planned for the 25 and 26 October 2018.

In Alembeeks Group, as proxy advisors, we analyzed the proposal and advised our clients to vote FOR as we agreed that the proposed structure improved some of the limiting and unequal conditions that are currently applicable to existing Unilever shareholders. We assessed also that the new simpler structure also unlocks certain constraints that might help the company attain a fair value and a greater flexibility to grow in the future.

Nevertheless, after a rebellion lead by main UK based asset managers – Columbia Threadneedle, Aviva Investors, M&G, L&G, and Schroders – the Unilever board decided to U-turn and withdrew the proposal.

In our opinion, Unilever major U-turn offers at least 7 takeaways for IR departments that can be applicable to other companies when thinking about voting major changes:

  1. A “good proposal” may have also detractors. There are several reasons for having opposition in a proposal that technically and according to all the corporate governance handbooks is a clear vote “FOR”. Shareholders base is not uniform, and shareholders' interests are not always aligned. Shareholders may have conflicts of interest in their different investment horizon approaches towards the company. Some proposals may look for a better long-term competitiveness but might imply a short-term setback that some shareholders are not willing to bear. In this Unilever case, the fact of falling from the FTSE 100 had been claimed as a major argument to vote against the proposal among detractors. The fact that the company was gaining flexibility to adapt to the market and improving its governance structure was not considered among those short-term oriented shareholders. Nevertheless, all shareholders have the right to vote according to their own views, which means that all may be right at the same time, voting for different options.
  2. A proposal should have no weak points at all. The weakest side of a proposal will be the most attacked and it will give a strong argument against it. In this Unilever case, it was the pending resolution of the Netherland’s government about the abolition of the dividend tax. It created fear not only among UK shareholders, but it also created rebuke among some Netherland stakeholders.
  3. The content of a proposal must be perfect, but also must be the timing. In this case, the proposal was planned during a period in which the Brexit tensions were in their zenith. It made that this issue fell in the scope of sensationalism. The UK press has found a gold mine with it, and it has been largely commented not only in the economic but also in the yellow press.
  4. Gaining the message battle. Most of the media was labeling the Unilever proposal as a matter of “Going Dutch”, “Leaving UK”, “Moving HQ from London to Rotterdam”, … Efforts must be made to explain the proposal clearly. Sometimes it is difficult to defend some complex arguments against simplistic ones. But this shouldn’t be an excuse. It also may happen that old stories like remuneration or unfinished problems came up and are mixed with the new proposal. In this sense, to face major changes the least unfinished problems, the better.
  5. Earlier shareholder engagement is key to endeavor major changes. By nature, shareholders are not prone to like changes. Engaging shareholders beforehand entails the same efforts than doing it after formally announcing the proposal. In the Unilever case, the board and the management should have paid more attention to this point, as this late withdrawal leave them in a weak stance for the next general meeting.
  6. Pay attention to the stakeholders. Stakeholders may have an indirect but important role in voting. This may come in a wide range of ways depending on the subject. In the case of Unilever, UK fund managers had a special strain from their clients and UK citizens to reveal against the proposal, especially as heated by the UK press. In some sense, this is a good thing, as it probably aligns fund managers vote with the will of their clients. Nevertheless, this ensures a non-robust voting policy.
  7. Beware of voting hurdles. In this case, Unilever needed a 75% majority of the UK votes but also a simple majority among all UK shareholder by number. On the one hand, institutional shareholders are more sensitive to fulfill their fiduciary responsibilities as regulators are pushing in this direction. On the other hand, retail investors are more conscious of their voting rights and their shareholder status than in preceding decades. The era of delegating the vote to the management is over.

In Alembeeks Group, as corporate governance consultants and proxy advisors, we follow up the Annual General Meetings of the listed companies in which our institutional clients invest in and provide them reports to vote in a well-informed manner. We also help listed companies improve their disclosure and corporate governance transparency.

Shareholder activism and coffee

If you are having a break, sipping coffee, but you cannot stop thinking about shareholder activism, we give you a compelling reason to explain your case.

In February 2017 Reuters reported Sachem Head Capital Management LP, activist investor holding 3.38 percent stake, wanted Whitbread’s management to examine a breakup as a way to boost the value of its individual businesses.

In April 2017 a unit of U.S. activist hedge fund Elliott Management, recognised activist investor, said it increased its position and held the largest stake (over a 6 percent) in Whitbread Plc. Elliott stressed that wanted the company to split its two divisions, Costa Coffee and hotels chain Premier Inn.

Last Friday 31st August 2018 Whitbread’s CEO announced the sale of the Costa Coffee chain to Coca Cola Co. for 3.9 billion pounds ($5.1 billion). It’s close to the 3.5 billion pounds to 4 billion pounds the division was estimated to be worth when investors first started to agitate for a breakup of Whitbread two years ago. As Costa’s performance stalled during last quarters, most analysts had since cut their estimate of its value to between 2 and 2.5 billion pounds. The agreement with Coca Cola Co. has been the preferred formula in front of the IPO alternative which had been considered.

According to Bloomberg data, the purchase values the Costa Coffee shops at about 16.4 times 2018 Ebitda — more than the 12.9 times multiple of Starbucks Corp.

According to some analysts, this valuation should make Whitbread’s CEO position more secure after she came under pressure from the two activist investors as Whitbread shares had slipped 12 percent since she took over in December 2015 — trailing the 21 percent gain in the FTSE 100 Index over the same period. Friday’s announcement sent the stock up by almost 20 percent.

Whitbread said it expects to return the “significant” majority of the money to shareholders, and the rest to reduce debt and contribute to its pension plan (see presentation of the sale) with the 3.8 billion pounds of net proceeds from the sale. In the coming months, it will be interesting to look at the stance of the two main investors in relation to the allocation of this fresh cash.

With this transaction Coca Cola Co. diversifies its struggling sugar drink business. “Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide,” said Coca-Cola President and CEO James Quincey. “Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market with a strong coffee platform.” Read Quincey's commentary on the announcement.

Once again, we have witnessed with this transaction, an example of how voting power has an impact in the evolution and the strategy of public companies. And how coffee and shareholder activism are, somehow, connected.

Dual class structure: are we aligned?

The dual class structure is one of the topics that is repeatedly commented due to the Facebook, Alphabet (Google) and other tech companies' exposure in the media. But they are not the only ones.

We would like to share with our readers a recent article by Anita Anand, University of Toronto – Faculty of Law. We have found the article is very educational about the dual class share structures and its pros and cons.

In a typical public company, shareholders can elect the board, appoint auditors, and approve fundamental changes. Firms with dual class share (DCS) structures alter this balance by inviting the subordinate shareholders to carry the financial risk of investing in the corporation without providing them with the corresponding power to elect the board or exercise other fundamental voting rights.

This article fills a conspicuous gap in the scholarly literature by providing empirical data regarding the governance of DCS firms beyond the presence of sunrise and sunset provisions.

The summary data suggest that the governance of DCS firms is variable. A large proportion of DCS firms have no majority of the minority voting provisions and no independent chair. By contrast, almost half of the DCS firms have a sunset clause and a majority of independent directors. Finally, just under one-third of DCS firms have change of control provisions over and above existing law.

On the basis of this evidence, this article argues against complete private ordering in favor of limited reforms to protect shareholders in DCS firms including: mandatory sunset provisions, disclosure relating to shareholder votes, and buyout protections that would address weaknesses inherent in DCS firms.

We also share a short article published at Bloomberg, which we find relevant as displays a couple of charts about the evolution of this capital structure during the last decades. We hope you find this information useful.

Alembeeks Group is an independent proxy advisor. Institutional investors need a proxy advisor that can help them effectively and efficiently make informed voting decisions and record keep all their votes.

ESG Ratings - Another way to build up and show a portfolio

More and more asset managers are using ESG values to create universes where they can invest in a sustainable and financially efficient way. The inclusion of these factors has proven to be effective in mitigating risks derived from reputational aspects.

There are currently numerous ESG data providers, a summary of each of which is beyond the scope of this post, but some well-known third party ESG report and ratings providers include: Bloomberg ESG Data Service; Corporate Knights Global 100; DowJones Sustainability Index (DJSI); Institutional Shareholder Services; MSCI ESG Research; RepRisk; Sustainalytics Company ESG Reports; and Thomson Reuters ESG Research Data.

From Alembeeks Group we encourage the reading of the following research, published on Harvard Law School Forum, regarding the return on investment in ESG initiatives. It identifies and analyses five pillars of the business case for corporate sustainability:

  1. Corporate investment in ESG enhances market and accounting performance
  2. Corporate investment in ESG lowers the cost of capital
  3. Corporate investment in ESG is a means of engagement with key shareholders
  4. Corporate investment in ESG improves business reputation
  5. Corporate investment in ESG channeled to product innovation fosters new revenue growth


Find below an interactive chart showing the ESG scores of each of the companies in a given European Equity portfolio. These values are courtesy of Sustainalytics.

Alembeeks and Digital Transformation in Luxembourg

Alembeeks Group was among the leaders of the Digital Transformation in Financial Services at the ALFI’s Leading Edge Conference in Luxemburg that took place on 28 March 2018 in Luxembourg.

The Conference was a great occasion to exchange the views about the opportunity that technology is providing to transform the economics of the Asset Management Industry and the Financial Sector in general.

The main focus of the agenda was on Data Management, the new ways to keep up the Control Functions, the approach to KYC/AML/KYD and of course the uses of blockchain within the industry. This last point was one of the highlights of the conference and it led to an interesting discussion about the potential functioning of shared multilateral controls on AML/KYC and the current reality, sometimes more constrained by conflicts of interest than by the technology itself.

The panel of experts provided by the organization was pretty interesting. There were representatives of the main players in the Luxemburgish asset servicing sector: State Street Bank, BNP Paribas Securities Services, RBC Investor & Securities Services, Carne Group, and Temenos among others and of course, the presence of panelist of the big four.

In Alembeeks Group, we know how to help those financial institutions which suffer from fragmented data. Departments often operate with different tools creating non-related datasets. Our Alembeeks Native team supports asset managers in client-driven projects to transform this data into knowledge.


On the cons side of the conference, the management of operational data was not fully discussed during the agenda as the main attention was on KYC/AMK and the immediate application of GDPR and its legal implications. Nevertheless, in our opinion, asset managers in Luxembourg are not using the full potential of the data they are dealing with on a daily basis. The industry players tend to be too guided by the next regulation challenges, forgetting sometimes about improving the core of their activity. There is where Alembeeks Natives makes the difference.


Alembeeks Natives is our division of experts on the financial industry, pure natives of the sector. Business consultants with strong expertise in operations leveraged by an I.T. team capable of providing clients with the perfect ad-hoc solutions.

Ferrovial, Caixabank, Acciona, Bankinter and BBVA: the winners of the Alembeeks Awards 2017

Alembeeks Group, the leading Spanish proxy advisor, announces the winner list of Spanish quoted companies in recognition of their corporate disclosure activity during 2017.

The Spanish corporate governance advisory firm Alembeeks Group awards Ferrovial, Caixabank, Acciona, Bankinter and BBVA in five categories related to governance, financial and non-financial reporting.  With this new initiative, the five winner IBEX-35 companies are acknowledged for their Investors Relations activities in disclosing information to shareholders in line with the best market practices.

Alex Bardaji, Director at Alembeeks Group, discusses: “After several years analysing companies from a corporate governance point of view, our objectives with this initiative are: first, to thank those companies that make our governance analysis activity much easier by disclosing their information properly; and second, to put forward positive signalling for these companies as references for other market players”.

The best-in-class Spanish companies of the Alembeeks Awards 2017 have been the following:

-          Best Financial Discloure:  Caixabank.

-          Best Non-Financial Discloure:  Acciona.

-          Best Governance Disclosure: Bankinter.

-          Best Proxy Statements: BBVA.

-          Best Investor Relations Digital Disclosure: Ferrovial.

The judging panel has been formed by Alembeeks Group’s governance analysts, who are international professionals specialized in governance, financial, non-financial and ESG reporting. The criteria and methodology used for the selection of the award-winning companies have followed rigorous qualification and scoring standards.

With this act, Alembeeks Group commends efficiency and transparency among financial market participants to foster an enhanced context for the development of business activities and societies.

In the picture, the event at Ferrovial premises delivering the prize to the Internal Control and IR Team.

Alembeeks Group is a corporate governance advisory company which serves institutional investors in their proxy voting fiduciary duties. Our services help our clients to improve their governance and operational activity by using our technology solutions as well as proxy reports and governance consulting services.


ICGN Paris Event 2017

The last conference of the ICGN (International Corporate Governance Network) was hold in Paris the 6th and 7th December 2017. It was hosted by Paris Europlace, the organisation responsible for promoting the Paris financial marketplace.

Established in 1995 as an investor-led organisation, ICGN's mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies world-wide and it is a leading referent within the sector.

During the Paris event, the main topics discussed were among others those related to investor stewardship, board composition, ESG disclosure and the integration of climate change aspects in the voting approach.

The conference was one of the main summits of the year 2017 within the sector and gathered a great number of professionals and reputed panellist of the corporate governance sector. We encourage our readers to find more relevant information and takeaways under #ICGN2017 hashtag in Twitter.