About time too. UK fund managers who will decide whether Unilever can go Dutch are starting to stir. David Cumming, the chief investment officer for equities at Aviva Investors, says his group will vote against the proposal. To encourage others to rebel, he adds that it’s hard to see any advantage in Unilever’s plan for any UK shareholder, which is a reasonable stance.
Everybody understands by now Unilever’s reasons for wanting to abandon its current Anglo-Dutch structure and incorporate in the Netherlands: it thinks deal-making and capital-raising would be easier without two classes of share, which is probably true. The problem is the effect of the revamp on UK funds.
A Dutch-incorporated Unilever would retain a listing in London but, critically, wouldn’t be eligible for the FTSE 100 index, the FTSE 350 index and FTSE All-Share indices. Exclusion is a big deal for the likes of Aviva, whose funds mostly track those indices or are benchmarked against them. For such funds, investing in Unilever would become either impossible or harder.
At this point in the debate, Unilever might object that it would be terribly unfair if a minority of UK shareholders succeed in killing its proposal. The company needs a 75% majority among shareholders in the plc, which represents 45% of the whole of the Unilever. So, in effect, 11.3% of the entire shareholder base could block the will of the majority.
The position is unsatisfactory but Unilever has brought it on itself. It cannot expect all UK fund managers just to swallow obediently and do what the board says is best. Fund managers have duties of their own, principally to their end-investors, the people who pay their fees. Cumming is merely doing his job in standing up for UK interests and arguing that a large, cash-generative core holding is not a stock to be surrendered without a very good reason.
All the big traditional UK houses – Legal & General, Standard Life Aberdeen, M&G, and so on – are on the Unilever register. They should know that silence on this issue is not an option. They are paid to have a view – and to justify it to the people whose money they manage. Speak up.
Is new Boohoo boss worth the money?
Most successful upstart clothing retailers reach a point when the founders decide the business is best run, day to day, by an experienced operator from outside. Here’s Boohoo’s moment. John Lyttle, the No 2 at Primark, is joining as chief executive. Primark resolutely refuses to sell online, whereas that’s all Lyttle’s new employer does, but Boohoo’s co-founders Mahmud Kamani and Carol Kane probably figure they’ve got the techie stuff covered.
Lyttle’s pay package, however, looks anything but sensible. On top of a £615,000 salary, plus the chance to earn a £922,000 bonus every year, the new man has been given the chance to collect a £50m bonus if Boohoo’s market capitalisation, adjusted from any share issues all the way, improves by 180% over five years.
Boohoo justifies this on the grounds that a 180% improvement would see the company’s stock market value rise from £2bn to £5.6bn, so Lyttle’s £50m slice would represent only 1.4% of the £3.6bn gain. Yes, that’s how the arithmetic works. And, since Kamani owns 30% of the stock with his family, and Kane has 4%, they can do more or less as they please on the remuneration front.
However, one wonders whether they’ve thought about the impact through the organisation. If you were a Boohoo executive outside the boardroom, you’d surely be lobbying for a piece of the same five-year bonus bonanza. And why not? And why not further down the employee ranks? Lyttle may be good but the cult of the superstar chief executive is usually over-done.
You’re wrong, Bernard Jenkin; Brexit could drive carmakers away
Jaguar Land Rover, when it cites “headwinds” as the reason for switching 2,000 staff to a three-day week at its Castle Bromwich plant, may chiefly be referring to sluggish demand for diesel vehicles. Brexit-induced uncertainty may be only a secondary factor.
Yet there’s still a moral here for Bernard Jenkin and those other Tory MPs who dismiss JLR’s regular warnings about the effect of a hard Brexit as “scaremongering”. Car plants are robust in that they are hard to shift overnight but their economics are simultaneously fragile. A few unwelcome winds can force a change in the direction of investment. If diesel can cause a three-day working week, a hard Brexit next March could do far more damage. Jenkin should pipe down. Car companies, and their workers, are closer to the market than he is.
