Report
Expert Corporate Governance Service (ECGS)
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Unilever Plc - EGM 12 October 2020

In general, Unilever plc ("Unilever") is in compliance with the UK regulations relating to the organisation and procedures of the Extraordinary General Meeting.

Under ITEM 1 approval is sought for a unification of Unilever under a single parent company: Unilever plc (i.e. Unilever NV will cease to exist).

First of all, ECGS strongly endorses the strategic rationale of the (proposed) unification. It acknowledges the increased strategic flexibility and enhanced corporate governance in terms share structure and applicable regulators.

Despite that the unification offers some corporate governance improvements, ECGS considers the choice in favour of the Anglo-Saxon model over the (continental) Rhineland model not obvious as it does not match Unilever¶s carefully crafted image as a 'sustainability leader'.

In addition, ECGS notes that two years ago, under the then CEO Mr. Paul Polman, Unilever chose to become a Dutch company (NV) in an attempt to simplify its corporate structure. Mainly Anglo-Saxon institutional investors, however, rebelled against this proposal, primarily because they would then have to pay taxes on the dividend that the company pays.

It is estimated that the Dutch treasury will miss out on many millions of Euros due to Unilever's decision. Therefore, on July 10, 2020, the Dutch left-wing political party ³Groenlinks´ submitted an initiative bill to the Dutch Lower House with the aim of forcing Unilever to pay (dividend) tax on profits accrued in the Netherlands.

In respect to the above, ECGS notes that Unilever has publicly stated that in the event the bill will be passed by the Lower House as well as the Dutch Senate (First Chamber) and thereby becomes legislation, the planned relocation will be cancelled as it is then no longer considered in the best interests of Unilever, its shareholders and other stakeholders.

At this time, it is not yet clear what the exact impact will be of the bill, as it is unclear how plausible it is that the bill will actually be approved by the Lower House and the Senate and, if so, in what form.

Although ECGS has serious concerns regarding the tax morality of (mainly) Anglo-Saxon institutional investors, it strongly endorses the strategic rationale of the (proposed) unification. ECGS therefore recommends to vote in favour of this resolution, however only on condition that the initiative bill (as presented above) will NOT be passed in its current form. Accordingly, ECGS recommends to vote FOR.

Underlying
Unilever PLC

Unilever is a consumer goods manufacturing group based in the United Kingdom. Co. is engaged in supplying consumer goods in the refreshments, foods, home and personal product categories. Co. supplies its consumers product for nutrition, hygiene and personal care and is active in emerging markets in Asia, Africa, Central & Eastern Europe and Latin America. Co.'s portfolio includes such well-known brands as Knorr, Lipton, Hellmann's, Magnum, Omo, Dove, Lux and Axe/Lynx. Co. manages its brands under the following four category headings: savoury, dressings and spreads; ice cream and beverages; personal care; and home care. Co.'s products are sold in over 190 countries around the world.

Provider
Proxinvest
Proxinvest

Founded in 1995, Proxinvest is an independent proxy firm supporting the engagement and proxy analysis processes of investors. Proxinvest mission is to analyse corporate governance practices and resolutions proposed at general meetings of listed firms.

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As Managing Partner of Expert Corprate Governance Service Ltd (ECGS), Proxinvest has built a large network of corporate governance experts to support clients in corporate governance analysis worldwide. 

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Expert Corporate Governance Service (ECGS)

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