When Business Emulates Politics

Businessmen should spend more time peddling products, not pushing protectionism.

|

Unilever building in Helsinki

For many years now, a multitude of politicians have made lofty promises, fudged the truth and denied a variety of allegations. Sadly, this seems to have become the norm. But what should we do when businesspeople join this political game, cynically peddling influence to boost their egos rather than peddling products to boost their bottom lines?

An institutional change to make this practice unacceptable among lawmakers would take many years and lots of manpower; however, the increasing occurrence of business executives acting like elected officials is a new-enough trend that it could be cut off before it becomes ingrained.

Take the CEO of British-Dutch consumer goods giant Unilever, whose actions mirror those of a politician. For years, Paul Polman touted his vision for an innovative way of doing business, relying heavily on buzzwords like "sustainability" and "long-term thinking," much like a candidate on the campaign trail. Now, he's looking to cement his legacy, as you might expect a lawmaker to—by attaching his influence to protectionist policies.

Polman's legacy would not simply be for show, like many lame-duck presidents' final decrees. He has publicly urged the British government to protect companies from outside bids, a concept at odds with competitive market ideals and basic economic fairness.

This is self-interest. It comes after the much smaller American Kraft Heinz Co.'s audacious bid for Unilever in February. In fact, Polman wants to go as far as removing the shareholders' power to dispose of their assets, in "the interests of the stakeholders."

Any economist will tell you that it's better for resources invested in weak or sluggish businesses to be freed up for more productive uses. This switch often occurs through an outside party stepping in against the weaker company's desires. Other times, the takeover is averted through political methods.

Economic protectionism is making a comeback, and unfortunately, Polman's public complaints could create momentum for politicians to step in. Already, British Prime Minster Theresa May's conservatives want the U.K. to "require a bid to be paused to allow greater scrutiny," an unnecessary and counterproductive interference sure to do more harm than good.

Polman's complaints must also be viewed in another context: his long crusade for "sustainability," a noble idea that provides cover for political meddling. Generally, if CEOs want to thump their chests to demonstrate their progressive bona fides, that's their right. It's up to shareholders and board members to decide whether that's the type of business they want to run. The danger comes when the rhetoric of businessmen begins to mirror the kinds of vague populist appeals that have long been used to undermine competitive markets.

Tellingly, Polman's high-minded rhetoric is at odds with some of Unilever's behavior in recent years. In 2011, Unilever was fined 104 million euros for colluding with Procter & Gamble on the price of washing detergent. The company claimed they were working together for environmental reasons.

But Unilever was again flagged for collusion earlier this year when The Competition Commission of South African recommended it be prosecuted for agreeing not to compete with another company over margarine and edible oils. These actions don't align with the kinds of national protection Polman proposes for businesses.

Unilever has also been heavily criticized for dramatically increasing fees on local partners in countries like India and South Africa—which, one could argue, is exactly the type of short-term mindset Polman rails against. The pressure to collect more fees may have been due in part to Polman's various vanity projects promoting his personal image and agenda.

Do these actions represent Polman's idea of sustainability, or are his public campaigns merely intended to divert public attention away from Unilever's sluggish stock?

We've become accustomed to seeing political figures exposed for engaging in the very behaviors they rail against. If Polman's moral preening catches on, we may soon become equally desensitized to the hypocrisies of business leaders. Worse, Polman may succeed in advancing his own agenda at the cost of the public and shareholders—much like a shady politician—by convincing voters and politicians that we need more politics in our business rather than less.

COPYRIGHT 2017 CREATORS.COM

NEXT: 'Humans of Freedom Fest': Portraits from the Largest Annual Gathering of Libertarians

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. First!

  2. Why, it’s almost as if power-seeking, whether in the public or private realm, is a pathology!


  3. In 2011, Unilever was fined 104 million euros for colluding with Procter & Gamble on the price of washing detergent. The company claimed they were working together for environmental reasons.

    This is pretty much what they’re all doing when they say they’re ‘for the environment’ in my opinion. Unilever was just stupid enough to be caught, apparently. Not that I trust the British Government to be honest about it either, but it sounds like Unilever learned their lesson and have greased the correct palms in government going forward.

    One of my classes back in college was taught by a former Proctor & Gamble advertising guy, interestingly enough, and he bailed on that group for more or less these exact type of deals. Last I checked, I think he owned a small business somewhere in East Texas. Go figure.

  4. “But what should we do when businesspeople join this political game, cynically peddling influence to boost their egos rather than peddling products to boost their bottom lines?”
    If it upsets you that much, stop buying their products. If you fail to convince enough other people to similarly stop buying their products, then clearly your outrage is not representative, and the company has no incentive to acquiesce to your demands.

    That’s kind of how the free market works.

    Similarly, existing companies lobbying the government for “protectionism”? Also how the free market works. Once you’re on the top of the hill, it’s in your own best-interest to shut down competition and cement the status quo. Expecting businesses to not do this is expecting them to put your ideology ahead of their bottom-line.

    That said, I don’t believe that this is true:
    “however, the increasing occurrence of business executives acting like elected officials is a new-enough trend that it could be cut off before it becomes ingrained.”
    Businesses have been doing that forever because, since time immemorial, “business executives” have been “people”, and act like “people”, which means pushing their biases, agendas, and so-on into everything they do. You may not have heard about it as much before, but that doesn’t mean it didn’t happen. I mean hell, that’s what President Trump was famous for before he entered politics.

    1. That awkward moment when a statist admits that they aren’t against crony capitalism…

      1. (A) If this is an awkward moment for you, that’s on you, not me. I’m not feeling awkward at all.
        (B) That said, you’re confusing observations about a real system with support for a theoretical one.

  5. What can shareholders do about it if they don’t control their shares? ‘Institutional’ investors typically have an overwhelming majority stake in these businesses funded with your retirement savings but with voting rights completely controlled by some yalie who wants to preserve his ‘access.’ Pretty sweet deal.

    Either give the real shareholders their voting rights back (still unlikely to cause much change) or take those shares out of the voting pool and let the minority activist investors drive change. I won’t hold my breath on either one.

  6. […]relying heavily on buzzwords like “sustainability” and “long-term thinking,”

    I get a kick of how these top management types, most of them Ivy League college graduates, fill their mouths with such meaningless sop, thinking that people are going to fall head over heels for their hearts which are squarely placed in the right place altogether, despite the fact that their fellow travelers on the leftside of the political spectrum hate their guts no matter the amount fo good deeds and words. Sustainability is rubbish. Long-term thinking cannot be distinguished from simple day-dreaming. It’s all utter rubbish, infecting modern business today.

    1. Good friends of mine are coffee producers in El Salvador. Their Great Grandfather was one of the first handful of producers in that country, long about 1870 or so. Six generations, they still farm the same land. They produce a huge volume of top quality coffee, often ending up in the Cup of Excellence auction with their amazing stuff. I asked them one time, early in in our friendship, about “organic certification”, and “sustainability”. They laughed about both…. “we’re doing things pretty much the way Great Grandfather did when he first started. Lots of hard work, diligence, vigilance, learning, applying what we learn… and NO chemicals or other artificial stuff. We have been growing organic coffee since before the term was invented, and we have no intention of changing that. As to sustainability, we’ve been producing award winning coffee for six generations, and are doing things the right way to in ten more we’ll still be producing award winners. Its just good business sense.

      I have to say, with the price I have to pay for their coffees, it DOES make good business sense… but NOWHERE have I been able to find such a wide variety of coffees at such astounding quality. I believe my great(x5) grandchildren will STILL be drinking their exquisite coffees….. and glad of it

      1. As to “fair trade”, that organisation refuse to certify any family farm. To do so would give the co-ops they DO certify a disadvantage, because the family farm does not have to maintain, at extra expense, the infrastructure demanded to manage the premiums and distribution and record keeping. The family farm have family members can do that without hiring someone for that additional burden. Another buzzword down the drain… YAY!!!!

  7. a multitude of politicians have made lofty promises, fudged the truth and denied a variety of allegations. Sadly, this seems to have become the norm

    i’m normally a fan of de rugy, but this is a terrible start to something that doesn’t get much better.

    What’s the point of this other than finger-wagging at Unilever?

    If Polman’s hypocritical (if self interested) behaviors are “the norm”, you’d think there would be a variety of examples to highlight. and surely there are. but instead it feels like a hit piece masked as social-commentary.

    I’ve covered the global consumer-products industry for a long time. Companies like Unilever + PG, which operate in hundreds of countries around the world, are incredibly political by necessity. Few organizations in the world have more experience balancing corporate self-interest against constantly shifting political-moods about trade. You are guaranteed to have situations where a posture in one country is entirely contradicted by behavior in another. Trying to create some one-size-fits-all PR messaging which works in every context is impossible. Deodorant commercials might champion women’s rights in feminist-Sweden, while reinforcing patriarchy in Kuwait. Corporate postures re: free market ideals are no different.

    I have no opinion on the merits of a UL/HZ merger. tho i think PG divested many of their food businesses because they found the food/Personal care mix inefficient


    1. Trying to create some one-size-fits-all PR messaging which works in every context is impossible. Deodorant commercials might champion women’s rights in feminist-Sweden, while reinforcing patriarchy in Kuwait.

      You make some really good points here Gilmore. Companies like P&G span the globe and as such there is no ‘overarching’ plan but rather hundreds of smaller, localized plans and messaging that are indeed in conflict with one another on occasion.

      Not to say that those companies are truly ‘ethical’ or anything, but they are political animals by necessity. RE: East India Trading Company for an example from centuries bygone. I’m not saying they’re the same, merely that when a company is large enough to be considered it’s own international government than the rules are somewhat different; for better or for worse.

    2. Deodorant commercials might champion women’s rights in feminist-Sweden, while reinforcing patriarchy in Kuwait.

      Trying here to envision what those respective ads would be like. Hmm….

      Sweden: “What’s this `baby-fresh’? We don’t have babies.”

      Kuwait: “You stinking again, wife #3? 10 lashes for you.”

Please to post comments

Comments are closed.