Management Turnover as Change Agent

Thursday, September 4, 2008

Outsider Chosen to Run Unilever

Unilever UN (NYSE) the Anglo-Dutch consumer products giant went to the outside again to bring some new energy to its operations and firm up its stock.  Under the tutelage of the company's Swedish chairman, Michael Treschow, Unilever selected Paul Polman to replace outgoing CEO, Patrick Cescau who is retiring at the end of the year.  Polman is the first CEO Unilever has hired from outside in its seventy eight year history.  Polman has been Nestle SA's head of North and South American Operations.

While the company may have had a number of qualified internal candidates to take the CEO position, the board, and likely Treschow, understood the need for a take charge
executive who could shake things up a bit.  Choice of an outsider makes the task more likely.  Polman, a well-known consumer products executive who has worked for Unilever's dreaded key competitors, Proctor and Gamble and Nestles',  comes to the company with many of the skills the firm needs at this particular time.  At one time, according to Aude Lagorce of MarketWatch,
Polman, 52, had previously been tipped to succeed Peter Brabeck-Letmathe at the head of Nestle, but found himself in a delicate position after the group picked former head of the Americas Paul Bulcke instead last September. Before joining Nestle as chief financial officer in 2006, Polman had spent 26 years at Unilever archrival Procter & Gamble.
Polman's selection has overall been hailed by the investment community.    According to a Reuters story in Forbes,
"Paul Polman is probably the best candidate in the world to become CEO of Unilever. With hindsight, he was probably the only logical choice," said independent analyst James Amoroso.

"I think they've made an excellent appointment ... They've really scored a home run here," said Martin Deboo of Investec.

... Analyst Virginia Heeribout at Natixis Securities said, "Mr Polman has a reputation as having a highly positive influence on Nestle's stance towards investors."

... "Investors will warm to this decision as Polman's shareholder friendliness has been proven during his short term as CFO of Nestle. He is also an extremely open, honest and likeable personality," said Amoroso.
According to a piece by Vidya Ram of Forbes Marketscan,
"It's very positive that they have appointed another external person. The company has been lagging in performance over the past few years and needs someone who will be more aggressive than the insiders at Unilever," said Keijser Capital analyst Nico Van Geest. Last year Unilever appointed Jim Lawrence, former vice chairman at General Mills, as its chief financial officer, and Michael Treschow of home appliance maker Electrolux, as its chairman. 

Geest said that investors were hoping that Polman, 52, would oversee a large share buyback program, having launched a $21.0 billion share buyback at Nestle last year. Unilever has already been implementing a number of changes including cost cutting, but there is need for more change, said Geest. These include being more aggressive in pricing, gaining more market share in emerging markets and in the United States, where Proctor & Gamble currently dominates.
According to a story by Celeste Perri and Jeroen Molenaar of Bloomberg,
"I'm glad Polman's coming,'' said Felix Lanters, who helps manage about 12.5 billion euros ($18.1 billion) including Unilever shares at Amsterdam-based Theodoor Gilissen Bankiers NV. "Unilever's stock hasn't been doing too well lately. This could be a kickstart."
All indications excluding the comments from analysts and the company's own spin on its decision to choose Polman appear to be in the right direction.  As the laggard of the big three consumer products manufacturers, Unilever needs a more aggressive management and a better understanding of the fundamentals.  Polman with the help of the chairman and others on the management team can make a difference at the firm.

Stay tuned.

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