It’s difficult to interpret a crisis when you’re in the midst of it, but Jeroen Smit, Daniëlle Melis and Lars Dijkstra give it their best shot. In what was originally planned as a roundtable but instead became a conference call, they discuss what we can learn from the past and reveal a shared sense of optimism.
Jeroen Smit, we’ve read your book on Unilever with interest. Looking back, what can we learn from your profile of Paul Polman and his book Het grote gevecht & het eenzame gelijk*?
‘In the book I’ve tried to reconstruct the years between 2009 and 2019, when Paul Polman was trying to promote the message that multinationals need to be a force for good. The world is still ruled by: if it’s possible, if it’s permitted, then you should do it. Otherwise you’re a poor businessman.’ Smit cites the example of Tim Cook, CEO of Apple, who in an interview with The Guardian said he wanted to pay more tax: ‘We desperately need a fair tax system’. It’s very interesting that, although he genuinely believes this, he can’t really get away with saying so in his role as CEO. In 2009, Paul Polman had the courage to point out the undesirability of this split between personal and professional integrity. Your personal integrity needs to be front and centre of what you do.
Another thing we can learn from Polman is that it’s not easy to be the trailblazer. He thought the world of 2016 would understand that we all ought to work together. A global tax on carbon emissions, a living wage and combating poverty, the Climate Accord etc. Instead, we got Brexit and President Trump. To top it all, Kraft Heinz then made an offer for all Unilever shares. What particularly frustrated Polman at the time was the knowledge that the influential major Dutch pension funds (which usually praise Unilever’s sustainable leadership) were willing to sell their stakes in the Anglo-Dutch multinational if the price was high enough. Many pension fund boards are fearful of anything that is hard to quantify.’
Daniëlle Melis, what is your experience as an independent board member at pension funds? What can we learn from the past?
‘In my view shareholders need to play a major role in improving the world. However, are all shareholders able to take on that role, and indeed, do they want to? The will is ther and many recognise the need to do so. But do all shareholders have the opportunity? This fits in with Polman’s frustration: do you allow yourself to be ruled by quarterly figures and regulators? Or do you opt for long-term engaged shareholdership? It’s not a homogeneous group.
You have the age-old dual agency problem: shareholders are the principals who vote at shareholder meetings and are in touch with the company’s management. At the same time, they’re the agents of the ultimate beneficiaries of the pension funds, the members. So you have a responsibility towards corporates, but also to the pension scheme members you serve. I see issues arising from this dual role in my position as an independent board member. They are two ecosystems in a single world. We still have a long way to go in this respect.’
Smit is curious to understand what lies behind the slow pace of change.
Daniëlle Melis: ‘Some board members still view socially responsible investment as a trade-off between doing good and performance. They think that sustainability costs money. The context in which you operate also matters. Take the plummeting financial markets. There is pressure on pension funds to safeguard their funding levels and financial returns. I don’t believe the constant search for yield and the threat of having to cut pensions mean you can’t focus on sustainability. Fear and turmoil in the short term certainly don’t help though.’
Lars Dijkstra, as an investor, how do you view our current rollercoaster ride in terms of lessons from Paul Polman’s story?
Dijkstra: ‘The current situation is exceptional and very scary, although economically you can also say: never waste a good crisis. How do major changes occur? It’s the classic S-curve. It often takes about twenty years to traverse the entire curve. First you have the pioneers, then a growing group of like-minded people and separate initiatives that are really the same. You can see this now with the focus on climate, sustainability and the long term. Ultimately they all come together and merge. It wouldn’t surprise me if this crisis acts as a major wake-up call: we can’t go on like this.
Our first truly sustainable portfolio dates from 2002. We know that in practice you can exert great influence on companies, even if you’re not a major player. But you all need to believe in it: the entire value chain of asset owners, asset managers and corporates. It’s about personal integrity, but the incentives at all the parties involved also need to be better aligned. I’m not naïve about this, it could take ten years, but still. It wouldn’t surprise me if we use this crisis
o change such things.’
It’s difficult to interpret a crisis when you’re in the midst of it, but Jeroen Smit, Daniëlle Melis and Lars Dijkstra give it their best shot. In what was originally planned as a roundtable but instead became a conference call, they discuss what we can learn from the past and reveal a shared sense of optimism.