Unilever finds fly in soup after shareholder rebellion | Nils Pratley

That’s the starter out of the way, and Unilever’s board will not have enjoyed it. Wednesday’s 36% shareholder rebellion against a pay policy that could hand bigger bonuses to chief executive Paul Polman and his senior colleagues was an embarrassment for a firm that likes to think of itself as being on the side of the angels in governance matters.

Unilever got the simple majority it required, but the main course – the autumn vote on the proposal to become a purely Dutch company – is when the fun begins. Polman & co need 75% of the plc shareholders, owners of one end of the currently Anglo-Dutch company, to sanction a switch to a single HQ in Rotterdam and a single class of share that would have its main listing in Amsterdam. Some UK fund managers hate the idea.

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The main problem is that Unilever shares, as things stand, would disappear from the FTSE 100 index – indeed, all FTSE indices. That would make it would it impossible for some funds, notably UK tracker funds and those with strict UK investment mandates, to own Unilever stock. A secondary listing in London, Unilever’s peace offering, is not useful if FTSE inclusion isn’t part of the package. Fund managers fear they will be forced to ditch their holdings at depressed prices.

Unilever hasn’t helped itself with its sniffy attitude. Columbia Threadneedle, which complained in March about a “lack of engagement with shareholders”, is the only public objector so far but other members of London’s big long-only club are privately seething. If The Investor Forum, the new lobbying collective, has not already taken up the cause, it should to do so. This is exactly the type of situation it was created to address.

Tracker fund managers, at the very least, should be up in arms. Their job is to protect the interests of end-investors and being a semi-forced seller of a top 10 FTSE 100 company would be a terrible outcome.

There are signs Unilever’s board realises the vote may not be the walkover it assumed. Chairman Marijn Dekkers told Wednesday’s meeting the company is talking to the FTSE index-compilers “to see if there is a possibility of inclusion”.

If the FTSE rules of qualification can’t be twisted to include a Dutch-incorporated company, however, Unilever needs to think again. Whatever its true reasons for choosing the Netherlands (purely commercial, and nothing to do with Brexit or takeover threats, it says), the plan can’t happen if 25% of plc shareholders vote no.

On pay, that level was surpassed, even though greedier bonus schemes from other FTSE 100 firms have encountered less resistance. The looming poll on relocation may partly explain what happened. Maybe the 36% revolt was a warning shot. Unilever has seriously annoyed a lot of people.

Give us a Gloo

“I would like to thank CEO Rebecca Miskin and her management team for their tireless efforts to identify and capture growth assets for Gloo,” says Arnaud de Puyfontaine, chairman of an Aim-listed startup that raised £30m in 2015 to hunt for digital media “transformation” opportunities but found nothing worth transforming. Shareholders invested at 120p and are told to expect 47p-ish as the firm is liquidated.

In the circumstances, it should be Miskin expressing thanks. She’s been paid an annual salary of £235,000 for three years, so the fruitless search hasn’t been entirely worthless from her point of view. Indeed, she got a bonus of £106,000 on top last year and £122,000 the year before. Colleague Bill Davis, who joined in July 2016, did better: a salary of £320,000 plus a £474,000 bonus last year.

Bonuses for what? No acquisitions were made and Gloo’s revenues were precisely zero. Richard Bernstein from activist fund Crystal Amber thinks the bonus criteria must have been “breathing in and breathing out.” Fair comment. Gloo’s recruits may have been high-flyers taking a career risk to join a startup, but a performance-related bonus for trying hard but getting nowhere is nonsense.

IT headache pesters Pester

Another reason why TSB chief executive Paul Pester may have been so tetchy at the Treasury select committee is that his bank probably expected to collect a decent slug of the money in the so-called “Alternative Remedies Package” fund. This is the cash that Royal Bank of Scotland had to cough up in place of spinning off 300 branches.

Some £775m is earmarked to boost competition in the small business banking market. TSB will still apply for funds, said chairman Richard Meddings, and, given the thinness of the field, it will probably still get something. But, after the IT shambles, best to lower expectations.