Barefaced Unilever cheek

I was astonished to see the Unilever Board praised last week for its attack on its own shareholders, for their passivity in the company's affairs.  In the appalling mess that is our law of corporate governance, the Unilever Board was trying to score a few Brownie points, getting its retaliation in first. 

But the shareholders are right to stay away.  Until "the authorities" (both in Europe and the USA) give shareholders real powers to act as a check upon the corporate salariat, shareholders should stay away. 

For the last 100 years, shareholders have been effectively written out of the corporate governance script.  By the 1890s, the UK Courts had decided that there should be just two executive elements in corporate governance - the Directors (i.e. the Board) and the Management.  By 1900, shareholders were being told that they had only two relevant options if they did not like what was going on in a company -

1. Vote out the Directors
2. Sell their shares

The first was rarely practicable (as it is even today) - and the second did not offer a solution to company woes, merely a personal exit route for the individual shareholder, if there were indeed a market in the Company's shares...  As the UK Courts were the leading judicial commercial institutions in the world at that time, other commercial countries tended to follow their jurisprudence - and that division of function became a matter of global corporate practice.

Then, "Management" seized control of the Board - for the last 50 years it has been executive management, having taken over the statutory powers of "the Board", that has ruled the roost.  In the USA, the Chairman of the Board is commonly the Chief Executive Officer.  There are no checks left, no balances.  The fuses have been disabled.  That is why Enron and Worldcom occurred, and will occur again. The Auditors (who were never conceived as an effective check on the management, rather as simple guarantors of the accuracy of the Accounts presented to shareholders) have also been subordinated to the power of the executive salariat, seduced by perks and high fees.

The Courts have forced shareholders to stand idly by and watch their companies plundered by Management. When in the 1970s rebellious Barclays shareholders tried to stop the Bank trading in South Africa during apartheid, they were told by Management to mind their own business - and the Courts backed the Management.  Shareholders have never been given any power of prior approval, in respect of their company's affairs.  They are the wallflowers at the dance.  They cannot decide the dance, the tune, or their partners.

Now - Governments the world over are just beginning to realise that the corporate thieves have decisively taken over the corporate kitchen - there are no checks, no balances.  Rupert Murdoch and has family have virtually untrammelled and unchallengeable positions of power, within their sphere of influence.  Governments now want and  need shareholders to play an active counter-balancing role.  But if that is to happen, radical company legal reform will be needed, to empower shareholders.  I argue for that, at Tame the Corporations.

But until they are taken seriously, and are given the necessary statutory powers to "make a difference", Unilever's shareholders should sit on their hands, and refuse to place the Management's game. 

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Just before he married the beautiful Diana Mitford (who died last week), Sir Oswald Mosley had dinner with my Dad, at his flat at No 16 Heoldon, in Whitchurch, Cardiff.  My Dad was a widower at that time, having lost his first wife in 1916, without having yet met my mother.  He was living alone, his mother also having died, in 1929 - he had looked after her since the death of his father, which was also in 1916.  And he was a leading "Independent" Councillor on Cardiff Rural District Council. 

The year was 1931. My father was no Fascist sympathiser.  He was a decidedly left-wing Liberal in Parliamentary terms, merely standing as an "Independent" at local level to acknowledge local government convention.  As a senior middle-class Welsh "professional" (qualified as a banker, Barrister, and Company Secretary), he would have found it hard to identify with working-class "Labour" in South Wales - and he never did.   But in 1931, everyone in politics was trying to solve the conundrum of the deflationary Great Depression.  My father had published his own essay on a system of negative interest rates, which required savers to top-up savings by 5% each year, to ensure the maintenance of the value of their savings. 

1929 had seen the publication of the famous Yellow Book by the Liberal Party - "Unemployment: What Can Be Done?" - which stood as a challenge to me, on our shelves at home, for many years.  And Mosley, having risen rapidly within the Labour Party and despaired of its ineffectiveness, was exploring the possibility of forming his own new "socialist" party. 

Mosley undertook a national tour, meeting thousands of local Councillors and local political activists, in an attempt - unsuccessful, as it transpired - to generate the momentum to form his new Party.  It was part of the grinding process of building political alliances, "networking" we would now call it, taking the political temperature.  And it was in that context that he came to dinner with my Dad.   Dinner was no doubt cooked by my Dad's faithful housekeeper Kate, whom I still remember.

But Dad, like many thousands of other local activists, sent Mosley packing.  His own Party got nowhere, and he soon made common cause with the pro-Hitler British Union of Fascists.  One of these days I plan to write an Alan Bennett-type three-hander play, The Day Mosley Came to Dinner - unless someone else gets there first...  And you've guessed it: that was me, when I came along at the end of 1935...

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