A mix that has worked for Shell and Unilever

Click to follow
The Independent Online
THE KEY to Unilever, the Persil, Wall's, Bird's Eye and Brooke Bond group, is its special committee of three - the British and Dutch chairmen and a third person who is almost always a chairman-in- waiting. The British and Dutch take it in turns to have the majority.

The triumvirate has three vital roles:

setting long-term strategy;

monitoring performance;

approving appointments to the top 100 jobs.

The last of those roles gives the committee the power to vet and veto rising management talent, ensuring that only those who conform to the group culture advance to the main positions.

The group is split 50-50 between the British Unilever plc and Holland's Unilever NV, but they have identical boards which annually elect the special committee. There is currently a vacancy, but it is due to be filled next May by Niall FitzGerald, the 48-year-old detergents co- ordinator.

The group was formed in 1930 when Margarine Unie and Lever Brothers merged. The two Unilevers operate as separate holding companies, but they exchange information and maintain common policies for their combined operating businesses.

When the bilateral structure was being created, the sharpest point of conflict arose between the British non-executive-director concept and the Continental model of the supervisory board of outside directors.

This has produced a compromise where all the directors are executive, but there is a class of advisory directors attached to them who are not formally members of either of the two main boards.

While this finely balanced organisation is designed to prevent mistakes happening, its sternest test in recent times has been this year's tussle with the American Procter & Gamble over new Persil Power. In May Ed Artzt, who is P&G's chief executive, marched into Unilever's Thameside headquarters and told FitzGerald that the product rotted clothing and should be aborted.

Nothing like it had ever happened before, and Artzt knew that it was the sort of challenge the Unilever bureaucracy would find difficult to counter.

So it has proved. While Unilever has not withdrawn the offending powder, behind the scenes its higher echelons have been urgently assessing the threat.

A tough chief executive might have produced an instant and decisive response - but although the Unilever committee members may take longer, they have a better chance of getting it right.

AT THE vast headquarters of 'Shell' Transport and Trading, overlooking the Thames by London's Waterloo station, they jokingly refer to their Dutch counterparts as 'the cloggies'.

And Sir Peter Holmes, the previous chairman, is said to have told a City meeting that one great advantage of global warming would be that Holland would be under 20 feet of water. But although such anecdotes suggest that there is a slight edge in the relationship between Shell's British and Dutch arms, the carefully constructed management structure ensures that real arguments are settled long before they reach board level.

And, if there is a real showdown, both sides know the Dutch have a controlling 60 per cent of the combined Royal Dutch/Shell Group of Companies.

'The committee structure tends to avoid personality problems,' said an insider.

'An aggressive chief executive type would be sidelined well before they reached the top, or they would be given their head in one of the operating companies.'

Royal Dutch/Shell grew out of an alliance in 1907, under which the two companies merged their interests while keeping their separate identities.

Today they handle nearly a tenth of the world's oil and natural gas outside the former centrally planned economies. Royal Dutch holds 60 per cent and Shell 40 per cent in each of three holding companies based respectively in the Netherlands, Britain and the United States. These holding companies own all the shares in hundreds of operating companies, other than in the US, where Shell Petroleum Inc owns Shell Oil.

There is a striking contrast between the conservative style of the group management and the entrepreneurial approach encouraged in the field, whether running an exploration business or managing a chain of petrol stations.

The board cedes power to a four-strong committee of managing directors - two British and two Dutch. This decides overall objectives and long-term plans to be 'recommended' to the operating companies.

Fergus MacLeod, at NatWest Securities, voted this week the City's top analyst, points out: 'The two sides take it in turns to provide the chairman of that committee, but it so happens in recent years that the Dutch have held the chairmanship for longer.'

This has apparently come about because the Dutchmen have been promoted to the committee younger, giving them as much as four years in the supreme job. Sir Peter Holmes, on the other hand, had only 18 months.

(Graphic omitted)

Comments