Welcome to In the City, Bloomberg's podcast, connecting you to the conversations and the stories shaping the world of finance. I'm David Merritt, and this week we bring in the second part of our conversation with Paul Pullman. Paul was the chief executive officer of Unilever for a decade from twenty and nine to twenty nineteen. Before that, he worked
for Procter and Gamble and Nesle. We asked Paul about his experience leading Unilever, one of the world's biggest consumer goods companies, and also his commitment to proving that putting a sense of moral purpose and sustainability front and center could actually be a more profitable way to run a business.
Paul, you were in charge of Unilever for ten years. You've had to make decisions and the longer term. On a short term, how difficult just is it to be a chief executives? Like, how do you when you realize what you're worth? Is it in a crisis or in the long term kind of motivation of the troops?
Well, it's probably both, And in fact it's a very difficult job in the sense that you have to be promoted into that job without really having ever done it, and yet the skill sets that are needed for that job are quite different. So when I became CEO, I wasn't feeling as comfortable and as confident as I would
normally feel. And there are very few people you can reach out to and very few people that can help contextually in a situation like that, especially when you come into a company you've not worked before and you don't fully understand how it functions, and yet everybody expects you to immediately come with the oracle of Delphi and make the right decisions and the one hundred day plan. I've always personally objected to that, but it's difficult.
So did you feel what you've felt a little bit of what imposter syndrome when you started?
I definitely.
Said to the board that there are better people than me to take that job, and I actually gave them names to interview.
Two thousand and eight.
So definitely I wasn't looking for a CEO job day because you know, it's all serendipity, and your predecessor needs to leave, the board needs to look it's always better to have an internal candidate that wasn't there. So this is a lot of serendipity, and my name was in the papers because I didn't get the job at at Nestley at that time. They gave it to a lifer Paul book at that time. So that's why I headhunters.
How long?
How long did it take you to sale? Like on top of the job, But you know, I.
Don't think you'll ever be because you always have to be sharp. The moment you feel you're on top of the job, where you become relaxed, I think it's time to move on, and some CEOs and my signal for that with other CEOs is when they start talking about all the wonderful things they've done, then it's really it's.
Really time to go. So you have to be no.
I think the most important skill sets that you have, that you always need to have and also in terms of crisis, is to have a high moral compass. And it's not surprising that the first thing I did was reads out to Bill George, who was the chairman of Metronics but now teachers at Harvard had written a book what was called two Norse find your own purpose, Find
your own you know what makes you tick. I don't believe you can be a purpose driven company or a sustainable company if you're not purposeful or sustainable yourself.
EAD So I worked with him to.
Work with the five hundred top leaders at un for at that time, I had an other hidden agenda. I needed to understand these five hundred people because they were going to be the key people I needed to rely on in terms of building our new strategy. So it gave me a year actually to think about the strategy, but also to collectively work on what the purpose of this company should be, because we clearly had lost it
and that was a very powerful thing. But the leadership skills, I think are evolving, but the basic leadership skills that you need to run these companies will always say the same.
But Paul, when you talk about purpose, I mean, does it have to be good purpose or can the purpose.
Also just be making money keeping shareholders having making money, which is true.
For many that operate under that way. But let me remind you that the average tenure of a CEO has now dropped to four and a half years. Let me remind you that when I was born, the average length of a publicly traded company's existence for sixty seven years. Now it's seventeen years. I think we've shown that the Milton treatment period, which was disguised by many other things,
is more destructive for society now than we thought. That the single minded pursuit of shareholder primacy doesn't really work. The graveyard of companies that pursue that strategy is absolutely full of that. So increasingly we can show that companies that work multi stakeholder longer term, who purpose at the core, have at least a better opportunity to get a better return,
And I think that's increasingly the model the financial market now. Interestingly, there are more people now in the financial market trying to encourage companies to be more longer term than the companies themselves are. So it's this notion that it's the financial market that puts that pressure on you. I would actually even challenge right now. There are some elements of the financial market that put pressure on you, but you
don't always have to give in to those. You know, if you let your unile eve at over one hundred thousand decent shareholders, if you want to call it that way, if you would listen to all the shareholders and do what they were asking you to do, your company would be bankrupt before you knew it.
I mean you've spoken about the need for that sort of moral compass as a kind of imperative increasingly now to attract staff as well, because otherwise people increasingly will make decisions about who they want to work for depending on that north star, that moral compass. And that's a shift, isn't it. Now, that's a generational show.
Well, we've seen a big shift, David, and it's actually a generational shift, but not as big as the shift itself, if I may say. In one of my foundations, we ran a study amongst four thousand people in the US and Europe, and what we found was that two thouirds of the people now select companies. Of course they want good pay and be competitive and take care of their families. That goes by itself. Two thirds of the people that were looking for jobs wanted to work for companies with
a bigger purpose. People want more. They wanted to make a bigger difference in life they than just getting a salary, and that's a key driver.
Now.
Now, interestingly, thirty percent of the people we interviewed had deliberately left a company because they couldn't find that purpose. And sixty percent of the people we interviewed were actually considering leaving the company. Half of them didn't have confidence in the CEO. They said the talk and the walk were not the same. So in this survey, we call
for higher ambitions of companies. We call for better communication than transparency, but we also for giving higher agency to the people in the companies to be part of that transition. So we call it conscious quitting. And that's probably a new trend. You are right that you see it go up when you get from the baby boomers to the millennials, to the Gen zs and the Gen Vice. You see the numbers going up, and generations now is ten years. By the way, it's not a generation the way we
thought about it. Their loyalty to companies has also shortened. For each of those generations, it's now less than two years because they clearly can't find what they're looking for in these companies.
Are they just being unrealistic? I mean the idea that they're not.
At all know Liver we put purpose right in the middle and created the Unilever Sustainable Living Plan. We saw our engagement scores go up from the bottom tursile when the company was not doing so well, to the top of the top tursile of eight thousand companies. We became the third most loucted company in LinkedIn, after Google and Apple. And we are not a company named. Unilever is an abstract name. The products are much better known, so no,
we we really see that as a driver. In fact, I want to make a point there because it comes to mind. In twenty fifteen, sixteen or so, I was in a meeting here in London somewhere and the financial people from the city were saying, we cannot attract talent. So I thought it was strange because in Lever we had an attraction into more talent than we could deal with and was another problem. We didn't have any turnover in the company either, because nobody wanted to leave the company.
This is another problem.
But the people in the financial market were saying, oh, we have such a hard time attracting talent because all of a sudden there's pay restrains. Are you know my bonuses are being looked at? So I asked our people, I said, in my office, literally I was at Blackfriars where Unilever's officers are. I literally look out over the city. I said, just give me the numbers of the bonuses that these people were getting that year in the city.
And what did we find That the bonuses of the city alone were bigger than the total salary bill of Unilever. And that's one hundred seventy five thousand employees trying to change the world. That's the power of purpose. If you say I can't attract people, you have to wonder why it's not because of salary. You can't solve everything by throwing money at it. I think that's proven to be the case in many things.
But how do you motivate people?
Then you do.
Motivate people by making them part of something bigger than they can be themselves. Obviously, you want to invest in people, you want to recognize people, but above all, people.
Want to be long. They want to be part of.
So that's high. That's more important than Hey.
No, there are always minimum conditions. It's like it's like your products you sell. Your products you sell need to perform, they need to taste good, otherwise why buy them. But then once you've done this minimal hurdle, people will put the will make a choice for the companies that they respect, for the products that are more sustainable. So most of these discussions are always people don't want to pay for sustainable products. It's just the wrong discussion. So we need
to be able to provide the minimum competitiveness. But it's not just throwing money at it. At Unaliver, we certainly didn't see anybody leave during my ten year ten yure few exceptions, but not anybody leave. But yet everybody could have worked for another company and earn more, but they were part.
Of a mission.
Collectively, they were able to do things that they wouldn't be able to do by themselves. That was important enough to them, you know, reaching one point three billion people improving their health and well being, even with simple things like bar soaps where we did hand washing campaigns that literally saved millions of live a year. That's what motivated people. Trying to address the poverty that is under the farmer community. Usually the farmers are the ones that actually go to bed hungry.
Believe it or not, Well, how do you communicate that? So did you spend a lot in internal communications?
Because a lot of the times you can have a chief executives that has great ideas, you know a lot of kind of fire and the ability to change things, but the person way at the bottom of the chain may not know that.
So you have to make sure that a good message goes across the board.
Oh absolutely, So obviously you have your fission that you communicate, but that many companies do. The challenge is how do you make it come alive. So you have to work on many things. You have to work on your leadership teams, you have to work on your own behaviors. You have to work on the incentive system or measurements that you put around that you have to put capabilities in place. It's very hard work. It's very hard work. But in
unally the penny dropped. I would say, when we could show that these brands that had this higher purpose Dove standing for women's self esteem, or domestos building more toilets to attack the issues of open devocation, or life by a bar soap, helping a child read the eights of five, when those brands were starting to grow faster and be more profitable, the penny dropped. The other thing that people want is they don't want to be part of creating problems.
Nobody wants to be part of a problem. They don't want to be accused at dinner conversations that they put the plastics in the oceans, or that they cut the forests in of this world, or that they kill the biodiversity that we all need to live. They don't want to be accused of being part of the eight million people that die of air pollution because they've factories are still running on call. So they want to work for companies that might not be perfect but are certainly becoming
part of the solutions. And as these solutions become bigger or the sense of urgency becomes higher, you need to do that partly individually but increasingly collectively.
What approach did you take to the pay at the top though, as well, because in terms of motivating people, obviously over the last decades, the gap between the c suite compensation and the people and the factories is obviously wide and enormously. Was that something you tried to limit? And where do you stand on this argument that maybe here in Britain we need to pay chief executives more. We're still paying them less here than they do in the United States.
So I don't want to talk too much about myself, but I never talked When I went into Uniliver, my only request was to be sure that we had a gender diverse board. We had a very diverse board of six white Brits and six white Dutch and boy could they disagree. But I said, we need a global board, we need a gender diversity. We were the first board in the UK as fifty percent women. We had two from car too, from the far East. The first black
woman from that went to Harvard and Fudson. A very good board actually, and that was to me important because I needed the support driving these major transformations, and boards that are aligned with what you do is so important to be successful. But other than that, I did not ask anything. So my starting salary was less than my predecessor. And then you do benchmarks like anybody does. It's a race to the top because CEOs are very carefully trying to find the right pool of benchmarking so that it
looks like they get underpaid. And there's this notion that has crept in. If I don't get more than the other, the perception must be that I do a worse job. So from the start I said I don't want my salary to be moved. I earned more than I thought I ever earned, and it was more than I ever needed.
So I changed the compensation plan for unial lever quite dramatically made it a performance driven plan, made it a five year plan, so its long term focus suggested that people invest as short term bonuses in the company shares to be committed instead of anything else and could only participate in the long term plans if they did that.
So the performance requirements went actually up. People had to work twice as hard to get paid less, and it didn't make anybody leave because they were all paid well. And when the company started doing well behind our strategy, when we got our three hundred percent return, people were rewarded. And every year when the board came and said we want to pay you more because you're grossly underpaid, I said I don't want it, but I want you to put it in the annual report so that people see
that we should have pay restrained. It is unacceptable that in the US, for example, if you look since the end of the seventies, still now, CEO pay has gone up nearly fifteen hundred percent. That is far ahead of what even the stock market went up. So that is no link to performance. That is just driven by greed.
Is nothing else?
Where does that end? Is that just keeping?
Where is that the average paid now, total compensation in the FUCI one hundred here for the biggest companies is thirteen million dollars. It's more than I earned every year in Unilever, but doesn't bother me. But why should we have these high salaries to attract talent? Is the issue of attraction the salary, or is the issue of attraction the purpose or the UK economy or the low pound because of Brexit or other things? So what are the real issues that prevent you? Often it is because many
companies don't have good succession planning in place. So why throw money at a problem when that problem is not created by the money? And frankly, when society needs more trust, the worst thing that you can do is keep cranking up CEO salaries. Last year, the salaries in the UK went up twenty percent for CEOs when the efforts worker in the street had to suffer still the tremendous consequences
from COVID. This doesn't make sense. That's what I'm trying to say to CEOs if you want to gain the trust, because at the end of the day, it's all about trust. If you want to lead these companies, and how do you get people wish you when you lead these companies is to be trustworthy, you know, and trustworthy comes from behavior. So it's great to have great statements, great values or overall missions, but if your behavior doesn't align, you get a rotten culture. And that is what happens in most
of these companies that run into trouble. We see it over and over and over again. So salaries is a very important signal or lightning rod for how you really behave as CEOs.
There's some m and A transactions or takeover deals that are very hostile and frankly are the stuff of legends. You had to fend off. One hundred and fifteen billion pounds were offered right yes by craft hignds like who's the first person you called? Did you remember that day when you got the call?
Well?
Absolutely, they offered me one hundred million. I'll tell you transparent here on the progress they offered me a hundred million. Because they think everything is for sale. Morals are not for sale.
Somebody called you, so what happened? Somebody? You get on you get a phone call from someone, Well.
I get a phone call from someone. At that time, we were.
Difesting the march in business because the market was declining. Russia was being closed, so butter became cheaper. It was a business that wasn't global for us, so we decided to go out and I got a visit from someone from their site that I thought was looking at the march in business and he comes in and he says, we want to make an offer for the total company.
So you were shocked.
Well, you know, this is a moment that at least five seconds you is better not to say anything.
But but you.
Know, I've I always, I always feel that whatever happens to you, you just need to think about what you're going to do and not get into the panic mode. So the beauty is there as a silence because if the offer is not public, then nothing happens. And as soon as the rumors are there, the one who makes the offer has to then declare it publicly. And that came out in Alphar about a week later. So I was about to go to mel Mar and Southeast Asia for business visits, which I continued, but it gave me
a week to think about this. Obviously I had informed the board, Obviously we had formed a group of people.
Immediately, did you get did you get on the phone with every single board.
Now immediately, Yeah, no, you have to when you get a novel like that. That's your fiduciary duty and would be wrong not to do that. But I also had prepared many scenarios. You say, when I you're a good CEO or not. Obviously you learn the sailing in the storms. You don't learn the sailing in the harbor, but you can practice a lot in the harbor, and we had practiced a lot with board scenarios. You always need to do that. So what if an activist would come on
the board, what if we would have an offer? Now we thought it would never happen, given the size of the company and the success. This was, by the way, not driven by the performance in our share price. We were outperforming our competitors, we were outperforming the market. We actually were outperforming Warren Buffett, who was part of that consortium.
So it wasn't the performance issue. It was purely a financial manipulation issue to get more out of it for a few people, the battle between a few billionaires and a company that was fighting for the billions of people.
Were the board unanimous in wanting to reject it, like you always.
Absolutely, but unanimous is also what are you going to do about it? What are the learnings?
What are you Because the share price goes up seventeen percent, that was the offer they made. Your share price goes up seventeen percent. It's interesting many of the shareholders that claimed to be long term see an opportunity. You find out that many of them get paid on the quarter, and if they missed the opportunity, their bonus is down.
So there's a reality out there. But we immediately took actions that I think the market liked, because if you look at the few years afterwards, our share price went up a further sixty seventy percent. DESK collapsed to well below when they started the company. But you know, we had to look at things. Our balance sheet was not well leveraged with serfs as well, when you have COVID and all, we are well conservative, and so we leveraged
our balance sheet up a little bit more. Some shareholders felt that they could get a little bit more returned from us at that time, so we gave a modest share buy back. These were things I personally would not have done, but to put a floor under the share.
Price, you have to compromise.
I always call it being principally right but practically wrong is not a good position to be in.
So you think, was that whole episode when you look back on it, the defining moment for your tenure CEO Ani Liver.
I certainly was glad that it happened in year eight because I was a little stronger in my shoes and there was a little bit more confidence with the board. There was a confidence with all of our stakeholders. And what we found when this happened was actually I got a lot of support from all of the stakeholders and from all channels, including people like el Gore or even Bono was willing to but these were people that we had, you know, in our network and had taken care of.
And so I think when you stand with the world, the world stands with you. I firmly believe that, and I also think we would have won that had that come to a vote, even though I went to Teresa May at that time and told her very clearly that the takeover code in the UK is absolutely stacked against the person that is being attacked. It's really wrongly written and that has cost a lot of business in the UK. It has actually weakened the UK from a corporate point
of view. So we've seen some minor changes there, because then you need to go into what do you do about it? So I worked with Brussels, I worked with the UK and other countries to look at these takeover codes. But I also think it brought the debate of what type of capitalism do we want? Brought it further to the foreground, what books were written about it. I think companies became a little bit more aware. Many CEOs said, yeah, I wish I could do that. I'm telling them you
can if you have the courage to do so. But I think it brought forward what type of society do we want to live in?
You know, what do you want to celebrate?
Paul, Thank you so much, Thank you, thank you, thanks for listening to this week's in the City. We will be back next.
Week, but in the meantime, if you like our show, please head on over to Apple Podcasts or wherever you listen to podcasts and rate, review, and subscribe.
This episode was hosted by Me David Merritt.
And me Froncin Blackway.
It was produced by Somasadi.
Additional editing by Blake Maples.
Special thanks for Paul Paulman