New Internationalist

Engine Of Enterprise

Issue 172

new internationalist
issue 172 - June 1987

Engine of enterprise
Two-faced or honest, generous or grasping, developers
or leeches - the bosses should be given a chance to defend
themselves. Here a recent Chairman of Unilever, David Orr,
explains how he sees the company as a provider of secure
jobs and bringer of wealth to poor countries.

Let me start by re-affirming our belief in the vital role private enterprise plays in creating wealth efficiently. The current phase of economic stagnation has not shaken Unilever's faith in the competitive market economy. Rather, it has strengthened our conviction that the only way to break out of the present rut is to mobilize the driving force of private enterprise. In the developing countries particularly, all of our experience suggests that private enterprise is the most powerful engine to create wealth without which development will not be possible. It is notable that the greatest economic growth in the last decade has occurred in countries like Brazil, Hong Kong, Japan, Singapore and South Korea where industry has been given the most encouragement.

In an environment of competitive enterprise, Unilever must be efficient and profitable to stand up to its rivals. Our contribution to wealth is the value added we create. In 1986 profits amounted to over one billion pounds.* Unilever's continued ability to create added value depends on earning an adequate return on capital employed, in other words, on our profitability. Profits are needed to safeguard the interests of all those who are linked to our future - our employees whose livelihoods are at stake, shareholders who risk their capital, and many others including governments who need our tax contributions to help pay for national development. Unilever must maintain a profitable base if it is to continue innovative and risk-taking investment which will increase our ability to support all those who depend on our prosperity.

As the world's largest producer of household products such as food, detergents and personal products, Unilever is keenly aware of its responsibility to serve well the needs of the consumers of our goods: we must provide products people want that are safe, reliable and give value for money. These vital goals can be stated simply. Yet to achieve them calls for harnessing all the world-wide resources and expertise of Unilever, from basic research and production through marketing.

We start by trying to find out what consumers want. This is like tracking a moving target since consumers and their needs are changing continually. Everywhere the impact of rapid social, economic and technical changes on life-styles and people's expectations is much in evidence. Therefore, to find out what people want, Unilever carries out continuous market research, spending well over £15 ($24) million annually. The results help us to define products that are needed and their chief characteristics such as performance, price, appearance, smell and taste.

Let me now turn to the governments of the countries in which Unilever operates. Our relationship is based on interdependence. Unless governments create a climate in which wealth creation is encouraged we will not be able to fulfill our responsibilities to the many who are involved in our enterprise.

Unfortunately, too often the rise in a state's share of national wealth is combined with increasing interference in industry. On top of this we find an upsurge in economic nationalism and protectionism which could seriously damage the liberal international trading system which is the foundation on which much of our postwar prosperity has been built.

In many countries we frequently find that what governments want from us is not at all clear. Often this seems to stem from ambivalence towards private enterprise, particularly the foreign investor. Invariably, the results are excessive regulation and controls and frequent, abrupt policy changes. Such uncertainty makes it very difficult to know how to comply with the wishes of the host government. As we invest abroad with the intention of staying and building up profitable businesses we are prepared to ride out the bad times as well as to enjoy the good. But there comes a point when we simply cannot afford to keep pumping in resources while getting nothing back. While we accept our responsibility to adjust to government policy we expect governments to allow us to manage our business on commercial lines. I am encouraged by the growing number of countries who understand this and realize the benefits international companies like Unilever can bring.

Job security is a major concern of employees everywhere but particularly in the Western European countries. We recognize that our reputation as a good employer has been built not only on treating our people with consideration and fairness but also on providing, as far as possible, continuity in their jobs. However, our companies cannot be expected to be immune from market forces and some operate in industries that have been hit hard by recession.

Nothing gives us greater cause for concern than retrenchment but at times it is inevitable. Where it must be faced we try to cut back if possible by natural wastage - early retirement and transfers. But there are occasional hard cases and here we try to give as much notice as possible, to give advice about re-deployment and to provide redundancy terms which we believe are generous.

Source: Edited from Unilever's Responsibilities as an International Business, Unilever 1982.

How Unilever works
Unilever is like a giant machine - its main aim is making money.
Management's decision-making structure is supposed to make
sure the Company succeeds in making large profits. But the
bosses face opposition, as this chart shows.

TWO PARENT COMPANIES

Unilever PLC Head Office London

Unilever PLC keeps the shares of companies in the UK, Ireland, the ex-Commonwealth Countries, United Africa Company (UAC), International and most African Unilever companies.

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Unilever NV Head Office Rotterdam

Unilever NV holds the shares of the companies in Europe, the US, Central and South America, Indonesia, Japan, the Philippines, Thailand, Turkey and holds shares of two companies in Zaire.

The President of PLC is Vice President of NV, and the other way round.

Board of Directors
Both parent companies' Board of Directors consist of the same 19 people:

3 IN SPECIAL COMMITTEE

LIKELY OPPOSITION:
Other multinationals' managements and their shareholders. Unilever's 'top trio' has used aggressive takeover tactics to combat these rivals recently. For example, Unilever engaged in a public battle over the takeover of Brooke Bond in 1984, after Tate and Lyle had appeared as the first potential buyer.

4 DIRECTORS EACH WITH RESPONSIBILITY FOR A SPECIAL SECTION 7 DIRECTORS RESPONSIBLE FOR ONE OR TWO OF THE EIGHT PRODUCT CO-ORDINATORS 5 DIRECTORS EACH RESPONSIBLE FOR ONE REGION

LIKELY OPPOSITION:
The trade union movement. Unilever does not recognize the trade union movement as an international organization. Each union is reduced to negotiating directly with the individual companies of the Unilever group, although management makes decisions across country borders.

SPECIALIST SECTION
4 members of the Board of Directors are responsible for sections including: research, engineering, accounting, and management of international communications within the company.

PRODUCT CO-ORDINATORS
The most important product groups within Unilever are represented here: edible fats and dairy; food and drinks; detergents; personal products; chemicals; frozen foods and paper, plastics and packaging.

REGIONAL BOARDS
Each regional board is under the direction of a member of the Board of Directors.

OPERATING COMPANIES
Trading and manufacturing companies in individual countries, e.g. Thomas J. Lipton in Canada, Unilever Australia in Australia, Elida Gibbs in South Africa; Shedd's Food Products in the US; Industrias Gessy Lever in Brazil; and Birds Eye Wall's in the UK.

LIKELY OPPOSITION:
Managers' rivalry. Product co-ordination managers can feel that their responsibility for one area is undermined by regional management who are also overseeing the same factories, and vice versa.

* figure changed and updated from original.

Source: Centre for Research on Multinational Corporations (SOMO) Unilever in Africa Amsterdam, 1984


SHIRLEY, Sacked Worker

Unemployment strikes. Shirley is losing her job. She has worked at Unilever's soap factory, Sydney, Australia for 25 years. Here she explains how she feels to Janet Hawley.

'This big old factory used to be a much happier place to work - whole generations of families worked here; grandfathers, fathers, sons, mothers, sisters, daughters - but it's closing down in September 1988 so there is a sense of gloom around now,' she said. 'A lot of people have already been made redundant, and there's 150 of us left till we close.'

'I put soap powder into trays - I put in three, and the chap on the other side of the line puts in three, then the soap goes down the line to the machine that puts it in cartons. You change position every two hours - two hours with the trays then two hours packing off your boxes of soap.

'Sometimes you get dust from the soap and it makes you sneeze something dreadful. We're issued with masks and it's up to us if we wear them or not. Many people find masks uncomfortable and I find it cuts your air off and it's hard to breathe in one. We get supplied with uniforms, safety shoes and cotton or rubber gloves.

'The factory is so noisy you have to raise your voice to have a conversation, It's cold in winter - the old heater isn't much use - and hot in summer even though we have fans.'

The 99-year lease on the factory site has run out, the old plant is being demolished and town houses built in its place. Unilever is moving its liquid soap operations to Minto, 30 miles away, and its powder soap operations to Melbourne in another state. 'We've been offered jobs there but it's too far to go, so most people are taking redundancy. Redundancy pay is good - you get 11 weeks for the first year and three weeks for each subsequent year plus long service or holiday leave due.

'But people would have been in a better position if we had superannuation. We've asked for it but been told it was only for staff, not unskilled workers. There was a pension fund for us but not many people knew about it or joined it, because it wasn't as good a deal as superannuation.'

The average wage for men and women for a 38-hour week is UKP4385 ($425) with 22.5 per-cent penalty loading for afternoon shift and a 25 per-cent penalty for night shift. There are no perks in Shirley's job. 'You can buy soap powder here but they charge so much, it's cheaper to go down the road and buy it at the supermarket.'

Shirley says the management-staff relationship at Unilever is 'fairly good but it was a lot better ten years ago: you could talk to management and personnel and get somewhere. Lately it's been new management with new ideas and everything tightening up, knowing the plant is going to close.'

Shirley says she won't be looking for another job after Unilever. She's going to retire and look after her aged mother. But others are worried about finding jobs in a tight market.


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