issue 172 - June 1987
Photo: Camera Press
UNILEVER'S STICKY FINGERS
Inside a Multinational
Like other multinationals, Unilever has great power.
But does it show a responsibility to match?
Amanda Root investigates.
They're stateless. They grow when we sleep. They are owned by people who often know nothing about what they do. They make everything - from hair-sprays to oil-slicks. And they say they're apolitical.
A visitor from outer space - a sort of Bob Geldof of ETs - would think our tolerance of multinational corporations a quaint piece of earthling double-think. Imagine a visitor from space's report on a multinational. Say our Extra-Terrestrial happened to stumble upon Unilever.
It is - if you discount petroleum companies - the world's ninth biggest company.¹ It is also the world's biggest food processing and household goods company. Unilever owns over 70 companies and trades in nearly 80 countries. Its goods confront an estimated two thirds of the world's people.2 Each working day Unilever's 306,000 workers produce profits. Last year they generated over a billion dollars.
Its profits seem to be generated unevenly from different parts of our planet. The Space Creature reads an old document that states: 'Despite the decline in capital investment in Africa, the level of profits has relatively increased. Profit in Africa as a percentage of capital employed is higher than in any other Unilever market. In India and other Asian countries, investment is increasing, and pound for pound, profits are much higher than in Europe'.3 This seems unfair. It seems to show evidence of a kind of exploitation that the official earth histories deny existed.
The Space Creature decides to check Unilever's claim that its multitudinous companies wish to 'remain good corporate citizens'.4 The well-meaning but curious ET investigates Unilever's past - and discovers that the Company traded with Nazi Germany.
'In the Sports Palace we were Hitler's personal guests of honour and were shown onto a podium next to Goebbels and Göring', writes Paul Rijkens, Unilever's Senior Director in the years leading up to the war. 'With arms raised in a Nazi salute they sang demonically. D'Arcy nudged me and said "For God's sake let's stand up as well" ... This was the first and only time that I made the Nazi salute - apart from this I was biting my lip not to laugh. The next morning, to my surprise, I got the contract.'5 Unilever's interests in Germany were huge. Margarine and edible oil produced there dominated Europe's markets. Germany in 1929 was consuming half the total Unilever production in Europe. Although fats and edible oils were most important, the complementary soap and food markets ensured that Germany held a central place in Unilever's investments.6 'All in all tens of thousands of people in Germany worked for us' wrote Paul Rijkens.7
The interest was reciprocal. A German Government enquiry into Unilever business late in 1931 commented favourably on their policies and administration. Hitler noticed. Unilever, he saw, brought into Germany raw materials that were crucial for the country's food industry. Hitler's obsession with Unilever was explained as follows: 'The majority of Europeans realized that half their food came from abroad. Today we recognize the foreign origin of the banana but not the steak. One man never forgot: Hitler. The need for tropical colonies and plantations obsessed him and he talked about it in his field headquarters in the Ukraine. He had decided to leave the management of tropical colonies and enterprises (after his presumed victory) to the Dutch, who, he said, knew more about this than anyone else in the world and "would do it better than we could hope to do it". What had evoked his respect? The incredible efficiency of one firm . . .'8
Unilever's close relationship with Hitler continued when, in 1932, the German Government suspended the Gold Standard and imposed control on the export of money from Germany. In order to trade and make profits Unilever needed concessions from the German Government and ultimately from Hitler. Rijkens wrote: 'We would not only try to get a business agreement but would try to get on friendly relations with the Nazis. Difficult to believe that the whole German people would allow themselves to be drawn into his leadership. We would give any regime a fair chance.'9
By the outbreak of World War Two, Unilever had accumulated in Germany cheese interests, a printing works, a fishing business, an ice-cream factory and an Elbe shipping company over and above its huge edible fats and oil business. These were appropriated by the Germans in the war.10
Episodes like this show Unilever, now the world's biggest food-processing company, using its statelessness in a way that most people would consider to be morally repugnant. This story could be dismissed as water under the bridge. There were, after all, plenty of companies embroiled in similar deals with Hitler. 11
More recent examples of Unilever's behaviour don't offer much of a break from this shameful behaviour, however. For example, Unilever plc has been accused of siphoning off huge amounts of money from the profits of Lever Brothers (Pakistan) Limited.
The story is recounted by Fazle Ghani, a former Lever Brothers employee. He says: 'Lever Brothers had a factory at Chittagong in the former East Pakistan. After the independence of Bangladesh the factory was taken over by the Government of Bangladesh. Lever Brothers (Pakistan) Limited subsequently wrote off 14,490,164 Rupees ($1.1m) against the 'loss'. This amount was supposed to be equivalent to the cost of the factory, and it was written off against net current assets from the profits of 1972. Lever Brothers (Pakistan) repeated this process of discounting a supposed loss against profits two years later: Fazle Ghani says they wrote off '6,963,937 Rupees ($0.53m) against the loss of fixed assets in East Pakistan in 1974.'
Meanwhile, Unilever in London received compensation for the loss of this factory from the newly-formed Government of Bangladesh. 'Later on the Bangladesh Government restored 61 per cent of the share capital in the reconstituted Lever Brothers (Bangladesh) Limited to Unilever plc.' According to Fazle Ghani, this payment to Unilever was 'reported in the annual balance sheet of Lever Brothers (Pakistan) in 1973'. This payment should have meant that the Company in Pakistan returned to its books the amount it had claimed was lost. But this has not happened. In Fazle Ghani's words, the 'amount written off against the initial losses was never returned to Lever Brothers (Pakistan)'.
'This was possibly a serious breach of the income tax laws of Pakistan, and also looks as if a substantial amount of money was absorbed by Unilever plc,' said Fazle Ghani. He added that 'apart from its legal and moral implications this act had seriously affected the functioning of the Company in Pakistan. It had also deprived the workers of their legitimate shares in the increased profits of the company.'12
This story, together with another about the Company's seeming unwillingness to make adequate payments to a 'Workers' Participation Fund' in Pakistan, have not, it seems, pleased Unilever. Fazle Ghani, once a Member of the Board of Trustees of this Fund, has been dismissed from work. He says he lost his job because of his stand on these issues.
Unilever's trustworthiness looks tarnished. Seeking the Company's defence, I sent a copy of Fazle Ghani's account to an otherwise very helpful Unilever Press Officer. Unfortunately his helpfulness seems to have evaporated at this point. Eventually, after nearly three weeks, I received a reply signed by his assistant, which stated that the Company has 'nothing to say'.
Cynics would assert that every company is going to use 'creative accountancy' where it thinks it can get away with it. Other more trusting souls might assert that a sleight of book-keeping hand doesn't mean that a company will treat its customers badly. But, once again, history doesn't seem to be on Unilever's side. The Daily Mirror of October 22 1906 carried a cartoon which implied that 'Port Moonshine' sold short measures. (Lever Brothers base was called Port Sunlight.) It ran:
Poor Woman: 'Please, Mr. Soap Trust, isn't this pound an ounce short?'
Mr. Soap Trust: 'Well, what are you going to do about it? You may think yourself lucky I let you live. I'm the boss of the situation, and no one else can make soap except me, and I'll put as few ounces in the pound as I like and raise the price to what I like, and if you don't get out I'll call the police.' Humour about Unilever's beginnings as a soap and detergent manufacturer, does not sweeten the point.
Enshrined in every set of capitalist ideals is 'freedom of choice'. This freedom is usually extended only to those with money. But even this privileged group forfeited many of their purse-given rights in Unilever's 'margarine war'.
Back in the 1970s Unilever created an intricate series of discount and bonus systems in its Danish subsidiary, Margarine Selskabet. This company's aim was to sell as much margarine as possible - by fair means or foul. Its strategy was to oust competitors from shop shelves, destroying the much-vaunted 'freedom of choice' by paying shopkeepers to remove, or hide, alternative margarines.
The firm's salespeople would pay the retailers an extra bonus, with cheques direct from their own accounts - accounts covered by Margarine Selskabet and Unilever.13
The lawyer of the local trade union was not allowed access to the documents relating to this incident. He was turned down because he was told he had no legal right of access to them, despite his role as representative of Unilever workers. The registrar of Danish Restrictive Trade Practices has also been unable to intervene, because Unilever has now substituted free merchandise to the grocers for the margarine war's payments - which were off the record.14
If our ET equivalent of Sir Bob had any doubts about the ability of multinationals to adhere to the rules they claim to set for themselves these examples would seem to prove their doubts justified. Other examples of convoluted corporate behaviour would not be hard to find. But the case rests with these: they are, perhaps, signs of other changes within Unilever itself. As one trade union puts it: the 'top three men in Unilever have a policy of becoming more aggressive and tougher . . . in the last 10 years the turnover has increased three times to £14,200 million and over 20,000 employees have disappeared off the payroll.'15 Unilever is changing from a paternalistic 'slumbering giant'.
Although describing Unilever, these examples could have been taken from virtually any multinational company. We chose to devote this magazine to one company because we felt that would offer more insight into how multinationals operate. And we chose Unilever not because it is the worst but because it is one of those which touches all of our everyday lives most directly.
All multinationals pursue 'aggressive' policies - which will not be reflected in their public image. Many, like Unilever, prefer to remain largely anonymous, hiding behind the hundreds of brand-name products they sell. Other multinationals ask us to believe in a clean and shining corporate image. They use TV advertising which, rather than focussing on a particular product, expects us to gasp at the sheer size and power of the multinational in question.
But whatever image they choose to present, we are asked to believe that they are going to play by the rules. That people are going to benefit from their presence and that we will not find profits extracted from the poor, choice eroded in an underhand way and Governments with racist or genocidal policies serviced with the same eagerness as those that uphold basic human rights.
We tolerate multinationals, largely because it seems there is no alternative to them at present. Life-style politics won't do much to curb the power of a vast company like Unilever; if we stop eating steaks, they'll sell us veggie-burgers and it won't make any difference to them. Profits are still profits, whatever product they originate from.
But while we tolerate them, they are making the world more uniform and destroying cultural diversity. Multinationals' profit-making tactics involve centralizing production, then selling the same products across national borders. Whether you're an Indian, a Peruvian or an African, whether you live in Sydney, Marseilles, Birmingham or Vancouver, Unilever are gently pushing and shaping your tastes. And they're moulding you into buying their products. Their goods are replacing local equivalents. If multinationals had their way, the whole world would consume the same things. Simply knowing which products a company makes (see page 16) does at least make avoidance of them possible.
You might think the power of multinationals demands a more militant response - dusting off your placards and converging on your nearest Unilever factory. But when small groups of demonstrators stand outside factory gates pleading, for example, 'Please stop polluting our rivers', they are protesting about decisions taken at headquarters thousands of miles away. Unless protests have clearly defined goals and purposes (beyond making those involved feel good about themselves) they will be doomed to be ineffective against multinationals which are, by their nature, remote from particular communities and insensitive to small pockets of local opinion.
Demonstrators who have only gone as far as wanting to make their protest heard will be fobbed off with a seemingly sympathetic Public Relations Officer who will promise to look into their complaints. Little more will be done. This technique is well known. Some companies run courses for management into how to deal with protestors. They are taught, for example, to pick on the least significant of a series of demands and to spend the whole of the confrontation dealing with this minor matter.
It is better, then, to have a sense of what can be realistically achieved in a brush-off with a multinational. Multinationals can move or close factories according to their global priorities. Even when they stay in a municipality, as we have seen, they can act according to their own interests rather than adhering to collectively agreed standards of behaviour. Being unclear in a confrontation with one multinational only gives it the advantage. Rather than aiming for concessions, I believe it is better to try to ensure that multinationals become accountable to local people, through the trade unions and the local and regional state.16
If local governments work together with trade unions, then it is possible to make multinationals accountable. Take the example of a Unilever subsidiary in Southall, London. Announcements of the closure had the effect of lowering the morale of the workforce. Unilever then managed to act very quickly to close the factory down - before effective opposition could be built up or plans for alternative uses of the site can be mobilized. Over 2,000 workers lost their jobs. Such episodes could, perhaps, have less tragic outcomes if some of the following steps - or others of a similar nature - had been taken:
· Multinationals should be monitored by local governments, or municipal authorities should encourage others to monitor the companies. This monitoring should be able to investigate the reasons for major job losses and closures before they have happened.
· Links should be built between local and international trade unionists employed by multinationals.
· Compensation should be demanded from multinationals - as a right - when they are responsible for job losses or urban blight.
· Pressure should be put on Governments to develop co-ordinated laws to control multinationals.
· Contacts can be made between municipal authorities to develop a co-ordinated response and to reduce the competition for investment which gives rise to major concessions or grants to multinationals.
In the UK, competition between different regions has taken the form of the creation of so-called 'Enterprise Zones' where companies are encouraged by the lure of low rates for a set period of time. Companies often relocate in order to become eligible for this bonus. In the process they make workers in one part of the country redundant, and hire others - for a time.
This process is repeated on a global scale. In the Third World Enterprise Zones are notorious for the low wages of those employed in them and the capriciousness of the employers. Third World Enterprise Zones are, in a sense, merely heightened examples of the sort of global game that multinationals can play against all poor countries. One country's concessions - made out of desperation to get business - can be played off another's. Countries will vie for each other to get multinationals to invest in them. Wages will drop and multinationals will benefit. Women will often be in the front line of the suffering caused by this sort of 'bargaining' as employers consistently give them the most menial and badly paid jobs.17 The pattern can only be broken by the co-operation of work-forces in different regions or countries.
If some degree of accountability becomes a reality then a future enquiry by our extra terrestrial neighbours may not come to harsh conclusions. Otherwise our ability to want one thing and allow big companies to do another will stand as an eternal monument to earthling folly.
1 Fortune August 4 1986.
2 CIS Anti Report No. 11 Unilever's World, London, 1974/5 p1.
3 CIS, ibid, p11
4 Unilever, Unilever's Responsibilities as an International Business. London, 1982, p6.
5 Rijkens, P. Handel en Wandel, A D Donker, Rotterdam, 1985. p83.
6 CIS, ibid, p78.
7 Rijkens, ibid, p72.
8 Tempel, G. The Chairman as God, Anthony Blond, 1970, p47.
9 Rijkens, ibid, p75.
10 CIS, ibid, p80 ff
11 See, for example, Samson A The Sovereign State, Coronet Books, 1973 for an account of lTT's involvement with the Nazis.
12 Edited from Unilever Workers' International Seminar, Grip on Unilever, Greater London Council, London,1984. p38.
13 Unilever Workers' Seminar, Trade Unions and Unilever in Denmark, London, 1984, p4.
14 Ibid, p4.
15 International Union of Foodworkers (lUF), Unilever Information No 12, Geneva
16 Transnationals Information Centre, London (TICL), News from TICL No 4, London, February - April 1987. p1. The following section draws on this document.
17 Mitter, S. Common Fate, Common Bond, Pluto Press, London, 1986.
This special report appeared in the unilever's sticky fingers - inside a multi-national issue of New Internationalist. You can buy this magazine or, to get stories like this one through your door every month, subscribe.