Power to the shareholders

Unilever has “lost the plot”. So says Terry Smith, the founder of Fundsmith. Smith is not exactly known for pulling his punches (The Times describes him this week as “famously pugnacious”), but he may well be saying something many others are already thinking. Like big companies everywhere, Unilever appears to be obsessed with “publicly displaying its sustainability credentials” and with the odd idea that each of its brands should have a stated “purpose”. Knorr stock cubes’s purpose is to “reinvent food for humanity”. Sunsilk shampoo exists to improve the “life opportunities for young women in developing countries”. Dove soap’s purpose is to “redefine beauty standards”. Hellmann’s is to “inspire and enable 100 million consumers every year to be more resourceful with their food and waste less”. All this is just silly, says Smith. “The Hellmann’s brand has existed since 1913, so we would have guessed by now that consumers would have figured out its purpose (spoiler alert – salads and sandwiches).” But silly or not, you’d be hard pushed these days to find a listed company not spouting a variety of the same nonsense. Where does it come from?

The answer to this question is bound up in a bigger one – what is the point of a company? In The New York Times in 1970, economist Milton Friedman argued that it was only to make profits for its shareholders. If this was done successfully the rest would follow – if you want to make long-term profits you need to make sure you give employees an incentive and keep an eye on the resilience of your supply chain, for example. Focusing on profit makes the rest a given: