Analysis of Corporate Governance at Unilever: A Comprehensive Review

This report provides a detailed analysis of Unilever's corporate governance practices, exploring its approach to risk management, stakeholder needs, and leadership. It examines the concept of corporate governance, the roles of managers in creating a socially responsible organization, and the specific ways in which Unilever addresses revenue, supply chain, and investment risks. The report also delves into Unilever's leadership and management processes, policy compliance, and the ethical issues that influence corporate decisions. Furthermore, it critically evaluates different organizational approaches to corporate governance and risk management within Unilever, considering functional, team, and divisional structures. The analysis highlights Unilever's commitment to transparency, stakeholder benefit, and ethical conduct in its global operations, demonstrating how corporate governance contributes to its success and social responsibility.

Running head: CORPORATE GOVERNANCE OF UNILEVER
Corporate Governance of Unilever
Name of the Student
Name of the University
Author note

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Table of Contents
Introduction:....................................................................................................................................2
Part 1. Concept of corporate governance and role of managers and creating socially responsible
organisation:....................................................................................................................................2
Part 1.1. Concept of corporate governance:.................................................................................2
Part 1.2. Role of managers and creating socially responsible organisation:...............................3
Part 2. Analysis and explanation of role of corporate governance and risk management in
responding to various stakeholders needs:......................................................................................4
Corporate governance and Revenue risk:....................................................................................4
Corporate governance and supply chain risks:............................................................................5
Corporate governance and investment risks:...............................................................................5
Part 3. Leadership and management processes in Unilever with respect to governance and policy
compliance:......................................................................................................................................7
Part 4. Conceptual, Contextual and ethical issues bearing upon corporate decisions:....................7
Part 5. Critical evaluation and application of different organisational approaches to corporate
governance and risk management:...................................................................................................8
Conclusion:......................................................................................................................................9
References:....................................................................................................................................10

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Introduction:
Corporate governance plays a very significant role in ensuring legitimate distribution of
rights and responsibilities among the management, employees and the external stakeholders.
Business organisations serve several stakeholders both internal as well as external. They are
legally and ethically bound to protect the interests of all the stakeholder groups. The apex
management of business organisations today form formidable corporate governance strategies
based on their visions and missions. Kraakman and Hansmann (2017) descried corporate law as
the basic law of corporate governance. Arora, and Sharma (2016) mention that corporate
governance is closely related to performance of the firms in the emerging economies which
already experience high level of market competition. Thus, it is evident that corporate
governance occupies a very important position in the present commercial organisations,
especially leading multinational companies. The aim of the paper is to explore the role of
corporate governance in different areas like risk management, CSR, leadership and policy
compliance. The base of the study would be lent by one of the largest fast moving consumer
goods marketing companies in world, Unilever (Unilever.com. 2018).
Part 1. Concept of corporate governance and role of managers and creating socially
responsible organisation:
Part 1.1. Concept of corporate governance:
The term corporate government as per Kraakman and Hansmann (2017) can be defined
as the procedures and policies which the apex management of business organisations take to
ensure that the rights and interests of stakeholders are protected to the feasible extent. The
feasible extent here refers to the acceptance of the benefits taking into account the legal and
ethical parameters. Armstrong et al. (2015) point out that corporate governance plays very

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important roles in the operations of multinational companies like Unilever. It can clearly be
pointed out that this pressing importance of corporate governance calls of leadership from the
apex managers.
Part 1.2. Role of managers and creating socially responsible organisation:
Managers play very significant roles in the corporate governance of business
organisations, thus contributing towards creating socially responsible corporate citizens. This
fact comes into play in the global corporate governance strategies of Unilever. This is evident
from the unified codes of business principles determined by the apex management which apply
to Unilever PLC, Unilever NV and the subsidiary companies, thereby referred to as Unilever
Group. The company maintains similar directors for both Unilever PLC based in London and
Unilever NV, based in Rotterdam, both functioning as the headquarters. The company in order to
ensure uniform decision making process appoints similar directors for the boards of both the
headquarters. The company follows a uniform procedure of operations like accounting
procedure, product quality assurance and convening shareholder meetings (Unilever.com. 2018).
The uniform corporate governance throughout Unilever Group ensure transparency and
stakeholder benefit. For example, nomination of similar senior managers at both PLC and NV
would result in uniform decision making in the headquarters of Unilever Group, thus paving
ways for effective execution. Secondly, the company maintains a uniform quality for its products
its markets in the global. These uniform product quality parameters enable customers of Unilever
obtain high quality, thus benefiting the former. Thirdly, uniform financial decisions and uniform
publication of its financial information benefitting the shareholders around the world. This
means that the corporate governance of Unilever under the leadership of the apex managers has
enabled the company to establish itself as a socially responsible organisation.

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Part 2. Analysis and explanation of role of corporate governance and risk management in
responding to various stakeholders needs:
Corporate governance plays a very significant role in risk management in responding to
the needs of various stakeholder groups. The discussion on the role of corporate governance in
risk management can be initiated by mentioning the work of Van Grembergen and De Haes
(2018). The authors point out that information technology has become a very significant part in
maintaining competitive advantage and risk management. However, the use of IT in risk
management in today’s organisations rests on effective corporate governance. Almeida, Hankins,
and Williams (2017) point out that in order to obtain high quality supply of raw materials,
business organisations have to hedge with the suppliers of raw materials. This statement points
out to three risks which companies need to management efficiently, namely, supply chain risks,
legal risks and legal risks, all in order to maintain economies of scale. It is evident from the
discussion that management of these three risks require strict supervision of the apex and middle
level management. This once again points out that effective risk management is not possible
without corporate governance from the apex management.
Corporate governance and Revenue risk:
Mason and Simmons (2014) points out that corporate governance plays very significant
role in risk management which business organisations can obtain by protecting needs of various
stakeholder groups. A closer analysis of this opinion of the author points out that it is closely
linked to the opinion of Almeida, Hankins, and Williams (2017) and in fact lends in further
substance. It can be pointed out that hedging in the supplier market actually enables business
organisations like Unilever obtain high quality raw materials for manufacturing their superior
quality products at economic rates. This enables the companies like Unilever protect the

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consumer interests by providing high quality products at legitimate rates. The companies like
Unilever are able to earn immense revenue by offering consumers appropriate products, thus
managing revenue risks. Thus, in other it can be pointed out that protecting customers’
interests help multinational companies like Unilever manage revenue risks. The strict
governance of apex management is evident from its central product strategy which applies
to all the subsidiaries of Unilever and appears on global website of the company
(Unilever.com, 2018).
Corporate governance and supply chain risks:
Hedging in the suppliers’ market enables the companies like Unilever to tackle supply
chain risks and protect interest of suppliers, both commence under strict corporate governance of
the apex management (Aguilera, Judge & Terjesen, 2018) For example, Unilever hedges in the
supplier market under the supervision of a dedicated board of directors which enables the
company to obtain superior quality raw materials. Thus, the company using corporate
governance manages supply chain risks. The company has central supplier management codes
which provides information to suppliers regarding the supply chain strategies of the company.
Unilever has a central ‘Procurement to Pays service desk’ which makes payments to suppliers
and provides information about invoices which is once again proves the involvement of
corporate governance of the company in benefitting the suppliers by providing time payments
(Unilever.com, 2018). Thus, it can be affirmed that corporate governance enables
multinational companies manage supply chain risks by protecting interests of suppliers
which are one of the primary stakeholders (Epstein, 2018).

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Corporate governance and investment risks:
Corporate governance plays a key role in acquisition of financial capital, investments of
the same in the markets and gaining supernormal returns, thus management investment risks.
Lebedeva eta l.(2016) point out that apex management of business organisations have to
supervise the entire process of financial capital acquisition from the stock market and investment
of the capital in appropriate asset classes in order to earn high returns. As far as Unilever is
concerned, the share price of the firm has remained high as shown by the graph below. This
means that company has benefitted the investors by giving them high returns which has enabled
it to attract more capital, which is evident from the rising share prices. The corporate governance
document of the company clearly points out that the directors have responsible for sanctioning of
investments in assets in both home and host countries. The directors are also responsible for
approving payment of dividends to investors. It can be pointed out strongly, the corporate
governance ensures protection of investors’ interest as well as utilisation of funds in the global
market, in order to give high ROI to the former. Thus, it can be affirmed that corporate
governance ensure protection of investors’ interests and appropriate investment of funds,
thus, managing investment risks (Eling & Marek, 2014)).

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Figure 1. 5 years stock price of Unilever PLC on LSE
(Source: Londonstockexchange.com, 2018)
Part 3. Leadership and management processes in Unilever with respect to governance and
policy compliance:
The management plays a very role in corporate governance and compliance with various
policies. The management of multinational companies form central strategy of operations to
ensure the operations in the company commences in compliance with the laws in place in both
home as well as host countries (Sale & Langevoort, 2016). This fact is very much applicable for
Unilever which complies with several laws both in its countries of domicile as well as in the host
countries. Legal compliance in Unilever is taken care of by dedicated legal teams both in its
global headquarters and regional headquarters. The company complies with the UK Modern
Slavery Act Transparency Statement as well as the UN and the Human Rights rules. The
company has a well specified supply chain policy which once again proves the strong corporate
governance exercised by the management to ensure legal compliance.

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Part 4. Conceptual, Contextual and ethical issues bearing upon corporate decisions:
Corporate decisions in multinational companies regarding corporate governance and risk
management comes under the influences of several conceptual, contextual and ethical issues.
Omokhomion, Egbu and Robinson (2018) point out that corporate governance plays a very
important role in corporate decisions and enable them to tackle conceptual, contextual and
ethical issues. For example, as far as Unilever in concerned, the British multinational company
has regional apex management bodies in all the subsidiaries which functions under the directions
of the apex management bodies. The regional management bodies apply the central strategies
according to the local market contexts like customer preferences and legal conditions. Again,
this integration of global and regional corporate governance in Unilever comes into play.
Unilever participates in social development activities around the globe which uphold the ethical
strength of the company. For example, the company works with the UN in flood prone regions in
different parts of the world. The company is also working towards refugee rehabilitation which
again upholds the ethical side of the company under the leadership of senior management. The
company also applies concepts like niche market in marketing goods in the global market. Thus,
it can once again be pointed out that Unilever under the governance of its apex
management takes corporate decisions regarding concepts, contexts and ethics.
Part 5. Critical evaluation and application of different organisational approaches to
corporate governance and risk management:
The three organisational approaches considered to evaluate the corporate governance and
risk management at Unilever are functional structure, team structure and divisional structure. `As
far as functional structures in Unilever are concerned, it can be pointed out that they function
efficiently under the guidance of the apex management. It can also be pointed out that the apex

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management of Unilever upholds equal opportunity to all employees and cultural intelligence
while employing human resources around the world. This is evident citizens from different
countries in the world in top positions. The corporate governance of Unilever ensure strong team
work and collaboration of employees from different departments. However, an evaluation
divisional structure of Unilever shows inequality between different divisions which actually
point out the flaw in corporate governance of the company. For example, the wholly owned
subsidiaries of Unilever in markets like the US, China and India enjoy more powers compared to
their counterparts in underdeveloped markets like Africa. In fact, the apex management allocates
more resources to manage risks in these markets compared to underdeveloped markets. The
difference between the official websites of Indian and Kenyan subsidiaries points out this lack of
equality in corporate governance. The Indian subsidiary of Unilever, Hindustan Unilever Limited
is one of the largest subsidiaries of Unilever and is a leading Asian public limited company. The
official website of HUL mentions the apex management dedicated to the Indian region and gives
a wide range of information about products. The Kenyan subsidiary’s website gives no such
information about regional leadership as well brands. It can be interpreted from this huge
disparity between the official websites of the two subsidiaries, that the apex management bodies
based in London and Rotterdam give priority to risk management to the former at the expense of
the latter. Thus, this points out that corporate governance and risk management in Unilever
lacks parity.
Conclusion:
It can be concluded that corporate governance plays a very significant role in corporate
decisions and risk management in business organisations. As far as Unilever is concerned, it can
be pointed out that the British multinational company has a strict corporate governance policy

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which takes into account interests of stakeholders. The corporate governance strategies of the
company is designed to manage risks which the company faces in the home and host countries.
However, it can also be pointed out that governance of Unilever differentiates between
subsidiaries based in developed and emerging markets and underdeveloped markets. The
subsidiaries based in the developed and emerging markets gain more priority compared to their
counterparts in underdeveloped markets. The apex management of Unilever must take steps to
empower these weaker subsidiaries.

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Almeida, H., Hankins, K. W., & Williams, R. (2017). Risk management with supply
contracts. The Review of Financial Studies, 30(12), 4179-4215.
Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2015). Corporate
governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1),
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Arora, A., & Sharma, C. (2016). Corporate governance and firm performance in developing
countries: evidence from India. Corporate governance, 16(2), 420-436.
Eling, M., & Marek, S. D. (2014). Corporate governance and risk taking: Evidence from the UK
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Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring
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