London Stock Exchange asked to downgrade Unilever’s Premium Listing

UK Lawyers for Israel

The London Stock Exchange (LSE) has been asked to downgrade Unilever PLC’s “premium listing” if it does not assert effective control over its Ben & Jerry’s subsidiary.

A joint letter from UK Lawyers for Israel (UKLFI) and the Zionist Advocacy Center to the LSE’s Regulatory Complaints Department comments that Unilever appears to have a rogue division in the United States known as “Ben & Jerry’s Homemade” which has been structured to evade normal corporate governance practices.

The letter notes that Ben & Jerry’s has announced plans to engage in a boycott against Israel that expose Unilever to sanctions under various laws in the United States. Unilever has, however, claimed that its agreement acquiring Ben & Jerry’s recognised the right of Ben & Jerry’s independent Board to take such decisions in direct opposition to Unilever.

Although Unilever’s American subsidiary, Conopco, owns all of the shares of Ben & Jerry’s, Conopco waived its rights to choose nearly all of Ben & Jerry’s Board members. The majority of the Board is self-selecting and answerable to nobody. Conopco reserved the right to appoint Ben & Jerry’s CEO, but authority to set important policies was delegated to its unaccountable Board.

The UK Corporate Governance code states:

“For parent companies with a premium listing, the board should ensure that there is adequate co-operation within the group to enable it to discharge its governance responsibilities under the Code effectively. This includes the communication of the parent company’s purpose, values and strategy.”

Unilever’s position does not appear to comply with this requirement and similar requirements expressed in its own Code of Conduct and its Governance Report.

UKLFI also wrote directly to Unilever’s Chief Legal Officer drawing attention to these problems, but pointing out that Unilever could and should insist that the Ben & Jerry’s Board comply with Unilever’s Code of Business Conduct, as required by the acquisition agreement. This requires full compliance with the laws in force in the places where Unilever subsidiaries trade.

Unilever’s share price has fallen some 11% since Ben & Jerry’s announced its planned boycott, reducing its market capitalisation by over £11 billion. The New York Post has now reported that activist investor, Michael Ashner of Winthrop Capital Partners, has taken a stake in Unilever and is asking US regulators to look into possible violations by the company of its disclosure obligations in failing to report the material risks to its business and valuation arising from Ben & Jerry’s BDS plans.

Jonathan Turner, UKLFI’s Chief Executive, said: “Unilever needs to put its house in order. We have pointed out steps that it can take to mitigate the governance weaknesses resulting from the terms of its acquisition of Ben & Jerry’s. Investors and regulators should draw appropriate conclusions if it fails to take them.”