Corporate Governance and Strategy Report

Sample Answer

Corporate Governance and Strategy Report: Unilever plc

Introduction

Unilever plc is one of the world’s leading consumer goods companies, producing a diverse range of products across personal care, food, beverages, and home care. Headquartered in London, the company operates in over 190 countries and owns globally recognised brands such as Dove, Magnum, and Persil. As a multinational operating in a complex, volatile, and competitive environment, Unilever’s corporate governance and strategic management practices are crucial to maintaining long-term sustainability and shareholder confidence.

In recent years, Unilever has faced several governance and strategic challenges, including shareholder disputes, climate-related pressures, and difficulties balancing profit with social purpose. The company’s 2023 restructuring and ongoing cost-of-living crisis have intensified scrutiny over its governance model and its ability to sustain growth in an increasingly uncertain business landscape. These challenges make Unilever a strong case for evaluating how corporate governance and strategic management align to drive performance in a VUCA world (volatile, uncertain, complex, and ambiguous).

The aim of this report is to critically evaluate Unilever’s corporate governance and strategy, analysing how effectively its leadership and governance structures support sustainable decision-making. The objectives are to:

• Assess the company’s position in the industry life cycle and examine how its strategy aligns with this stage.

• Compare and evaluate Unilever’s corporate governance structure and its effectiveness in ensuring accountability and ethical behaviour.

• Propose a board crisis action plan relevant to potential disruptions such as environmental, reputational, or geopolitical crises.

• Critically analyse a governance failure within Unilever or a comparable firm to identify lessons learned.

• Evaluate research methods for analysing governance and strategy issues, including primary and secondary data.

By integrating theoretical models, research findings, and practical recommendations, this report aims to provide Unilever’s board and management with an actionable framework to strengthen strategic governance in the face of emerging global challenges.

Literature Review

The Concept of Corporate Governance

Corporate governance refers to the system through which organisations are directed and controlled (Cadbury, 1992). It encompasses the mechanisms that ensure accountability, fairness, and transparency in a company’s relationship with its stakeholders. According to Tricker (2019), effective governance balances the interests of shareholders, management, employees, and society. In the case of Unilever, corporate governance plays a central role in aligning its sustainability objectives with shareholder expectations.

The OECD (2015) principles outline key aspects of good governance: rights of shareholders, equitable treatment, disclosure, and board responsibility. In multinational corporations like Unilever, adherence to these principles builds trust and ensures compliance across diverse jurisdictions.

Strategic Management and the Industry Life Cycle

Strategic management is defined as the process of formulating and implementing decisions that enable an organisation to achieve its objectives (Johnson et al., 2020). The industry life cycle model explains how industries evolve through introduction, growth, maturity, and decline (Grant, 2019). Unilever’s industry, fast-moving consumer goods (FMCG), is largely in the maturity stage, characterised by market saturation, intense competition, and innovation-driven differentiation.

Unilever’s strategy has traditionally focused on brand strength, sustainability, and global reach. However, as consumer preferences shift toward ethical and digital-first consumption, the firm faces pressure to innovate continuously while maintaining governance standards.

Corporate Governance Frameworks

The Agency Theory (Jensen and Meckling, 1976) explains governance in terms of conflicts between principals (shareholders) and agents (managers). This framework is useful in assessing Unilever’s executive accountability mechanisms. The company’s board composition, including independent non-executive directors, aims to mitigate agency conflicts by overseeing management decisions and ensuring transparency in reporting.

The Stakeholder Theory (Freeman, 1984) offers a broader view, arguing that firms should balance the interests of all stakeholders, not just shareholders. This theory aligns closely with Unilever’s “Sustainable Living Plan”, which integrates social and environmental goals into business strategy.

Corporate Governance Failures and Lessons

Corporate governance failures in firms like Enron, Volkswagen, and Boeing illustrate the risks of weak oversight and poor ethical cultures. In Unilever’s context, criticism arose in 2022 after its investors, including Terry Smith, accused the company of prioritising social purpose over financial returns. Although not a failure in legal terms, this event highlights a governance tension between purpose-led strategy and shareholder value. It demonstrates the need for governance systems that can balance ethical commitments with financial discipline.

Governance and Leadership in a VUCA World

The concept of the VUCA world (Bennett and Lemoine, 2014) describes environments marked by volatility, uncertainty, complexity, and ambiguity. Strategic leaders must demonstrate agility and resilience to navigate such contexts. For Unilever, challenges such as climate change, digital disruption, and supply chain instability demand a governance model that promotes flexibility and rapid response.

The Adaptive Leadership Theory (Heifetz et al., 2009) is particularly relevant, as it emphasises the importance of leading through uncertainty by encouraging collaboration, experimentation, and learning. Unilever’s CEO, Hein Schumacher, has recently adopted this approach, focusing on cost efficiency while maintaining the company’s sustainability values.

Crisis Management and Governance

Crisis management involves anticipating, mitigating, and responding to threats that can damage an organisation’s operations or reputation (Coombs, 2015). The Crisis Life Cycle Model identifies three stages: pre-crisis, crisis response, and post-crisis recovery. A board-level Crisis Action Plan ensures readiness for natural disasters, cybersecurity threats, or reputational crises. For Unilever, given its global supply chain, climate-related disruptions and ESG controversies represent key risks.

Methods of Data Collection in Corporate Governance Research

According to Saunders et al. (2019), effective governance research requires both primary and secondary data. Primary methods include interviews with executives or employee surveys, while secondary data encompass annual reports, sustainability reports, and market analyses. For this study, secondary sources such as Unilever’s Annual Report (2023), academic literature, and market data form the evidence base for analysis.