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When Business Emulates Politics

Summary:
For many years now, a multitude of politicians have made lofty promises, fudged the truth and denied a variety of allegations. Sadly, this seems to have become the norm. But what should we do when businesspeople join this political game, cynically peddling influence to boost their egos rather than peddling products to boost their bottom lines? An institutional change to make this practice unacceptable among lawmakers would take many years and lots of manpower; however, the increasing occurrence of business executives acting like elected officials is a new-enough trend that it could be cut off before it becomes ingrained. Take the CEO of British-Dutch consumer goods giant Unilever, whose actions mirror those of a politician. For years, Paul Polman touted his vision for an innovative way of

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For many years now, a multitude of politicians have made lofty promises, fudged the truth and denied a variety of allegations. Sadly, this seems to have become the norm. But what should we do when businesspeople join this political game, cynically peddling influence to boost their egos rather than peddling products to boost their bottom lines?

An institutional change to make this practice unacceptable among lawmakers would take many years and lots of manpower; however, the increasing occurrence of business executives acting like elected officials is a new-enough trend that it could be cut off before it becomes ingrained.

Take the CEO of British-Dutch consumer goods giant Unilever, whose actions mirror those of a politician. For years, Paul Polman touted his vision for an innovative way of doing business, relying heavily on buzzwords like "sustainability" and "long-term thinking," much like a candidate on the campaign trail. Now, he's looking to cement his legacy, as you might expect a lawmaker to — by attaching his influence to protectionist policies.

Polman's legacy would not simply be for show, like many lame-duck presidents' final decrees. He has publicly urged the British government to protect companies from outside bids, a concept at odds with competitive market ideals and basic economic fairness.

This is self-interest. It comes after the much smaller American Kraft Heinz Co.'s audacious bid for Unilever in February. In fact, Polman wants to go as far as removing the shareholders' power to dispose of their assets, in "the interests of the stakeholders."

Any economist will tell you that it's better for resources invested in weak or sluggish businesses to be freed up for more productive uses. This switch often occurs through an outside party stepping in against the weaker company's desires. Other times, the takeover is averted through political methods.

Economic protectionism is making a comeback, and unfortunately, Polman's public complaints could create momentum for politicians to step in. Already, British Prime Minster Theresa May's conservatives want the U.K. to "require a bid to be paused to allow greater scrutiny," an unnecessary and counterproductive interference sure to do more harm than good.

Polman's complaints must also be viewed in another context: his long crusade for "sustainability," a noble idea that provides cover for political meddling. Generally, if CEOs want to thump their chests to demonstrate their progressive bona fides, that's their right. It's up to shareholders and board members to decide whether that's the type of business they want to run. The danger comes when the rhetoric of businessmen begins to mirror the kinds of vague populist appeals that have long been used to undermine competitive markets.

Tellingly, Polman's high-minded rhetoric is at odds with some of Unilever's behavior in recent years. In 2011, Unilever was fined 104 million euros for colluding with Procter & Gamble on the price of washing detergent. The company claimed they were working together for environmental reasons.

But Unilever was again flagged for collusion earlier this year when The Competition Commission of South African recommended it be prosecuted for agreeing not to compete with another company over margarine and edible oils. These actions don't align with the kinds of national protection Polman proposes for businesses.

Unilever has also been heavily criticized for dramatically increasing fees on local partners in countries like India and South Africa — which, one could argue, is exactly the type of short-term mindset Polman rails against. The pressure to collect more fees may have been due in part to Polman's various vanity projects promoting his personal image and agenda.

Do these actions represent Polman's idea of sustainability, or are his public campaigns merely intended to divert public attention away from Unilever's sluggish stock?

We've become accustomed to seeing political figures exposed for engaging in the very behaviors they rail against. If Polman's moral preening catches on, we may soon become equally desensitized to the hypocrisies of business leaders. Worse, Polman may succeed in advancing his own agenda at the cost of the public and shareholders — much like a shady politician — by convincing voters and politicians that we need more politics in our business rather than less.

Veronique De Rugy

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.

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