If there is one thing worse for a journo than being wrong, it’s being proved right in the interval between writing and publishing. This is my FT column, submitted last Thursday evening, for Saturday. On Friday morning Unilever abandoned its ill-judged plan…

The column that actually appeared will be the next post.

 

Unilever directors are in a corner, as October 26, the date for the meeting, draws nigh. The list of refuseniks for Unilever’s “simplification” proposal grows steadily, with holders of around 12 per cent of the plc shares now indicating that they will vote against the plan.

Other institutional holders, too shy or feeble to come out, can now shelter behind the advice from pension consultants PIRC that they should follow suit. Even if many of them simply abstain, the proposal requires a 75 per cent majority of votes to pass, so there is a real possibility that it will fail.

The other vote, which requires over 50 per cent of shareholders by number in favour, presents a different problem. Individuals holding shares through platforms and nominee holdings are effectively disenfranchised. Unilever’s shameful response is to suggest we pay up to switch to an old-fashioned paper certificate, presumably switching back again after the vote.

This is nonsense, and typical of the board’s cloth-eared approach to dissent. Revolting plc shareholders are viewed as an irresponsible minority who threaten the interests of the company. Rather than try and understand their concerns, Unilever has merely parroted that the votes will pass. They may still do so, but only at considerable damage to its enviable reputation. Far better to abandon this plan and find a solution that is genuinely in all shareholders’ interests.

 

Dancing like it’s 2008

History doesn’t repeat, but it does rhyme. Jim Leaviss of Bond Vigilantes has dug out his missives in the months before Lehman imploded in 2008, and found some ominous similarities. The market was obsessing about oil prices, then on their way to $140 a barrel, while the European Central Bank was tightening monetary policy.

All that’s needed for a hat-trick today, says Mr Leaviss, is a “credit accident”, and for good measure, he notes that the biggest difference between then and now is the level of debt. Globally, borrowing by governments and companies is far higher today, which is hardly reassuring.

A default somewhere, anywhere, could be the “credit accident” that triggers a panic. That looks most likely in a developing country with a weak currency. Measured in Turkish lira, for example, the oil price has doubled since March.

Oil traders are betting heavily on supply shortages over the coming months, following plunging output in Venezuela and US sanctions against Iran. As John Kemp at Reuters observes: “The recent rise confirms closely to the traditional boom-bust pattern. Oil prices are not inherently self-stabilising and display strongly non-linear and cyclical behaviour.”

The developed world gets more bang for each buck spent on oil than it did a decade ago, but a spike in prices remains a distinct possibility. It is hard to see how its malign consequences could be avoided.

 

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