MAGGIE PAGANO: When it comes to takeovers, why shouldn’t we go Dutch

Soon after Kraft dropped its bid for Unilever last year, the chief executive, Paul Polman, called for a rethink about the definition of national interest in takeovers, and a more “level playing field” for companies fighting off bids.

It was an issue which Polman, who has confirmed London’s best-kept secret (that Unilever is moving its HQ to Rotterdam), admitted he raised with the Government, advising them that: “The UK is not — and I put my words carefully — in an equal position.”

Not only did Polman point out that UK takeover rules are more liberal than in the US or the Netherlands, he suggested that interested parties should ask themselves why these differences exist, and whether the UK is putting itself in a good position, especially given Brexit. Nor did he mince his words, asking: “Do you want short-term forces — that work for a few people, and make a few more billionaires — to be the dominant force? Or do you want the system to work for the billions that need to be served? It’s a fundamental choice.”

And its a choice that Theresa May’s Government — despite all the early rhetoric about protecting UK companies from aggressive asset-strippers and tax avoiders — has done nothing concrete to tackle, despite Polman’s implicit warning.

So no one should be surprised at Unilever’s decision to move its legal entity across the Channel. But, with luck, it will be a wake-up call for ministers to take action. Though Polman did not say so specifically, it’s clear the move back home is motivated by the fact that Dutch corporate rules make takeovers tougher. You only have to look at how successful Dutch paint group AkzoNobel was in fighting over the advances by the US paint rival PPG Industries to see the differing approach. Dutch directors have a wider responsibility to look at the impact of a takeover on other stakeholders such as employees, unions and the local community as well as shareholders.

Not so in the UK. Here shareholder value is king, enshrined in a concept that’s known as shareholder primacy theory. Although the responsibilities of directors was widened under the Companies Act 2006, the main duty remains that they should look to maximise shareholder value. This makes it almost impossible for directors to reject a generous share approach.

Unless a bid collapses, the only way officially to block a takeover is if the Government rules it is against the national interest. As we have seen in recent bids such as SoftBank’s takeover of ARM Holdings and the Melrose bid for GKN, the Government is toothless when it comes to intervening under present laws. There are only three criteria on which it can properly act: if the bid interferes with the country’s defence, its media plurality or poses a systemic risk to the financial system.

Yet there are alternatives. Why don’t we go Dutch and look at changing UK corporate law so that directors of publicly listed companies are forced to take into account broader responsibilities? This idea is fast gaining ground in the City, even among investment bankers who earn their crust from takeovers.

Sir Simon Robertson, one of the City’s grandees who has himself advised on hundreds of bids, reckons the UK’s open-door policy on takeovers has gone too far, and queries the much-stated notion that takeovers boost inward investment or productivity. Rather than tinker with the Takeover Code or the national interest test, he argues that the law should be changed to make directors more explicitly responsible to a social as well as economic community. Other changes which could promote the longer view include giving shareholders double votes if they keep shares for a certain period, as they do on the Continent.

Robertson is right, and it’s a suggestion that should be pursued. There’s another highly sensitive area which the Government also needs to look at urgently. Ministers should consider whether takeovers of UK companies involved in cutting-edge technologies such as AI, cyber-security, blockchain and fintech, which are revolutionising industry in ways we have yet to understand fully, should be included in the national interest criteria. It’s an area where British entrepreneurs are leading the field but where their companies — such as DeepMind — are being swallowed up by US tech giants like Google without a second’s thought. Yet these new technologies, still in infancy, have the potential to pose systemic risks to our lives in ways which are still unfathomable.