It is, perhaps, one of the oddest corporate governance clashes of recent times. The board of Ben & Jerry’s, the ice cream brand with a passion for quirky flavours and social causes, is suing its owner, Unilever, the UK consumer goods giant.
The case is due to be heard this week in the Manhattan District Court, with Ben & Jerry’s attempting to block the sale of its Israeli business by Unilever to the holder of the local distribution licence, American Quality Products (AQP), run by owner Avi Zinger. At stake is Ben & Jerry’s insistence that its ice cream should not be sold in the occupied West Bank. A sale of the business, the Ben & Jerry’s board argues, should not go ahead.
The courtroom clash underlines the tensions that can emerge when ethics, politics and business mix. But it is also a conflict stemming from the governance structures put in place at the time Unilever acquired the Vermont-based ice cream maker in 2001.
The agreement was that Ben Jerry’s would retain a board to manage ethical concerns. Three members would be independent, while two would come from Unilever. It is this board that is now at odds with Unilever’s.
Perhaps also at the heart of the legal battle are the values on which Ben & Jerry’s was established. The brand was built on strident political beliefs. In recent years, Ben & Jerry’s has backed the Black Lives Matter movement, spoken out on LGBTQ+ rights, campaigned for the environment and publicised voting registration to bolster US voting rights.
But Ben & Jerry’s board has become increasingly concerned about business in Israel and the occupied territories. In July last year, the brand said it would stop selling its product in the “occupied Palestinian territory”.
Cold shoulder
Unilever followed with a proposal to sell the Israeli business to AQP. Ben & Jerry’s responded with a tweet: “We are aware of the Unilever announcement. While our parent company has taken this decision, we do not agree with it.
The clash reveals the tension between the two boards, one charged with ethics issues and given unique powers under terms of the takeover, and another attempting to resolve business issues.
One keen observer believes it will bring into court a debate about whether subsidiary boards should fall into line with the views of a parent company.
According to Richard Leblanc, professor of governance at York University and author of the Handbook of Board Governance, the clash will see a tussle over the duties owed by a subsidiary to a parent company. Investors, even a parent company, may be limited in their ability to “usurp” the powers of another board, he says.
“This is interesting because courts will decide whether a subsidiary with a majority of independent directors must act independent of a parent, or in line with the parent.”
He adds: “I think Ben & Jerry’s has a very good argument. They have a separate board with a majority of independent directors. The parent is a stakeholder only. Ben & Jerry’s board deliberates with a duty to Ben & Jerry’s best interests, not Unilever’s.”
Ironically, the case comes as a time when Unilever has, itself, come under pressure for its sustainability approach to business. The company has faced criticism from high-profile investors for a “purpose” driven approach, with one claiming the company had “lost the plot”.
At the annual World Economic Forum meeting in Davos, Unilever chief executive Alan Jope defended his company. “It’s been a torrid time for the world over the last two or three years,” said Jope at the event, “but one constant is that Unilever’s investors have exhorted us to continue on the path of putting sustainability at the heart of our business model.”
Ben & Jerry’s and Unilever are caught in a battle both could well do without, over two different ways of doing business. However, the outcome will tell us more about the powers of parent companies. Governance observers are keeping watch.