Unilever 2001 Annual Report Download - page 39

Unilever Annual Report & Accounts and Form 20-F 2001
>36
CORPORATE GOVERNANCE
the Netherlands, is unknown in the United Kingdom,
it is not practicable to appoint supervisory or non-executive
directors who could serve on both Boards. However, a
strong independent element has long been provided by
Unilever’s Advisory Directors, who perform many of the
functions of supervisory and non-executive directors.
The Audit, External Affairs and Corporate Relations and
Remuneration Committees consist exclusively of Advisory
Directors and the majority of the members of the
Nomination Committee are Advisory Directors. See pages
37 to 38 for details.
The Committee on Corporate Governance in the
Netherlands issued its report ‘Recommendations on
Corporate Governance in the Netherlands’ in 1997.
NV applies the Committee’s recommendations for
supervisory directors to its Advisory Directors in so far
as these are in line with their specific role within Unilever.
NV complies with all other recommendations of the
Committee, except that the Board of Directors takes the
view that requests for an item to be placed on the agenda
for a shareholders’ meeting must be supported by more
than an insignificant proportion of the shareholders and
will therefore only accept requests from a shareholder or
group of shareholders holding at least 1% of the voting
rights attaching to the issued share capital of NV. Requests
must be submitted, at the latest, 60 days prior to the date
of the meeting.
PLC is required, as a company that is incorporated in
the United Kingdom and listed on the London Stock
Exchange, to state how it has applied the principles and
how far it has complied with the provisions set out in
Section 1 of the Combined Code (‘the Code’) appended
to the United Kingdom Listing Rules.
As already explained, the Boards control the Company
through the Executive Committee. Responsibilities are
shared by the Chairmen of NV and PLC, while the Advisory
Directors perform many of the functions of the supervisory
board members or non-executive directors, although they
are not formally members of the Boards. For the purposes
of the Code, the Boards have not appointed a senior
independent director, on the basis that issues for the
Boards can be raised with whichever Advisory Director is
the Chairman of the relevant Board Committee and the
Advisory Directors are entitled to meet as a body and
appoint a senior member as their spokesman.
Unilever’s remuneration policy is contained within the
report by the Boards on the directors’ remuneration and
interests on pages 40 to 48. This also deals with aspects
of non-compliance with the Code in this area. Members
of the Audit, Remuneration and Nomination Committees
will be available to answer questions at the Annual General
Meetings of both NV and PLC. The members attending
each meeting will not necessarily include the Chairman of
the Committee, since these meetings take place at about
the same time in Rotterdam and London respectively.
A description of Unilever’s compliance with ‘Internal Control
– Guidance for Directors on the Combined Code’ is given
on page 49.
Unilever has, since its inception, adopted the principle
that it is good practice that the most senior roles in NV
and PLC are shared and not concentrated in one person.
As a consequence it is a principal tenet of its governance
philosophy, which finds expression in two people who each
combine the roles of Chairman and Chief Executive and
who meet regularly for joint decision making. This carefully
balanced arrangement has served Unilever’s unique
constitutional arrangements very well for many years and
the Boards believe that to separate these roles would only
introduce undesirable and unnecessary complexity. Since
the Advisory Directors are not formally members of the
Boards, it would be inappropriate for one of them to act
as Chairman.
In all other respects, PLC has complied with the Code
throughout 2001.
Auditors
Subject to the annual appointment of auditors by the
shareholders and in addition to our ongoing process of
monitoring the auditors’ performance, we undertake a
formal review every three years. The next review is currently
in progress. As part of this review, we have decided to invite
competitive tenders for the audit contract. The directors’
recommendation resulting from this review will be put to
the AGMs for approval in 2003.
Both the Executive Committee and the auditors have for
many years had safeguards to avoid the possibility that
the auditors’ objectivity and independence could be
compromised. In particular, our procedures in respect of
other services provided by PricewaterhouseCoopers are:
> Audit related services – This is work that, in their
position as the auditors, they must or are best placed to
undertake. It includes formalities relating to borrowings,
shareholder and other circulars, various other regulatory
reports and work in respect of acquisitions and disposals.
> Tax consulting – In cases where they are best suited,
we use the auditors. All other significant tax consulting
work is put to tender.
> General consulting – All significant general
consulting projects are put out to tender. Prior to
2002, PricewaterhouseCoopers were only permitted
to tender when we, and they, were satisfied that the
nature of the work presented no potential threat to
the independence of the audit team. Additionally such
projects were not awarded to PricewaterhouseCoopers
without the prior approval of the Executive Committee.
From the beginning of 2002, in recognition of
increasing public concern over the effect of consulting
services on auditors’ independence, our policy is that
the external auditors will not be invited to tender for
any further general consulting work.
These safeguards have been approved by the Audit
Committee and are regularly reviewed and updated in the
light of internal developments, such as the recent increased
need for consultancy services arising from the integration
of Bestfoods and the creation of the divisional structure,
and external requirements and best practice.