Unilever 2001 Annual Report Download - page 44

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Unilever Annual Report & Accounts and Form 20-F 2001
>41
Report of the Directors
REMUNERATION REPORT
For 2001 the earnings per share results were towards the
upper end of the target range and the turnover target range
was exceeded.
One quarter of the annual bonuses for directors is paid in
the form of shares in NV and PLC and the directors are
then awarded ‘matching’ shares (see below).
(iv) Long-term incentive arrangements:
There are three parts to the long-term incentive
arrangements:
(a) Matching Shares:
As explained above, one quarter of the annual bonus is
paid in the form of NV and PLC shares. The company then
awards an equivalent number of matching shares. These
matching shares vest three years after grant provided
certain conditions are met, including the requirement that
the original ‘bonus’ shares have been retained for the three-
year period.
(b) Share Options:
Directors are generally entitled to share options on the
same basis as other employees. They participate in the UK
Employee Sharesave Plan and the Netherlands Employee
Option Plan, which are All-Employee plans. In addition they
participate in the Executive Option Plans, as described in
note 28 on pages 79 to 87.
The Remuneration Committee has established benchmark
grant levels, described as the ‘normal’ allocation, to assist
each year in deciding on actual grant levels under the
Executive Option Plans. The Committee has reviewed these
normal allocations and has concluded that they are still in
line with those awarded by companies in our peer group.
Individual and Group performance criteria are set annually
by the Remuneration Committee, and these criteria must
be satisfied before an individual can be granted an option.
The Remuneration Committee agrees the level of grants.
The Group performance criterion for 2001 was that
our earnings per share before exceptional items and
amortisation of goodwill and intangibles over the three
financial years preceding the date of grant should have
cumulatively risen by at least 6% more than the rate of
inflation. If it had not, no grants would have been made.
Once the Group criterion had been met, each director’s
option grant is determined by the percentage increase,
above the rate of inflation, of the Group’s earnings per
share BEIA over the financial year preceding the date of
grant. The Remuneration Committee decided that for 2001
the targets and levels of grant would be:
Par level of grant as
EPS BEIA growth achieved in 2000 percentage of normal allocation
Inflation + less than 4% 0%
Inflation + 4% 50%
Inflation + 5% 75%
Inflation + 6% 100%
Inflation + 7% 125%
Inflation + 8% or more 150%
The EPS BEIA growth for 2000 was inflation + 8% which produced
a 150% level of grant for 2001.
The normal allocations in 2001 to which the percentages above
would be applied were:
NV shares PLC shares
Chairmen 12 000 80 000
European based directors 7 500 50 000
North American based director 12 000 80 000
As a further incentive participants may be granted ‘premium
options’. These are options granted to reward commitment
and good performance over a five-year period. The first
premium options may be granted in 2002 and relate to
grants of options made in 1997. To qualify for the grant
of a premium option:
> the Group must have performed well over the preceding
five years;
> the individual must not have realised free cash from the
exercise of options granted five years previously; and
> the individual must have received on average at least
100% of the Par allocation over the preceding five years.
Premium options will be granted equivalent to 20% of the
number of shares originally granted to the individual under
the scheme in the relevant year. One of the proposals for
change in 2001 was that no further premium options
would be granted in respect of future grants of options,
and therefore this incentive is now withdrawn.
Under the Executive Option Plans we have the right to
substitute the cash value for shares on the exercise of any
individual’s options. We do not generally intend to exercise
this right unless an individual would be disadvantaged if we
did not.