Unilever 2001 Annual Report Download - page 45

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Unilever Annual Report & Accounts and Form 20-F 2001
>42
REMUNERATION REPORT
(c) TSR Long-Term Incentive Plan:
The TSR Long-Term Incentive Plan (LTIP) was introduced in
2001. Under this plan directors and certain senior employees
are granted conditional rights to shares in NV and PLC.
The level of the annual grants is made under the guidance
of the Remuneration Committee. In 2001 the following
conditional awards were made to each director:
> Chairmen: Shares in NV and PLC to the combined value
of 800 000
> European based directors: Shares in NV and PLC to the
combined value of 500 000
> North American based director: Shares in NV and PLC to
the combined value of 400 000.
Depending on the performance of Unilever’s Total
Shareholder Return (‘TSR’) over a three-year period in
comparison with that of its defined peer group (as described
on page 33), the awards vest following the end of the
three-year performance cycle, in accordance with the
following table:
Percentage of
Ranking within TSR Group award which vests
Numbers 12 – 21 Nil
Numbers 10 – 11 25%
Numbers 8 – 9 50%
Numbers 5 – 7 100%
Numbers 3 – 4 150%
Numbers 1 – 2 200%
The first conditional rights were awarded in May 2001 and,
depending on the outcome of the performance tests for the
three year performance cycle 2001, 2002 and 2003, will
vest in May 2004.
Directors’ shareholding requirements
It is a requirement of the long-term incentive arrangements
that over a period of five years each director must build up
a personal shareholding in NV and PLC equivalent in value
to one and a half times their salary.
Directors’ service contracts
NV and PLC’s Articles of Association require that all
directors retire from office at every Annual General Meeting.
Directors’ contracts of service with the Unilever Group are
generally terminated no later than the end of the month
when the Annual General Meeting closest to their
62nd birthday is held.
During 2001, as part of the introduction of the changes
to the remuneration policy, the service contracts for each
director were amended so that the employer is now
required to give 12 months notice of termination of the
contract, instead of 24 months as previously applied.
No compensation was paid to any director in respect of
the reduction in this notice period.
The compensation payable to a director upon the
termination of his service contract will be calculated in
accordance with the law applicable. The directors have
service contracts with both NV and PLC. The Remuneration
Committee’s aim is always to deal fairly with cases of
termination whilst taking a robust line in minimising any
compensation. The Remuneration Committee has given
due consideration to the recommendations contained in
the Code regarding the inclusion of explicit provisions in
directors’ service contracts for compensation commitments
in the event of early termination. The Committee will
continue to keep its current practice, which is not to
include such provisions, under review.
In 2001 two directors served for only part of the year.
In 2000 five directors served for only part of the year.
Directors’ pensions: policy
The aim of the Remuneration Committee is that pension
and other related benefits should be in line with good
practice by major companies in Continental Europe and
the United Kingdom, bearing in mind the need to make
conditions for the various nationalities of directors
reasonably comparable.
All directors are members of the normal Unilever pension
schemes. Because directors are paid by both NV and PLC,
they participate in both the NV and PLC normal pension
schemes, with the exception of a US based director who
participates in the normal US schemes. The NV scheme has
been on a contribution holiday since 1990. The PLC scheme
has been on a contribution holiday since January 1997.
The US schemes, with the exception of the 401(k) scheme,
are non-contributory.
All directors are also members of their respective early
retirement schemes, which provide overall pension coverage
including benefits under other Unilever schemes. The current
arrangements are that directors belong to either the NV or
PLC scheme, depending on their contractual arrangements.
NV finances the NV scheme and PLC finances the PLC
scheme. Also, under the current arrangements, in order
to equalise benefits among the directors, those directors
appointed before 31 December 1998 who are members
of the NV scheme, and retire at or after normal retirement
date, receive an additional lump sum equal to one year’s
final pensionable pay. This is not provided to directors
who are members of the NV scheme and were appointed
after 1 January 1999. The benefits received by directors under
these early retirement schemes are, in most other respects,
the same as those generally provided for senior management.