Unilever 2004 Annual Report Download - page 68

Unilever Annual Report and Accounts 2004 65
Corporate governance
(continued)
• the issue of a Code of Ethics for senior financial officers;
• the issue of instructions restricting the employment of former
employees of the audit firm; and
• establishment of standards of professional conduct for US
attorneys.
In each of these cases, existing practices were revised and/or
documented in such a way as to conform to the new
requirements.
The Code of Ethics applies to the senior executive, financial
and accounting officers and comprises the standards prescribed
by the US Securities and Exchange commission (‘SEC’),
and a copy has been posted on our website at
www.unilever.com/ourcompany/investorcentre/. The Code of
Ethics comprises an extract of the relevant provisions of Unilever’s
Code of Business Principles and the more detailed rules of
conduct that implement it. The only amendment to these pre-
existing provisions and rules that was made in preparing the Code
of Ethics was made at the request of the Audit Committee and
consisted of a strengthening of the explicit requirement to keep
proper accounting records. No waiver from any provision of the
Code of Ethics was granted to any of the persons falling within
the scope of the SEC requirement in 2004.
We also took into account the US requirements taking effect in
2004 and 2005 applicable to both foreign and US listed
companies in preparing the changes to its corporate governance
arrangements that became effective from the NV and PLC Annual
General Meetings held on 12 May 2004.
These changes included the appointment of Non-Executive
Directors to join our top tier of executives, who comprise the
Executive Directors and the Executive Committee, on the Boards.
This board structure is not the one most familiar to our
shareholders in the US, where the most senior executives draw
their authority primarily from their corporate office rather than
their appointment, if any, as a Director.
The changes we are making in 2005, in particular with the
appointment of a Group Chief Executive on the Board and the
creation of a Group Executive that is immediately below Board
level, will bring our arrangements closer to those of a typical
model for US issuers. However, the situation remains that the
laws in the Netherlands and the UK only give limited recognition
to the existence of any corporate officer other than that of a
Director.
We are required by US securities laws and the Listing Standards of
the New York Stock Exchange, with effect from 1 August 2005,
to have an Audit Committee that satisfies Rule 10A-3 under the
Exchange Act and the Listing Standards of the New York Stock
Exchange. The change of status of our Advisory Directors to that
of Non-Executive Directors with effect from the 2004 Annual
General Meetings means that our Audit Committee is already
fully compliant with these requirements.
We are also required to disclose any significant ways in which
our corporate governance practices differ from those typically
followed by US listed companies. We should therefore alert our
US shareholders to the fact that the membership of our
Nomination Committee currently includes the Chairmen/CEOs of
NV and PLC. This is common practice in the UK and is done in
order to ensure that the Committee will have the benefit of their
extensive knowledge of the executives under consideration. This
has been particularly relevant for a company like Unilever which
has a practice of predominantly promoting to senior positions
from within the Group. The practice is permissible so long as the
Chairmen/CEOs are in a minority to the Independent Non-
Executive Directors and they absent themselves when their own
positions are under consideration. As already explained, from
2005 no Executive Director will be a member of the Nomination
Committee and three of the four members will be Independent.
In addition to the information we have given you in this
document about our corporate governance arrangements, further
details are provided in The Governance of Unilever, which is on
our website at www.unilever.com/ourcompany/investorcentre/.
We would also confirm, as our longer term shareholders will
be aware, that it is our practice, in accordance with our home
country laws and practices, to give our shareholders the
opportunity to vote on equity compensation plans.
It goes without saying that we must be compliant with applicable
US legislation, including the relevant regulations enacted by the
SEC. In addition to being fully compliant with the Listing
Standards of the New York Stock Exchange applicable to foreign
issuers, we believe ourselves also to be compliant with the
substance of the Corporate Governance Standards applicable to
US domestic issuers, with one exception. This is the composition
of the Nomination Committee, as already noted.
Nomination Committee report
Composition
In 2004 the Nomination Committee comprised three Independent
Non-Executive Directors and the Chairmen of NV and PLC. It was
chaired throughout 2004 by Bertrand Collomb. Other members
throughout 2004 were Antony Burgmans, Lord Simon and Jeroen
van der Veer. Patrick Cescau joined the Committee on 1 October
following the retirement of Niall FitzGerald. The Joint Secretaries
act as secretaries to the Committee.
The composition of the Committee was included as part of the
review of corporate governance arrangements during 2003 and
early 2004, and again in 2004 and early 2005.
The Committee’s standing was strengthened in 2004 by the
change in status of the independent majority of its members from
Advisory Directors to Non-Executive Directors. This, combined
with the existence from May 2004 of a majority of Independent
Non-Executive Directors on the Boards of NV and PLC, ensures
that Independent Non-Executives control the procedure for
nominating the candidates for election as Directors of NV and
PLC. This is reinforced by the members of the Nomination
Committee comprising the directors of NV Elma and United
Holdings Limited (see pages 57 and 58).