Unilever 2004 Annual Report Download - page 75

72 Unilever Annual Report and Accounts 2004
Remuneration report
Remuneration Committee and Policy
Remuneration Committee
Tasks and responsibilities
The Committee is responsible for making proposals to the Boards
on the remuneration policy for Executive Directors. It is also
responsible for setting individual remuneration packages for
Executive Directors and for monitoring and approving all share-
based incentive arrangements. The Committee meets at least
three times a year and, during 2004, it met on six occasions.
Apart from one meeting, every member was present at
each meeting.
Structure
The Committee members are all independent Non-Executive
Directors, chosen for their broad experience and international
outlook. During 2004 the members were:
• Bertrand Collomb (Chairman of the Committee)
• Lord Simon of Highbury
• Jeroen van der Veer
Advice and assistance
The Committee does not formally retain remuneration
consultants. It seeks professional advice from external advisers
as and when required. During 2004, the Committee sought
advice from Towers Perrin (an independent firm of human
resources specialists) on market data, remuneration trends and
performance-related pay. Towers Perrin also provides general
consultancy advice to Unilever group companies on employee
rewards, pension, communications and other human
resource matters.
The Committee is supplied with information by Jan van der Bijl,
who is also Joint Secretary of Unilever.
The Chairmen of NV and PLC are invited to attend Committee
meetings to provide their own insights to the Committee on
business objectives and the individual performance of their direct
reports. Naturally, the Chairmen do not attend when their own
remuneration is being discussed.
Remuneration policy – Executive Directors
Main principles
Unilever’s objective is to attract world-class executives who can
drive the business forward and achieve the highest results for
shareholders. This is essential to the successful leadership and
effective management of Unilever as a major global company.
To meet this objective the Committee follows three key principles,
validated by shareholders:
• The reward policy is benchmarked regularly against
arrangements for comparable companies in Europe. This
ensures that Executive Directors’ remuneration levels remain
competitive.
• A comparison is made with the remuneration arrangements for
other senior executives within Unilever.
• The Committee links a significant proportion of the Executive
Directors’ total remuneration to a number of key measures of
company performance.
Where Group performance meets the overall business plan, the
variable elements of the remuneration package, such as the
annual bonus and the expected value of long-term incentive
payments, can account for about 60% of the total package
(ie. 60% of the combined sum of base salary, annual bonus and
long-term incentive payments, but excluding pension provision).
However, outstanding Group results can increase the variable
elements to around 75% of the total package. If the Group
results were below target, the variable elements would reduce
significantly.
Closely linking the package to key performance measures
ensures that the Executive Directors’ remuneration is aligned
effectively with shareholders’ interests. This is consistent with the
remuneration policy for senior executives below board level, who
also have a significant performance-related element of pay within
their remuneration package.
Executive Directors are required to build up a significant personal
shareholding in Unilever. Within five years of appointment, they
are expected to hold shares worth 150% of their annual base
salary. This reinforces the link between the executives and other
shareholders.
On a limited basis Unilever Executive Directors serve as non-
executives on the Boards of other companies. Unilever requires
that all remuneration and fees earned from outside directorships
are paid directly to Unilever.
Reward structure
The Executive Directors’ total remuneration package consists of:
• Base salary;
• Annual performance bonus;
• Long-term incentives;
• Pension provision; and
• Other benefits and allowances.
The Committee regularly reviews the reward structure to ensure
that it meets its objectives.
Base salary
Each Executive Director receives a base salary which is fixed in
the currency appropriate to the country in which the individual
is based.
Market reference points are agreed each year depending on
where the individual is based (eg. the Netherlands, the UK or
the US). Based on those market reference points a personal
salary level is set for each Executive Director to take effect from
1 January of the year concerned.
When granting pay rises, the Committee looks at a range of
factors including individual and company performance. The
Committee also uses independent expert advice to compare
Unilever’s remuneration for executives of this calibre with that
paid by other major international companies in Europe.