Unilever 2005 Annual Report Download - page 48

Report of the Directors
Unilever Annual Report and Accounts 2005 45
Requirements and compliance – general
Unilever is subject to corporate governance requirements in the
Netherlands, the UK and the US as a Foreign private issuer. In the
following section we set out areas of non-compliance with the
corporate governance regulations and best practice codes
applicable in the Netherlands, the UK and we also describe
compliance with corporate governance regulations in the US.
The preceding description of our governance arrangements and
the text on compliance that follows reflect Unilever’s governance
arrangements following the changes adopted at the Shareholder
Meetings in May 2005. They also reflect our Boards’ intentions for
2006 and 2007. The Boards reserve the right, in cases where they
decide such to be conducive to the interests of the companies
and the enterprise connected therewith, to depart from that
which is set out in the present and previous sections in relation to
our corporate governance. Further changes will be reported in
future Annual Reports and Accounts and, when necessary,
through changes to the relevant documents published on our
website. As appropriate, proposals for change will be put to our
shareholders for approval.
Further information can be found in The Governance of Unilever,
the Boards’ own constitutional document, on our website at
www.unilever.com/investorcentre/corpgovernance. This describes
the terms of reference of our Board Committees, including their
full responsibilities. It will be kept up to date with changes in our
internal constitutional arrangements that our Boards may make
from time to time.
Requirements – the Netherlands
General
NV is required to state in its Annual Report and Accounts whether
it complies or will comply with the Principles (‘P’) and best
practice provisions (‘bpp’) of the Dutch Corporate Governance
Code (‘the Dutch Code’) and, if it does not comply, to explain the
reasons for this. As will be clear from the preceding description of
our governance arrangements, NV complies with almost all of the
principles and best practice provisions of the Dutch Code. The
text that follows sets out areas of non-compliance and certain
statements that the Dutch Code invites us to give our
shareholders that are not included elsewhere in this Annual
Report and Accounts.
Board and Committee structures
As already indicated, NV has a one-tier board, consisting of both
Executive and, as a majority, Non-Executive Directors. We achieve
compliance of our board arrangements with the Dutch Code,
which is for the most part based on the customary two-tier
structure in the Netherlands, by, as far as is possible and
practicable, applying the provisions of the Dutch Code relating to
members of a management board to our Executive Directors and
the provisions relating to members of a supervisory board to our
Non-Executive Directors. Management tasks not capable of
delegation are performed collectively by the Board. Reference is
made to Ps II and III and corresponding bpps. Our compliance
with the Dutch Code in these respects should be seen in the light
of our one-tier board structure. Reference is also made to the UK
Combined Code on Corporate Governance, which is fully tailored
to the one-tier board model (see page 35).
Board evaluation, and Chairman and individual Director
appraisals
2005 was the first year of our new Boards’ operation. To ensure
optimal functioning of the Board and the individual Directors and
compliance with the most recent developments in best practice,
the Nomination Committee commissioned Spencer Stuart to carry
out a full review of the functioning of the Boards and of its
governance arrangements. This review concluded that our
arrangements stood comparison with our peers. A full report was
made to the Boards in February 2006 and a range of minor
changes in terms of the day-to-day operations of the Boards will
be introduced during the balance of the year. A Board evaluation
and Chairman and individual director appraisal process is
scheduled for the second quarter of 2006. Thus, the changes
following the said review can be taken into account in the
evaluations (bpp III.1.7).
Role of the Chairman
The Dutch Code recommends that in a one-tier board the
chairman should neither be, nor have been, responsible for the
day-to-day conduct of the business (bpp III.8.1). Before his
appointment as Chairman, Antony Burgmans was jointly
responsible for the daily operations of NV and PLC. Thus he is not
independent from Unilever. He was nominated as Non-Executive
Chairman in 2005 because of his thorough knowledge of Unilever
and its operations. In addition to his role as Chairman, the Board
considered his knowledge of the business to be essential to see
through the changes resulting from the structure review. The
Nomination Committee has commenced the search for a new
independent Chairman to succeed Antony Burgmans who is due
to retire in 2007. A well-reputed search firm has been
commissioned by the Nomination Committee to assist them in
this process. In addition to the Chairman, the Boards of NV and
PLC have a Senior Independent Director who is appointed by the
Non-Executive Directors and acts as their spokesperson. Our
Senior Independent Director was elected Vice-Chairman by the
Boards in 2005.
Nomination of Directors
The Dutch Code recommends that shareholders may resolve by
an absolute majority of votes to cancel the binding nature of a
nomination for the appointment of a director (bpp IV.1.1). In
2004, NV’s shareholders approved an alteration of the Articles
of Association to align the arrangements for NV and PLC. This
makes it possible for the meeting of shareholders to cancel
binding nominations by a majority of two-thirds of the votes cast
representing more than one-half of the issued capital. This
arrangement is in place in order for NV and PLC to have a unified
Board (see page 35). The interests of our shareholders are
protected because all the Directors submit themselves for election
every year and shareholders can remove any of them by a simple
majority vote. Thus, as a practical matter, the Boards cannot
perpetuate themselves contrary to the will of the shareholders.
Corporate governance
(continued)