Unilever 2005 Annual Report Download - page 57

54 Unilever Annual Report and Accounts 2005
Report of the Remuneration Committee
(continued)
Remuneration policy 2006 and beyond – Executive Directors
Main principles
Unilever’s objective in its remuneration policy for Executive
Directors is to drive performance and to set reward in support of
the achievement of its goals. Therefore it is important to recruit
key 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 Remuneration
Committee follows three key principles, supported by
shareholders:
• A significant proportion of the Executive Directors’ total reward
is linked to a number of key measures of company performance
to create alignment with the strategy and business priorities;
• The reward policy is benchmarked regularly against
arrangements of other global companies based in Europe.
Unilever reward policy table
Indicative levels at face
Element Payment method value as % of base pay Plan objectives/Key drivers Performance measures
Base salary Cash Market competitive Attraction and retention of Individual performance
key executives
Annual incentive Cash (75%) Executive Director: 60% Delivery of trading Trading contribution
on target contribution (Unilever’s (Executive Director: 40%,
Shares (25%) (range of 0% – 100%) primary internal measure of Group Chief Executive: 50%)
economic value added) and
Group Chief Executive: top-line growth targets Underlying sales growth
90% on target (Executive Director: 40%,
(range of 0 – 150%) Individual responsibility for Group Chief Executive: 50%)
key Unilever business
objectives Individual contribution to
Unilever business strategy
(Executive Director 20%,
Group Chief Executive: 50%)
Global Shares Grant level: c. 25% Ungeared Free Cash Flow Ungeared Free Cash Flow (50%)
performance as the basic driver of Unilever
share plan Vesting level: 0 – 200% shareholder returns Underlying sales growth
of grant (50%)
Top-line growth as
essential to Unilever’s
long-term value creation
TSR plan Shares Grant level: c. 60% Shareholder return at upper Relative total shareholder
half of peer group with return
Vesting level: 0 – 200% 20 other companies
of grant
Share matching Shares 25% of annual Alignment with shareholders’
plan incentive paid interests
Short-term (one year)
This ensures that Executive Directors’ reward levels remain
competitive; and
• An internal comparison is made with the reward arrangements
for other senior executives within Unilever to support consistent
application of Unilever’s executive reward policies.
Each element of the Executive Directors’ reward package focuses
on supporting different business objectives. The table below
provides an overview of all the elements of reward (excluding
pension), the key drivers, the resulting performance measures and
indicative levels. In setting targets for the performance measures,
the Committee is guided by what needs to happen to drive
underlying performance and this is reflected in both the short-
term and long-term performance targets.
Depending on the level of performance the variable component
could vary between 0 and around 80% of the total reward
package (excluding pensions).
Some of the Executive Directors serve as a non-executive on the
Board of another company. Unilever requires that all remuneration
and fees earned from outside directorships are paid directly to
Unilever.
Long-term (three year)