Unilever 2005 Annual Report Download - page 59

56 Unilever Annual Report and Accounts 2005
Report of the Remuneration Committee
(continued)
Vested award
(% of original conditional
TSR peer group ranking award that will vest)
12th to 21st 0%
10th or 11th 25%
8th or 9th 50%
5th to 7th 100%
3rd or 4th 150%
1st or 2nd 200%
Peer Group:
Altria Kao
Avon Lion
Beiersdorf L’Oréal
Cadbury Schweppes Nestlé
Clorox Orkla
Coca-Cola Pepsico
Colgate Procter & Gamble
Danone Reckitt Benckiser
Gillette Sara Lee
Heinz Shiseido
Kraft will replace Altria and Kimberly-Clark will replace Gillette in
the peer group.
Share Matching Plan (linked to the annual incentive)
The Share Matching Plan enhances the alignment with
shareholder’s interests and supports the retention of key
executives. In addition, the necessity to hold the shares for a
minimum period of three years supports the shareholding
requirements set out on page 55.
As mentioned earlier, the Executive Directors receive 25% of their
annual incentive in the form of NV and PLC shares. These are
matched with an equivalent number of matching shares. The
matching shares will vest after three years provided that the
underlying shares have been retained during this period and the
Executive Director has not resigned or been dismissed.
The Remuneration Committee considers that there is no need for
further performance conditions on the vesting of the matching
shares because the number of shares is directly linked to the
annual bonus (which is itself subject to demanding performance
conditions). In addition, during the three-year vesting period the
share price of NV and PLC will be influenced by the performance
of Unilever which, in turn, will affect the ultimate value of the
matching shares on vesting.
Executive Directors’ pensions
Executive Directors are provided with a defined benefit final salary
pension, which is consistent with the pension provision for other
Unilever Netherlands and UK employees. The Executive Directors’
arrangement provides a pension of a maximum of two-thirds of
final pensionable pay if they retire at age 60 or later.
As stated in last year’s report, the Remuneration Committee
decided that annual incentive would no longer be part of
pensionable pay for new Executive Directors appointed as from
2005. For Executive Directors appointed prior to 2005, annual
incentive is pensionable up to a maximum of 20% of base salary.
Other benefits and allowances
Executive Directors enjoy similar benefits to many other
employees of Unilever. For example, like other employees,
Executive Directors are able to participate in the UK Employee
ShareSave Plan, the UK Share Incentive Plan (‘ShareBuy’) and the
All Employee Option Plan, in the Netherlands.
Future developments
The Remuneration Committee intends to continue monitoring
trends and changes in the market. It keeps a watching brief on
the continuing alignment between Unilever’s strategic objectives
and the reward policy for Executive Directors. The Committee is
continuing its review of the pension arrangements for Executive
Directors during 2006.
Commentary on Executive Directors’ Remuneration
paid in 2005
The tables on pages 60 to 67 give details of the specific elements
of the Executive Directors’ reward package in 2005. However, the
following additional comments may be helpful in understanding
the various tables. The first sections cover the arrangements for
current Executive Directors, followed by an explanation of the
arrangements for former Executive Directors.
Base salary
Following the AGMs in May 2005, the number of Executive
Directors and their responsibilities changed substantially. The
Committee therefore reviewed base salary levels in light of these
changes. The salary levels were benchmarked against those paid
in other major global companies based in Europe, excluding
companies in the financial sector. The increases for 2005 reflect
the change in the composition and responsibilities of the
Executive Directors, market levels as well as individual and
company performance. The total salary figure compared with that
for last year has reduced significantly as a consequence of the
reduction in the number of Executive Directors. The current
annual base salary levels for the Executive Directors are set out
below:
Executive Director Current annual base salary levels
Based in the UK
Patrick Cescau £935 000
Ralph Kugler £570 000
Rudy Markham £645 000
Based in the Netherlands
Kees van der Graaf €760 000