Unilever 2006 Annual Report Download - page 36

Unilever Annual Report and Accounts 2006 33
Report of the Directors (continued)
Corporate governance
Introduction
Unilever constantly keeps its corporate governance arrangements
under review. NV and PLC are subject to various corporate
governance requirements and best practice codes, the most
relevant being those in the Netherlands, the United Kingdom
and the United States. It is Unilever’s practice to comply, where
practicable, with the highest level of these codes and respond
to developments appropriately.
The Unilever Group
Unilever N.V. and Unilever PLC are the two parent companies
of the Unilever Group. Together with the group companies, NV
and PLC operate effectively as a single economic entity. This is
achieved by a series of agreements between NV and PLC (the
Foundation Agreements, see page 39), together with special
provisions in the Articles of Association of NV and PLC. NV and
PLC have the same Directors and adopt the same accounting
principles. Shareholders of both companies receive dividends on
an equalised basis. NV and PLC and their group companies
constitute a single reporting entity for the purposes of presenting
consolidated accounts. Accordingly, the accounts of the Unilever
Group are presented by both NV and PLC as their respective
consolidated accounts.
NV and PLC have agreed to co-operate in all areas and ensure
that all group companies act accordingly. NV and PLC are holding
and service companies, and the business activity of Unilever is
carried out by their subsidiaries around the world. Shares in group
companies may ultimately be held wholly by either NV or PLC, or
jointly by the two companies, in varying proportions.
NV was incorporated under the name Naamlooze Vennootschap
Margarine Unie in the Netherlands in 1927. Its objects and
purposes areset out in Article 2 of its Articles of Association.
PLC was incorporated under the name Lever Brothers Limited in
England and Wales in 1894. Its objects and purposes can be
found in Clause 3 of its Memorandum of Association. The two
companies have different shareholder constituencies and
shareholders cannot convert or exchange the shares of one
company for shares of the other. NV is listed in Amsterdam and
New York. PLC is listed in London and New York.
Unilever policies
The implementation of and compliance with our governance
structure is facilitated through a business orientated policy
framework. Unilever policies are characterised by being universally
applicable within the Unilever Group. They are mandatory in
effect and have been developed to ensure consistency in key
areas within our worldwide operations. They cover operational
and functional matters, and govern how we run our business,
in order to comply with applicable laws and regulations.
Unilever policies include: the Code of Business Principles; the
Code of Ethics for Senior Financial Officers, the Compliance
Manual for the Listing Rules and Disclosure and Transparency
Rules (including the Unilever Share Dealing Code), the Risk
Management Policy, the Corporate Pensions Policy and the
Accounting and Reporting Policy.
The Code of Business Principles is Unilever’s statement of values
and represents the standard of conduct we require from all of our
employees. Our 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).
The Code of Business Principles Hotline provides for a confidential
hotline, not only to ensure that employees can anonymously
submit concerns regarding accounting and auditing issues but to
handle all alleged violations of the Code of Business Principles.
Copies of the Code of Business Principles, the Code of Ethics
and the Share Dealing Code are posted on our website at
www.unilever.com/investorcentre/corpgovernance.
Our internal risk management and control systems are described
on page 9.
Developments in corporate governance
In recent years there have been significant developments in
Unilever’s corporate governance structure.
In 2004, the NV and PLC shareholders adopted proposals to
create one-tier boards with a majority of independent Non-
Executive Directors.
In 2005, shareholders approved a series of further changes to
streamline management and leadership. A separate Non-Executive
Chairman and Group Chief Executive were appointed. The Group
Chief Executive established the Unilever Executive (UEx) which
comprises three Regional Presidents (for Europe, The Americas
and Asia Africa), two Category Presidents (for Foods and Home
and Personal Care), the Chief Financial Officer and the Chief
HR Officer.
The regions are responsible for performance, implementing
proven brand mixes and focusing on building capabilities with
customers. The categories are responsible for the entire brand
development process, including innovation, brand positioning and
communication and category strategies. The interdependence
between the regions and categories allows us to exploit our
global scale, while building on our deep roots in local markets.
Our HR and Finance functions concentrate on excellence in
human capabilities and cost-efficiencies across the Group.
In 2006, following a thorough review of our corporate structure,
shareholders approved proposals to:
•adapt Unilever’s constitutional arrangements to allow greater
flexibility to allocate assets between both parent companies;
•simplify the relationship between NV and PLC shares by
establishing a one-to-one equivalence in their economic interest
in the Unilever Group (this was achieved by a split of the NV
shares and a consolidation of the PLC shares); and
• allow shareholders the right to nominate candidates to the
Boards, taking into account the need to ensure the unity
of management.