Unilever 2006 Annual Report Download - page 46

Unilever Annual Report and Accounts 2006 43
Report of the Directors (continued)
Corporate governance (continued)
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, as well as
certain statements that the Dutch Code invites us to make to
our shareholders that are not included elsewhere in this Annual
Report and Accounts.
Board and Committee structures
NV is a multinational company with activities and shareholders
located all over the world. It has a one-tier board, consisting of
both Executive and, as a majority, Non-Executive Directors.
Weachieve 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 by the Board. Reference is made to Ps II
and III and corresponding bpps. Reference is also made to the UK
Combined Code on Corporate Governance, which is fully tailored
to the one-tier board model (see page 34).
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). Beforehis
appointment as Non-Executive 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. Antony Burgmans will be succeeded by Michael Treschow
as an independent Chairman at the AGMs in 2007, subject to his
appointment as Non-Executive Director.
As Antony Burgmans was the only Non-Executive Director who is
not independent from Unilever, NV complies with bpp. III.2.1 of
the Dutch Code.
In addition to the Chairman, the Boards of NV and PLC have
aSenior Independent Director who is appointed by the Non-
Executive Directors and acts as their spokesperson.
Risk management and control
Reference is made to page 66 where Unilever’s control framework
is described. This incorporates risk management, internal control
procedures and disclosure controls and procedures. Our
procedures cover financial, operational, social, strategic and
environmental risks and regulatory matters. They are in line with
the latest recommendations of ‘Internal Control – Revised
Guidance for Directors on the Combined Code’ published by the
Internal Control Working Party of the Institute of Chartered
Accountants in England and Wales in October 2005 (‘The Turnbull
Guidance’). On pages 9 and 10 we have identified certain specific
risks that are areas of focus in 2007. Unilever has designed its
internal risk management and control systems to provide
reasonable (not absolute) assurance to ensure compliance with
regulatory matters and to safeguard reliability of the financial
reporting and its disclosures.
The Board considers that the internal risk management and
control systems are appropriate for our business and in
compliance with bpp II.1.3.
In bpp II.1.4 the Dutch Code invites our Board to make a
statement on our internal risk management and control systems.
In its report, published on 20 December 2005, the Corporate
Governance Code Monitoring Committee has made
recommendations concerning the application of this best practice
provision. In accordance with its recommendation and in the light
of the above, the Boardbelieves that, as regards financial
reporting risks:
•the risk management and control systems provide reasonable
assurance that this Annual Report does not contain any
material inaccuracies;
• the risk management and control systems have worked
properly in 2006;
• there are no indications that the risk management and control
systems will not work properly in 2007;
• no material failings in the risk management and control systems
werediscovered in the year under review or the current year
until the signing of these accounts; and, as regards financial,
operational, social, strategic, environmental and regulatory
risks; and
• no material failings in the risk management and control systems
were discovered in the year under review.
This statement is not a statement in accordance with the
requirements of Section 404 of the US Sarbanes-Oxley Act.
Share options and awards
In line with bpp II.2.2, the awards and grants of shares and
options to our Executive Directors are in the material cases subject
to performance criteria, as referred to on pages 51 and 52 of the
Report of the Remuneration Committee. The exception is the
options over 150 NV shares granted each year to our Executive
Directors under the all-employee share option plan in the
Netherlands, as described on pages 117 and 118. The Directors’
participation in this plan is seen as a stimulus for all employees
to participate.