Unilever 2014 Annual Report Download - page 26

REMUNERATION PRINIPLES
SUPPORTIN THE DELIVERY OF OUR STRATEY THROUH
REMUNERATION ARRANEMENTS
Our busness vson s to double the sze of Unlever whle
reducng our envronmental footprnt and ncreasng our postve
socal mpact through a focus on our brands, our operatons and
our people, and the Unlever Sustanable Lvng Plan (USLP)
Remuneraton s one of the key tools that we have as a busness
to help us to motvate our people to acheve our goals
Our remuneraton arrangements are desgned to support our
busness vson and the mplementaton of our strategy The key
elements of our remuneraton package for Executve Drectors
are summarsed below
FIXED
ELEMENTS
PERFORMANCE-RELATED
ELEMENTS
Base salary Fixed allowance
and other
benefits
Annual bonusLonger-term:
GSIP
Longer-term:
MCIP
EXEUTIVE DIRETORS TURN DOWN SALARY INREASES
FOR 2015
In our 2011 Drectors’ Remuneraton Report, the ommttee
drew shareholders’ attenton to our concern that the EO’s salary
was postoned at the lower end of market practce compared
to smlar szed UK and European companes At that tme the
ommttee stated that t would look to make further ncreases,
as approprate, to address ths over the next few years Snce
then, largely at the EO and FO’s own nsstence, we have
consstently awarded less of a salary ncrease than we beleved
was merted by the performance of the Executve Drectors
Havng held ther salares steady for longer than ntended and
n vew of the sustaned track record of performance delvery,
the ommttee recommended, and the Boards approved, salary
ncreases for the EO and FO wth effect from January 2015
In makng these recommendatons the ommttee consdered
the strong performance of Unlever and algnment, both to
ncreases n pay for the broader employee populaton and
externally The EO and FO have turned down the salary
ncreases recommended by the ommttee for 2015
STRATEI LINKAE OF REWARD TO BUSINESS
PERFORMANE
As n prevous years, the ommttee contnues to use
performance-based ncentves to drve the busness towards
delverng sustanable long-term value for shareholders For
2015, the ommttee has decded to focus on the mportance of
cash generaton n an envronment of lower global growth rates
by replacng underlyng volume growth wth growth n free cash
flow (FF) as a performance measure for the annual bonus, n
algnment wth our strategy as set out n the Strategc Report
(wwwunlevercom/ara2014/downloads) FF s a wdely reported
metrc used to evaluate Unlever’s n-year performance For our
shareholders, cash s an mportant drver of value creaton,
allowng us to pay attractve and sustanable dvdends whle
contnung to nvest n the busness
The performance measures for our long-term share ncentve
plans reman unchanged for the 2015-2017 performance cycle
Even though FF s our prmary cash measure, we use operatng
cash flow (OF) as the cash measure n our long-term ncentve
plans as t better represents underlyng long-term performance
at constant exchange rates To better descrbe long-term
management performance, OF s also adusted to exclude the
mpact of cash nflows and outflows resultng from M&A actvty
and the mpact of penson contrbutons and nterest costs on
external borrowngs
For reasons of commercal senstvty, our practce s to dsclose
the target ranges for performance measures together wth the
outcomes of ncentve plans at the end of the respectve
performance perod
In 2015 the ommttee plans to undertake a further revew of our
remuneraton framework to ensure that t contnues to be fully
algned wth Unlever’s busness strategy and enables us to
respond quckly to the rapdly changng markets n whch we
operate Specfcally, we wll be lookng for opportuntes to
smplfy reward arrangements and also to strengthen the lnkage
between executve pay and the creaton of sustanable longer-
term shareholder value To the extent that changes are proposed,
the ommttee wll consult wth key shareholders to get ther
feedback n advance of recommendng changes to shareholders
Paul Walsh
harman of the ompensaton ommttee
63Unilever Annual Report and Accounts 2014 Governance