Unilever 2002 Annual Report Download - page 53

50 Remuneration report
Unilever Annual Report & Accounts and Form 20-F 2002
Remuneration package
The remuneration package of the directors consists of a base
salary, allowances and benefits in kind, annual performance
bonus, long-term incentive arrangements and pension
provision. The details are as follows:
1. Base salary
Base salaries are set by the Remuneration Committee and
are fixed in the currency appropriate to the country in which
the individual is based. Whilst one overall salary framework
applies to all directors, separate salary ranges are agreed
each year for directors based in continental Europe, the UK
and the US.
2. Allowances and benefits in kind
Directors enjoy similar benefits to many other employees of
the Unilever Group. These include private medical insurance,
the use of company cars (or cash in lieu) and assistance with
relocation costs when moving from one country to another.
They also receive an allowance to cover small out-of-pocket
expenses not covered by the reimbursement of their
business entertaining expenses. In addition, the UK-based
directors receive an allowance, where applicable, to
compensate for the fact that some of their remuneration
is paid in the Netherlands.
3. Annual performance bonus
The annual bonus can range between 0% and 100% of
base salary. This bonus is based on achievement of specific
corporate and personal targets which are set by the
Remuneration Committee at the beginning of each year.
Up to the equivalent of 80% of base salary is paid by
reference to corporate targets and up to 20% of base
salary is paid by reference to personal targets.
The corporate targets are based on a combination of the
increase in earnings per share (BEIA) and underlying sales
growth of the leading brands for the year in question.
Personal targets are based on agreed key objectives relative
to the director’s specific responsibilities.
At the end of each year the Remuneration Committee
reviews the results against the targets which had been
set previously.
For 2002 the earnings per share (BEIA) target range was
exceeded and underlying sales growth in the leading brands
was in the upper half of the target range. Moreover the
personal key objectives set for each director were generally
achieved. Details of the payments made for 2002 are shown
in the remuneration table.
One quarter of the annual bonus for directors is delivered
in the form of NV and PLC shares and the directors are
then awarded an equivalent number of ‘matching shares’.
These matching shares are described as forming part of the
long-term incentive arrangements (see below).
4. Long-term incentive arrangements
Directors are eligible to be considered for participation
in three long-term incentive arrangements as follows:
(a) Matching shares
As explained above, one quarter of the annual bonus is
delivered in the form of NV and PLC shares. The Group then
awards an equivalent number of matching shares. These
matching shares vest three years after grant provided that
the original ‘bonus shares’ have been retained for the
three-year period and that the director has not resigned
or been dismissed during that period.
Apart from these latter conditions no further performance
conditions apply to the vesting of the matching shares. The
Remuneration Committee considers that, as the level of the
award is directly linked to the payment of the annual bonus
(to which performance conditions do apply), there is no need
for further performance conditions on the vesting of the
award. The Remuneration Committee also wishes to
encourage directors to hold shares in the company they serve
to further align the interests of the directors with those of the
shareholders in general. The necessity to hold the ‘bonus
shares’ for a minimum of a three-year period (during which
time the share price will be influenced by the performance
of the Group) reinforces this commitment on the part
of the director and is also consistent with the shareholding
requirement described on page 55. In addition, the
Remuneration Committee believes that the three-year period
to vesting of the ‘matching shares’ supports, as far as is
possible, the retention of key executives.
(b) Share options
Directors are able to participate in the UK Employee
ShareSave Plan and the Netherlands Employee Option Plan,
which are both All-Employee plans. The US-based director
is able to participate in the North American Employee Stock
Purchase Plan. These plans are referred to in note 29 on
pages 103 to 111.
In addition, directors participate in the Executive Option
Plans, as described in note 29 on pages 103 and 106
to 108.
The Remuneration Committee has established benchmark
grant levels, described as the ‘normal’ allocation, to assist
each year in deciding on actual grant levels under the
Executive Option Plans. The Committee has reviewed these
normal allocations in 2002 and has concluded that they are
still in line with those awarded by other companies with
which we compare ourselves.