Unilever 2003 Annual Report Download - page 53

Corporate governance
Requirements – the United Kingdom
PLC is required, as a company that is incorporated in the United
Kingdom and listed on the London Stock Exchange, to state how
it has applied the principles and how far it has complied with the
provisions set out in Section 1 of the Combined Code issued in
1998 (‘the Combined Code’) appended to the United Kingdom
Listing Rules.
As already explained, the Boards exercise control through the
Executive Committee. Responsibilities are shared by the Chairmen
of NV and PLC, while the Advisory Directors perform many of the
functions of the supervisory board members or non-executive
directors, although they were not formally members of the Boards
in 2003. For the purposes of the Combined Code, the Boards had
not appointed a senior independent director during 2003, on the
basis that issues for the Boards can be raised with whichever
Advisory Director is the Chairman of the relevant Board
Committee and the Advisory Directors are entitled to meet as a
body and appoint a senior member as their spokesman. A senior
independent director will be appointed as a consequence of the
proposals put to the Annual General Meetings in 2004.
Unilever’s remuneration policy is contained within the report on
the directors’ remuneration and interests on pages 54 to 68. This
also deals with aspects of non-compliance with the Combined
Code in this area. Members of the Audit, Remuneration and
Nomination Committees will be available to answer questions at
the Annual General Meetings of both NV and PLC. The members
attending each meeting will not necessarily include the Chairman
of the Committee, since these meetings take place at about the
same time in Rotterdam and London respectively.
A description of Unilever’s compliance with ‘Internal Control –
Guidance for Directors on the Combined Code’ is given on
page 71.
NV and PLC are separate legal entities, each subject to its own
national traditions and practices and each with responsibilities to
different sets of shareholders. Unilever has, since its inception,
adopted the principle that it is good practice that the most senior
roles in NV and PLC are shared and not concentrated in one
person. As a consequence it is a principal tenet of its governance
philosophy, which finds expression in two people who each
combine the roles of Chairman and Chief Executive and who
meet regularly for joint decision making. This carefully balanced
arrangement has served Unilever’s unique constitutional
arrangements very well for many years and the Boards believe
that to separate these roles would only introduce undesirable and
unnecessary complexity.
In all other respects, PLC has complied with the Combined Code
throughout 2003.
For Unilever, the revisions made to the Combined Code in 2003
apply as from 1 January 2004. Unilever has had the new
requirements in mind in making the changes in its corporate
governance arrangements that will, subject to shareholder
approval, be effective from the Annual General Meetings in 2004.
See page 47. It will therefore report formally on its compliance in
next year’s Annual Report & Accounts and Form 20-F. Before
then, further information will be placed on Unilever’s website
www.unilever.com/investorcentre/.
Requirements – the United States
Both NV and PLC are listed on The New York Stock Exchange and
must therefore comply with such of the requirements of US
legislation, such as The Sarbanes-Oxley Act of 2002, SEC
regulations and the Listing Rules of The New York Stock Exchange
as are applicable to foreign listed companies. In some cases the
requirements are mandatory and in other cases the obligation is
to ’comply or explain’.
Unilever has complied with these requirements concerning
corporate governance that were in force during 2003. Attention
is drawn in particular to the Report of the Audit Committee on
page 69. Actions taken to ensure compliance that are not
specifically disclosed elsewhere or otherwise clear from reading
this document include:
• the issue of a Code of Ethics for senior financial officers;
• the issue of instructions restricting the employment of former
employees of the audit firm; and
• establishment of standards of professional conduct for US
attorneys.
In each of these cases, existing practices have been revised and/or
documented in such a way as to conform to the new
requirements.
The Code of Ethics applies to the senior executive, financial and
accounting officers and comprises the standards prescribed by
the SEC, and a copy has been posted on Unilever’s website at
www.unilever.com/investorcentre/. The Code of Ethics comprises
an extract of the relevant provisions of Unilever’s Code of Business
Principles and the more detailed rules of conduct that implement
it. The only amendment to these pre-existing provisions and rules
that was made in preparing the Code of Ethics was made at the
request of the Audit Committee and consisted of a strengthening
of the explicit requirement to keep proper accounting records.
No waiver from any provision of the Code of Ethics was granted
to any of the persons falling within the scope of the SEC
requirement in 2003.
Unilever has also taken into account the US requirements taking
effect in 2004 and 2005 applicable to both foreign and US listed
companies in preparing the changes in its corporate governance
arrangements that will be effective from the NV and PLC Annual
General Meetings on 12 May 2004. Further information will be
placed on Unilever’s website at www.unilever.com/investorcentre/
following those meetings, and will be reported in the Annual
Report & Accounts and Form 20-F for 2004.
Auditors
Subject to the annual appointment of auditors by the
shareholders and in addition to our ongoing process of
monitoring the auditors’ performance, we undertake a formal
review every three years. The most recent review was completed
in November 2002 and resulted in the re-appointment of
PricewaterhouseCoopers. On the recommendation of the Audit
Committee, the Directors will be proposing the re-appointment
of PricewaterhouseCoopers at the Annual General Meetings on
12 May 2004 (see pages 148 and 151).
50 Unilever Annual Report & Accounts and Form 20-F 2003