Unilever 2003 Annual Report Download - page 58

Unilever Annual Report & Accounts and Form 20-F 2003 55
Remuneration report – policy
Directors
Remuneration policy
Main principles
Unilever’s objective is to attract, motivate and retain business
executives of the highest calibre. This is essential to the successful
leadership and effective management of Unilever as a major
global company. To meet this objective the Committee follows
three key principles, validated by shareholders:
• The reward policy is benchmarked regularly against
arrangements for comparable companies in Europe. This
ensures that Directors' remuneration levels remain competitive.
• A comparison is made with the remuneration arrangements for
other senior executives within Unilever.
• The Committee links a significant proportion of the Directors'
total remuneration to a number of key measures of company
performance. This is in line with the ‘Path to Growth’ strategy.
The three main measures are:
– Earnings per share growth (BEIA);
– Sales growth in the leading brands; and
– Total shareholder return generated by Unilever, in comparison
with a group of 20 relevant competitors.
Where Group performance is on-target, the variable elements of
the remuneration package, such as the annual bonus and long-
term incentive payments, can account for about 60% of the total
package (excluding pension provision). However, outstanding
Group results can increase the variable elements to around 75%
of the total package. If the Group results were below target, the
variable elements would reduce significantly.
Closely linking the package to key performance measures
ensures that Directors’ remuneration is aligned effectively
with shareholders’ interests. This is also consistent with the
remuneration policy for senior executives below board level, who
have a significant performance-related element of pay within their
remuneration package.
Directors are also required to build up a significant personal
shareholding in Unilever. Within five years of appointment,
they are expected to hold shares worth 150% of their basic
annual salary.
On a limited basis Unilever Directors serve as non-executives
on the Boards of other companies. Unilever requires that all
remuneration and fees earned from outside directorships are paid
directly to Unilever.
Future developments
The Remuneration Committee keeps its remuneration policy
under review in the light of company and market developments.
Currently the share-based elements of the remuneration package
and the pension arrangements are being reviewed.
Remuneration Committee
Tasks and responsibilities
The Committee is responsible for setting the remuneration policy
for Directors and advising the Boards accordingly. It is also
responsible for setting individual remuneration packages for
Directors and for monitoring and approving all executive share-
based incentive arrangements. The Committee meets at least
three times a year and, during 2003, it met on four occasions.
Every member was present at each meeting.
Structure
The Committee members are all independent Advisory Directors,
chosen for their broad experience and international outlook.
During 2003 the members were:
• Bertrand Collomb (appointed Chairman May 2003)
• Lord Simon of Highbury
• Jeroen van der Veer; and
• Frits Fentener van Vlissingen (former Chairman, retired
May 2003)
Advice and assistance
The Committee does not formally retain remuneration
consultants. It seeks professional advice from external advisers
as and when required. During 2003, the Committee sought
advice from Towers Perrin (an independent firm of human
resources specialists) on market data, remuneration trends and
performance-related pay. Towers Perrin also provides general
consultancy advice to Unilever Group companies on pension,
communications and other human resource matters.
The Committee is supplied with information by Jan van der Bijl,
who is also Joint Secretary of Unilever.
The Chairmen of NV and PLC are invited to attend Committee
meetings to provide their own insights to the Committee on
business objectives and the individual performance of their direct
reports. Naturally, the Chairmen do not attend when their own
remuneration is being discussed.
Remuneration package
Reward structure
The Directors’ total remuneration package consists of:
• Base salary;
• Annual performance bonus;
• Long-term incentives;
• Pension provision; and
• Other benefits/allowances
The Committee regularly reviews the reward structure to
ensure that it meets its objectives. The structure of the package
is benchmarked against arrangements for comparable
European companies.