Unilever 2003 Annual Report Download - page 61

Remuneration report – policy
The minimum price payable for each share, on the exercise of the
options, is not less than the market price of the shares as at the
date of grant. Normally, an option granted under the Executive
Plans may not be exercised earlier than three years from the date
of grant. It cannot be exercised any later than ten years from the
date of grant.
Premium Options
For options granted between 1997 and 2000, rights to further
options (known as ‘premium options’) arise five years after the
date of the original option grant. These premium options will
amount to 20% of the original number of options granted
provided that:
• During the relevant five-year period, both the Group and the
individual Director have performed well, and
• The Director has not exercised the ‘original’ options granted
five years previously or, if he has, he retains all ‘profit’ of the
exercise in the form of shares.
This incentive of premium options was discontinued in 2001, as
part of the changes in the remuneration package of the Directors,
approved by shareholders at that time. No further rights to
premium options arise on grants made from 2001 onwards.
All-Employee Share Plans
Directors are able to participate in the UK Employee ShareSave
Plan, the UK Share Incentive Plan (‘ShareBuy’) and the
Netherlands Employee Option Plan. These arrangements are
known as ‘All-Employee’ plans. The US based Director is able to
participate in the North American Employee Stock Purchase Plan.
Details of all the plans are shown in note 29 on page 116.
Directors’ pensions
Directors are provided with defined benefit final salary pensions.
This is consistent with the pension provision for all UK and
Netherlands employees. This provides Directors with a pension
of up to two-thirds of final pensionable pay from age 60, which
is in line with market practice in continental Europe and the UK.
Final pensionable pay includes the average annual performance
bonuses paid in the last three years, up to a maximum of 20%
of base pay. This is similar to the current Group practice for long-
serving senior executives. It is the view of the Committee that a
significant part of Directors’ remuneration should be performance-
related, and that therefore part of the annual performance-
related bonus should be pensionable. The Committee reconsiders
this topic from time to time in the light of the recommendations
of the Combined Code and continues to take the view that, at
present, these arrangements should be kept in place.
The tables on page 65 give details of the Directors’ pensions
values for the year ended 31 December 2003.
Other benefits/allowances
Directors enjoy similar benefits to many other employees of
the Unilever Group. These include subsidised 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, certain UK based Directors receive an allowance to
compensate for the fact that some of their remuneration is paid
in the Netherlands.
Directors’ service contracts
The Directors have service contracts with both NV and PLC. The
notice period under the service contracts for Directors is one year.
If they choose, NV and PLC may pay a Director a sum equal to
twelve months’ salary in lieu of notice.
NV’s and PLC’s Articles of Association require that all Directors
retire from office at every Annual General Meeting. Directors’
contracts of service with the Unilever Group are generally
terminated no later than the end of the month in which the
Annual General Meeting closest to their 62nd birthday is held.
See table on page 67.
The Directors are long-serving Unilever executives who can
reasonably expect, subject to satisfactory performance, to be
employed by Unilever until retirement. The Committee takes
the view that the entitlement of the Directors to the security
of twelve months’ notice of termination of employment is in line
both with the practice of many comparable companies and the
entitlement of other senior executives within Unilever.
The Remuneration Committee’s aim is always to deal fairly with
cases of termination while taking a robust line in minimising any
compensation.
In both 2003 and 2002, all eight Directors served for the whole
of the year.
Other items
Statement of Compliance
This report sets out the policy and disclosures on Directors’
remuneration, as required by legislation in the Netherlands
and the United Kingdom. It also takes into account:
• The Dutch Corporate Governance Code;
• The Combined Code of the United Kingdom Listing Rules
(the Combined Code); and
• The requirements of the Directors’ Remuneration Report
Regulations 2002.
58 Unilever Annual Report & Accounts and Form 20-F 2003