Unilever 2004 Annual Report Download - page 78

Unilever Annual Report and Accounts 2004 75
Remuneration report
Policy (continued)
Other benefits/allowances
Executive 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 Executive Directors receive an
allowance to compensate for the loss in their net income due
to the fact that some of their remuneration is paid in the
Netherlands.
Future developments
The Remuneration Committee keeps the remuneration policy for
Executive Directors under review in the light of company and
market developments. Currently there are proposals to make the
following changes to the remuneration package:
• Proposals will be made to shareholders to replace the existing
executive share option plans with a new Global Performance
Share Plan. If the proposals are accepted by shareholders no
further grants will be made to Executive Directors under the
executive share option plans (apart from the final grants of
premium options to be made in 2005). Instead, from 2005
onwards, grants will be made under the new Global
Performance Share Plan. These awards will vest three years
from grant but will be subject to performance conditions on
vesting. Full details of this new plan are contained in the
notices to shareholders regarding the 2005 Annual General
Meetings.
• The Executive Directors pension arrangements are currently
under review. In particular the Committee has decided that the
current policy of including a proportion of the annual bonus (of
up to 20% of base salary) as part of pensionable earnings
should be abandoned, with immediate effect, for new
Executive Directors.
• The performance criteria relating to the annual bonus is being
revised in order to align the Executive Directors’ targets to the
business plans leading up to 2010. For 2005 it is proposed that
the new corporate targets be based on a combination of the
Trading Contribution (TC) and Underlying Sales Growth (USG)
of the Group. It is also proposed that the bonus opportunity for
the Group Chief Executive be set at a maximum of 150% of
base salary from 2005 onwards.
Commentary on Executive Directors’ Remuneration
payable for 2004
The tables on pages 77 to 85 give details of the specific elements
of the Executive Directors’ remuneration package for 2004.
However, the following additional comments may be helpful in
understanding the various tables.
Base salary
The average of salary increases for Executive Directors for 2004
was 4.7% compared with the year 2003.
This increase was a result of the yearly benchmarking exercise
whereby the salary payable to Unilever’s Executive Directors was
compared with that payable to Directors of other major
international companies based in Europe. This benchmarking
excluded companies in the financial sector in order to ensure that
the outcome of the study was not distorted. The increase also
took into account the personal performance of the individual in
question together with the overall performance of the business.
Annual performance bonus
Corporate and personal targets were set by the Remuneration
Committee for 2004 as follows:
• Corporate: these were based on a combination of (a) the
increase in earnings per share BEIA at current exchange rates
and (b) the sales growth of the leading brands. The maximum
bonus in respect of these Corporate targets is 80% of
base salary.
• Personal: these were based on agreed key objectives relative
to the Executive Director’s specific responsibilities. Up to 20%
of base salary can be earned in respect of these targets.
At the end of 2004 the Committee measured the results against
the targets set and agreed that bonuses should be payable to
Executive Directors averaging approximately 11% of base salaries
in respect of that year.
Long-term incentive arrangements
• Share Matching Plan
Two awards vested in 2004. These awards were originally
made on a conditional basis in 1999 (with a vesting period of
five years) and in 2001 (with a vesting period of three years).
• TSR Long-Term Incentive Plan
The conditional award made in 2001 vested in May 2004. This
award was based on the TSR performance of Unilever (when
ranked against its defined peer group of 20 comparator
companies) for the three-year performance period ended 31
December 2003. Unilever was ranked position 6 out of the peer
group of companies for this period which resulted in a 100%
vesting of the award.
The conditional award made in 2002 was based on the TSR
performance of Unilever for the three-year period ended 31
December 2004. For this period Unilever was ranked 13 out of
its peer group of companies and therefore there will be no
vesting of this award in March 2005.
• Executive Share Options
The grants of share options made in 2004 were based on the
earnings per share growth BEIA for 2003 compared with 2002.
This resulted in a level of grant for 2004 equivalent to 100% of
the normal allocation of options.