Unilever 2006 Annual Report Download - page 52

Unilever Annual Report and Accounts 2006 49
Report of the Directors (continued)
Report of the Remuneration Committee
During 2006 the Committee has reviewed the remuneration
policy and practice of the past few years, and on the basis of this
experience has decided to prioritise five strategic principles to
serve as the platform for Unilever’s approach to remuneration.
This strategy is not only for our Executive Directors but for all
Unilever’s leadership levels. These principles, which improve the
structure of our existing remuneration framework as explained
in greater detail in the following pages, are that pay should be:
• robustly linked to performance;
• aligned with strategic priorities;
• aligned with shareholders’ interests;
• market competitive; and
• finally, easy to understand and communicate.
Our overriding objective is to ensure that Unilever recruits and
retains the best performers and then optimises the return on
investment from the reward system for Unilever’s leadership
group. It is also our aim to manage the differing elements of
total remuneration in a fully integrated manner.
The five principles will from 2007 provide the foundation of
some important changes to executive remuneration that we are
proposing for the level and structure of Unilever incentive plans.
Our proposals have been the subject of consultation with our
major shareholders and their representatives. In summary, these
changes enhance variable rewards relative to fixed pay and
simplify the share-based incentives.
The details of the proposed changes to Unilever’s long-term
incentive arrangements are described in the Notices to
Shareholders for the 2007 AGMs.
In short, we believe that we have developed an approach
which incorporates the right mix and level of incentives for our
leadership team which also aligns with shareholders’ interests. It
would also be more understandable and simpler to communicate
to our staff.
The year 2006 showed a continuing improvement in top-line
growth, whilst trading contribution was proximate to but slightly
below the targets we had set.
To remain competitive the base salaries for the Unilever Executive
team were increased by an average of 3.9% from the beginning
of 2006. Based on the performance over 2006 the annual
incentive awards were on average 52% of base salary across
the Unilever Executive team. However, in industry ranked terms
we arenot yet in a payout position for the TSR Long-Term
Incentive Plan.
In 2007, we arestrengthening the linkage between business
performance and executive rewards.
We hope to see continued improvement in business results
in 2007, with the leadership team appropriately rewarded
commensurate with these improved results.
David Simon Chairman of the Remuneration Committee
Jean-Cyril Spinetta
Jeroen van der Veer
Definition of auditable part of the report of the Remuneration Committee
In compliance with the UK Directors’ Remuneration Report Regulation 2002, and under Title 9, Book 2 of the Civil Code in the
Netherlands, the auditable part of the report of the Remuneration Committee comprises the ’Aggregate remuneration for Executive
Directors’ on page 55, the ’Remuneration for individual Executive Directors’ on page 55, the ‘Executive Directors’ Global Performance
Share Plan’ on page 56, the ’Executive Directors’ conditional share awards under the TSR Long-Term Incentive Plan’ on page 56,
the ‘Executive Directors’ Share Matching Plan’ on page 57, ’Executive Directors’ share options’ on page 58, ’Executive Directors’
pensions’ on page 59, ’Executive Directors’ interests – share capital’ on page 60, ‘Non-Executive Directors’ remuneration
on page 61 and ‘Non-Executive Directors’ interests – sharecapital’ on page 62.