Unilever 2007 Annual Report Download - page 46

44 Unilever Annual Report and Accounts 2007
Report of the Directors continued
Corporate governance continued
Board and Committee structures
NV is a multinational company with activities and shareholders
located all over the world. It has a one-tier board, consisting of
both Executive and, as a majority, Non-Executive Directors.
We achieve compliance of our board arrangements with the
Dutch Code, which is for the most part based on the customary
two-tier structure in the Netherlands, by, as far as is possible and
practicable, applying the provisions of the Dutch Code relating to
members of a management board to our Executive Directors and
the provisions relating to members of a supervisory board to our
Non-Executive Directors. Management tasks not capable of
delegation are performed by the Board. Reference is made to Ps II
and III and corresponding bpps. Reference is also made to the UK
Combined Code on Corporate Governance, which is fully tailored
to the one-tier board model (see page 33).
Risk management and control
Reference is made to pages 13 and 14 where Unilever’s control
framework is described. This incorporates risk management,
internal control procedures and disclosure controls and
procedures. Our procedures cover financial, operational, social,
strategic and environmental risks and regulatory matters. They are
in line with the latest recommendations of ‘Internal Control –
Revised Guidance for Directors on the Combined Code’ published
by the Internal Control Working Party of the Institute of
Chartered Accountants in England and Wales in October 2005
(‘The Turnbull Guidance’) and in line with the Recommendations
of the Dutch Monitoring Committee. On pages 13 and 14 we
have identified certain specific risks that are areas of focus in
2008. Unilever has designed its internal risk management and
control systems to provide reasonable (not absolute) assurance to
ensure compliance with regulatory matters and to safeguard
reliability of the financial reporting and its disclosures.
The Board considers that the internal risk management and
control systems are appropriate for our business and in
compliance with bpp II.1.3.
In bpp II.1.4 the Dutch Code invites our Board to make a
statement on our internal risk management and control systems.
In its reports, published on 20 December 2005 and 19 December
2007, the Dutch Corporate Governance Code Monitoring
Committee has made recommendations concerning the
application of this best practice provision. In accordance with its
recommendation and in the light of the above, the Board believes
that, as regards financial reporting risks:
• the risk management and control systems provide reasonable
assurance that this Annual Report does not contain any
material inaccuracies;
• the risk management and control systems have worked
properly in 2007;
• there are no indications that the risk management and control
systems will not work properly in 2008;
• no material failings in the risk management and control systems
were discovered in the year under review or the current year up
to the date of signing of these accounts;
and, as regards operational, strategic, legislative and regulatory
risks:
• no material failings in the risk management and control systems
were discovered in the year under review.
This statement is not a statement in accordance with the
requirements of Section 404 of the US Sarbanes-Oxley Act 2002.
Share options and awards
In line with bpp II.2.2, the awards and grants of shares and
options to our Executive Directors are in the material cases subject
to performance criteria, as referred to on pages 51 and 52 of the
Report of the Remuneration Committee.
Retention period of shares
The Dutch Code recommends that shares granted to executive
directors without a financial consideration must be retained for
a period of at least five years (bpp II.2.3). In 2001 we introduced
a new remuneration policy with shareholder approval which
requires our Executive Directors to build and retain a personal
shareholding in Unilever equal to at least 150% of their annual
base pay. We believe that this is in line with the spirit of the
Dutch Code.
Severance pay
It is our policy to set the level of severance payments for Directors
at no more than one year’s salary, unless the Board, at the
proposal of the Remuneration Committee, finds this manifestly
unreasonable given circumstances or unless otherwise dictated by
applicable law (bpp II.2.7).
Regulations for transactions in securities in other
companies
The Dutch Code recommends that a director shall give periodic
notice of any changes in his holding of securities in other Dutch
listed companies (bpp II.2.6 and bpp III.7.3). We are a
multinational company operating all over the world and our
Directors come from a wide variety of countries. We therefore
have a broader more general requirement for our Directors,
requiring them, upon request, to disclose to the compliance
officer their holdings and transactions in securities in any listed
company.
Conflicts of interest
In the event of a (potential) conflict of interest, the provisions of
the Dutch Code (P II.3 and III.6) are applied. Conflicts of interest
are not understood to include transactions and other activities
between companies in the Unilever Group.
Financing preference shares
NV issued 4%, 6% and 7% cumulative preference shares
between 1927 and 1970. Their voting rights are based on their
nominal value, as prescribed by Dutch law. The Dutch Code
recommends that the voting rights on such shares should, in any
event when they are newly issued, be based on their economic
value rather than on their nominal value (bpp IV.1.2). NV agrees
with this principle but cannot unilaterally reduce voting rights of
its outstanding preference shares.
Anti-takeover constructions and control over the company
With reference to bpp IV.3.9, NV has no anti-takeover
constructions, in the sense of constructions that are intended
solely, or primarily, to block future hostile public offers for its
shares. Nor does NV have any constructions whose specific
purpose is to prevent a bidder, after acquiring 75% of the capital,
from appointing or dismissing members of the Board and