Unilever 2008 Annual Report Download - page 47

Corporate governance
44 Unilever Annual Report and Accounts 2008
Report of the Directors
Introduction
Unilever aspires to high standards of corporate governance.
We keep our corporate governance arrangements under constant
review. NV and PLC are subject to various corporate governance
requirements and best practice codes, the most relevant being
those in the Netherlands, the United Kingdom and the United
States. It is Unilever’s practice to comply, where practicable, with
the highest level of these codes and respond to developments
appropriately.
The Unilever Group
Unilever N.V. and Unilever PLC are the two parent companies
of the Unilever Group. Together with their respective group
companies, NV and PLC operate effectively as a single economic
entity. This is achieved by a series of agreements between NV and
PLC (the Foundation Agreements, see page 51), together with
special provisions in the Articles of Association of NV and PLC. NV
and PLC have the same Directors and adopt the same accounting
principles. Shareholders of both companies receive dividends on
an equalised basis. NV and PLC and their group companies
constitute a single reporting entity for the purposes of presenting
consolidated accounts. Accordingly, the accounts of the Unilever
Group are presented by both NV and PLC as their respective
consolidated accounts.
NV and PLC have agreed to co-operate in all areas and ensure
that all group companies act accordingly. NV and PLC are holding
and service companies, and the business activity of Unilever is
carried out by their subsidiaries around the world. Shares in group
companies may ultimately be held wholly by either NV or PLC or
by the two companies in varying proportions.
NV was incorporated under the name Naamlooze Vennootschap
Margarine Unie in the Netherlands in 1927. Its objects and
purposes are set out in Article 2 of its Articles of Association.
PLC was incorporated under the name Lever Brothers Limited in
England and Wales in 1894. Its objects and purposes can be
found in Clause 3 of its Memorandum of Association.
Unilever PLC’s Memorandum of Association and Unilever N.V.’s
Articles of Association contain, among other things, the objects
clause which sets out the scope of the activities that PLC and NV
are authorised to undertake. The Memorandum of Association
and Articles of Association are drafted to give a wide scope and
provide that the primary objectives are: to carry on business as a
holding company, to manage any companies in which it has an
interest and to operate and carry into effect the Equalisation
Agreement (see page 51).
The two companies have different shareholder constituencies and
shareholders cannot convert or exchange the shares of one
company for shares of the other. NV is listed in Amsterdam and
New York. PLC is listed in London and New York.
Unilever policies
The implementation of and compliance with our governance
structure is facilitated through a business-orientated policy
framework. Unilever policies are universally applicable within the
Unilever Group. They are mandatory and have been developed to
ensure consistency in all material respects amongst worldwide
operations in key areas. They cover operational and functional
matters, and govern how we run our business, in order to comply
with applicable laws and regulations.
Our internal risk management and control systems are described on
page 28.
Developments in corporate governance
Patrick Cescau retired from Unilever at the end of 2008 and,
following his appointment as a Director in October 2008, Paul
Polman succeeded Patrick Cescau as Chief Executive Officer in
January 2009. Paul Polman is the first Chief Executive Officer
appointed from outside the Unilever Group.
The text that follows describes the corporate governance
arrangements operating within Unilever and the changes anticipated
in 2009. More information on our corporate governance
arrangements is set out in the document entitled ‘The Governance
of Unilever’, the Boards’ statement of their internal arrangements,
which can be found at
www.unilever.com/investorrelations/corp_governance
The Boards
The Boards of NV and PLC comprise the same Directors and have
the same Chairman. This ensures unity of governance and
management by ensuring that all matters are considered by the
Boards as a single intellect, reaching the same conclusions on the
same set of facts, save where specific local factors apply.
The Boards are one-tier boards, comprising Executive Directors and,
in a majority, Non-Executive Directors. The Boards have ultimate
responsibility for the management, general affairs, direction and
performance of our business as a whole. The responsibility of the
Directors is collective, taking into account their respective roles as
Executive Directors and Non-Executive Directors. The Executive
Directors have additional responsibilities for the operation of our
business as determined by the Boards and the Chief Executive
Officer.
Our Directors have set out a number of areas of responsibility which
are reserved to the Boards and other areas for which matters are
delegated to the Chief Executive Officer and committees whose
actions are regularly reported to and monitored by the Boards.
These are described on pages 48 and 49. Further details of how our
Boards effectively operate as one board, govern themselves and
delegate their authorities are set out in the document entitled ‘The
Governance of Unilever’, which can be found at
www.unilever.com/investorrelations/corp_governance