Unilever 2008 Annual Report Download - page 63

Report of the Remuneration Committee
60 Unilever Annual Report and Accounts 2008
Report of the Directors
During 2008, the Committee’s activities were greatly influenced
by the Board and Executive Committee changes that the
succession plan required.
In October 2008 Paul Polman was elected to the Board, becoming
Chief Executive Officer on Patrick Cescau’s retirement at the end
of December. Jim Lawrence was elected to the Board at the 2008
AGMs following his appointment as Chief Financial Officer in the
latter half of 2007. The 2008 AGMs also marked the retirement
from the Board of Kees van der Graaf, President, Europe, and
Ralph Kugler, President, Home & Personal Care, each with over 28
years of service.
Given our agreed policy framework, the Committee’s aim has
been to ensure that the remuneration arrangements for Paul
Polman and Jim Lawrence, as Executive Directors, are fully in line
with the five strategic principles that serve as the platform for
Unilever's approach to remuneration for the Unilever Executive.
These principles not only apply for our Executive Directors but to
all Unilever's leadership levels. They provide the basis for our
remuneration structure as explained in greater detail in the
following pages, and direct that pay should be:
• aligned with shareholders' interests;
• robustly linked to performance;
• aligned with strategic priorities;
• market competitive; and
• easy to understand and communicate.
The overriding objective is to ensure that Unilever recruits and
retains the best performers, and effectively incentivises them to
achieve superior results. It is also our aim to manage the differing
elements of total remuneration in a fully integrated manner.
Shareholders were provided with summaries of the full
remuneration arrangements for both Paul Polman and Jim
Lawrence prior to their elections to the Board. In addition, at the
2008 AGMs shareholders separately approved increased bonus
and Global Share Incentive Plan award limits for Jim Lawrence,
who joined us from the USA.
Reflecting the transformation that Patrick Cescau has led over the
last four years, Unilever’s performance continued to improve
through 2008 despite the challenging environment. The focus on
growth priorities coupled with timely pricing actions and savings
from cost efficiency programmes meant that we were able to
deliver underlying sales growth well above target levels and
improved underlying operating margins.
The annual incentive awards paid to the Executive team in respect
of 2008 (on average 120% of base salary) reflect Unilever’s strong
underlying sales growth, improved margin performance as well
delivery on individual business objectives. Long-term incentive
awards will vest in 2009 in respect of the performance period
2006 to 2008. 122% of awards made in 2006 under the Global
Performance Share Plan (GPSP) will vest, reflecting strong annual
average underlying sales growth (USG) over the three-year period
to the end of 2008 and continued progress towards longer-term
ungeared free cash flow (UFCF) targets. (The performance ranges
for these awards set in 2006 were 3.2% - 5.2% per annum for
USG and €12.5 - €13.7 billion for cumulative UFCF. Awards made
in 2006 under the TSR long-term incentive plan will also vest in
2009. As Unilever’s relative total shareholder return performance
over the period 2006 to 2008 ranks 9th against a comparator
group of peer companies (see page 62) 50% of the awards are
due to vest.
Looking forward to 2009, we believe that Unilever remains well
placed and we expect the new Group leadership team to pursue
the opportunities present even in challenging times and that, as a
result, our shareholders and our executives will be duly rewarded.
David Simon Chairman of the Remuneration Committee
Michael Treschow
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 64, the ‘Remuneration for individual Executive Directors’ on page 65, the ‘Executive Directors’ Global Share Incentive
Plan on page 66, the ‘Executive Directors’ Global Performance Share Plan’ on page 67, the ‘Executive Directors’ conditional share
awards under the TSR Long-Term Incentive Plan’ on page 68, the ‘Executive Directors’ Share Matching Plan’ on page 67, ‘Executive
Directors’ share options’ on page 69, ‘Executive Directors’ pensions’ on page 70, ‘Executive Directors’ interests – share capital’ on
page 71, ‘Non-Executive Directors’ remuneration’ on page 72 and ‘Non-Executive Directors’ interests – share capital’ on page 73.