Unilever 2009 Annual Report Download - page 53

Corporate governance
50 Unilever Annual Report and Accounts 2009
Report of the Directors Governance
Introduction
Unilever is 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 text that follows describes the corporate governance
arrangements operating within Unilever.
The Unilever Group
Unilever N.V. and Unilever PLC are the two parent companies of
the Unilever Group, and 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 56), together with
special provisions in the Articles of Association of NV and PLC.
NV and PLC have the same Directors, adopt the same accounting
principles, and pay dividends to their respective shareholders 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 to 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, and PLC was
incorporated under the name Lever Brothers Limited in England
and Wales in 1894. The two companies have different shareholder
constituencies and shareholders can hold shares in either or both
companies but cannot convert or exchange the shares of one
company for shares of the other. NV is listed in Amsterdam and
New York, and PLC is listed in London and New York.
Unilever PLC’s and Unilever N.V.’s respective Articles of Association
contain, among other things, the objects clause, which sets out
the scope of activities that PLC and NV are authorised to
undertake. PLC’s and NV’s 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. It is proposed that at the
2010 AGM the objects clause be removed from PLC’s Articles of
Association so that there are no restrictions on its objects.
Our risk management approach and associated systems of internal
control are described on page 35.
The Boards
The Boards of NV and PLC comprise the same Directors and have
the same Chairman. This guarantees 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, with the Executive
Directors having additional responsibilities for the operation of the
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. The Boards have also
established committees whose actions are regularly reported to and
monitored by the Boards, and these are described on pages 53 and
54. 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
Appointment of Directors
Directors are normally appointed by shareholders at the AGMs.
All existing Directors, unless they are retiring, submit themselves
for re-election every year, and shareholders can remove any of them
by a simple majority vote. A list of our current Directors and the
periods during which they have served as such is set out on pages
22 and 23.
In order to seek to ensure that NV and PLC have the same Directors,
the Articles of Association of NV and PLC contain provisions which
are designed to ensure that both NV and PLC shareholders are
presented with the same candidates for election as Directors. This is
achieved through a nomination procedure operated by the Boards of
NV and PLC through Unilever’s Nomination Committee.
Based on the evaluation of the Boards, its Committees and its
individual members, the Nomination Committee recommends to the
Boards a list of candidates for nomination at the AGMs of both NV
and PLC. In addition, shareholders are able to nominate Directors,
and to do so they must put a resolution to both meetings in line
with local requirements. However, in order to ensure that the Boards
remain identical, anyone being elected as a Director of NV must also
be elected as a Director of PLC and vice versa. Therefore, if an
individual fails to be elected to both companies then he or she will
be unable to take their place on the Boards.
The provisions in the Articles of Association for appointing Directors
cannot be changed without the permission, in the case of NV, of the
holders of the special ordinary shares numbered 1-2,400 inclusive
and, in the case of PLC, of the holders of PLC's deferred stock. The
NV special ordinary shares may only be transferred to one or more
other holders of such shares. The joint holders of both the NV special
ordinary shares and the PLC deferred stock are N.V. Elma and United
Holdings Limited, which are joint subsidiaries of NV and PLC. The
Boards of N.V. Elma and United Holdings Limited comprise the
members of the Nomination Committee, which comprises
Non-Executive Directors of Unilever only.
Board meetings
Our Boards meet at least seven times a year to consider important
corporate events and actions, such as: