Unilever 2009 Annual Report Download - page 63

Corporate governance (continued)
60 Unilever Annual Report and Accounts 2009
Report of the Directors Governance
• NV and PLC are not aware of any agreements between holders
of securities which may result in restrictions on the transfer of
such securities or on voting rights;
• neither NV nor PLC are parties to any significant agreements
which include provisions that take effect, alter or terminate such
agreement upon a change of control following a takeover bid;
• NV and PLC do not have any agreements with any Director or
employee that would provide compensation for loss of office or
employment resulting from a takeover except that most of
Unilever's share schemes contain provisions which operate in
the event of a takeover of Unilever, which provisions may for
instance cause options or awards granted to employees under
such schemes to vest after a takeover or be exchanged into new
awards for shares in another entity; and
• the Trustees of the PLC employee share trusts may vote or
abstain in any way they think fit and in doing so may take
into account both financial and non-financial interests of the
beneficiaries of the employee share trusts or their dependants.
Historically the Trustees tend not to exercise this right.
Requirements – the Netherlands
NV is required to state in its Annual Report and Accounts whether
it complies or will comply with the Principles and best practice
provisions (‘bpp’) of the Dutch Corporate Governance Code (the
Dutch Code) and, if it does not comply, to explain the reasons for
this. As will be clear from the description of our governance
arrangements, NV complies with almost all of the principles and
best practice provisions of the Dutch Code, a copy of which is
available at www.commissiecorporategovernance.nl The text that
follows sets out certain statements that the Dutch Code invites
us to make to our shareholders that are not included elsewhere
in this Annual Report and Accounts as well as areas of non-
compliance.
On 10 December 2008 the Dutch Corporate Governance Code
Compliance Committee published a revised version of the Code,
which is applicable to our annual reporting over 2009 and we
therefore report compliance under the revised Code in our
Annual Report and Accounts 2009.
Unilever places a great deal of importance on corporate
responsibility and sustainability as is evidenced by our vision
to double the size of the company while reducing our
environmental impact. With respect to our performance measures
Unilever is keen to ensure focus on key financial performance
measures which we believe to be the drivers of shareholder value
creation and relative total shareholder return. Unilever therefore
believes that the interests of the business and shareholders are
best served by linking the long-term share plans to the measures
as described in the Directors’ Remuneration Report on page 67
and has not included a non-financial performance indicator
(Principle II.2 and bpp II.2.3).
Board and Committee structures
NV has a one-tier board, consisting of both Executive and, in 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 by applying 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 as a whole.
Risk management and control
Our principal risks are described on pages 30 to 34. Our approach
to risk management and systems of internal control are described
on page 35.
As a result of the review of the Audit Committee (as described
in their report on page 63) the Board believes that as regards
financial reporting risks the risk management and control systems
provide reasonable assurance that the financial statements do
not contain any errors of material importance and the risk
management and control systems have worked properly in
2009 (bpp ll.1.5).
The aforesaid statements are not statements in accordance with
the requirements of Section 404 of the US Sarbanes-Oxley
Act of 2002.
Retention period of shares
The Dutch Code recommends that shares granted to Executive
Directors must be retained for a period of at least five years
(bpp II.2.5). Our shareholder-approved remuneration policy
requires Executive Directors to build and retain a personal
shareholding in Unilever. The Board believes 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.2.8).
Conflicts of interest
In the event of a potential conflict of interest, the provisions of the
Dutch Code (Principles 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
NV confirms that it 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 (bpp IV.3.11). 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 subsequently
altering the Articles of Association. The acquisition through a
public offer of a majority of the shares in a company does not
under Dutch law preclude in all circumstances the continued right
of the Board of the company to exercise its powers.