Unilever 2010 Annual Report Download - page 64

Unilever Annual Report and Accounts 2010 61
Report of the Directors Governance
Directors’ Remuneration Report
The Committee aims to ensure that remuneration arrangements
for Unilever’s Executive Directors support the achievement of the
company’s strategic goals and the delivery of competitive
performance relative to our peers.
As disclosed in last year’s report and following consultation with
shareholders, the Committee has overseen the introduction of
anew remuneration structure, which enables us to place more
focus on rewarding higher standards of long-term performance
through variable pay.
Executive Directors and Unilever senior managers now need to
achieve and maintain higher personal shareholding limits than
before; 400% of salary for the Chief Executive Officer and 300%
of salary for the Chief Financial Officer. Senior managers also
have the opportunity under the Management Co-Investment
Plan (MCIP) to invest up to 60% of their annual bonus in respect
of 2010 in Unilever shares and subject to the maintenance of that
investment they may earn matching shares from Unilever if
demanding performance conditions are achieved over the
following three years. Executive Directors are excluded from the
MCIP in respect of their annual bonus for 2010.
Despite strong business results in a challenging economic
environment, the Committee has decided not to raise our
Executive Directors’ base salaries for the third consecutive year.
During 2011 the Committee will need to take a close look at the
competitive position of our Executive Directors’ salaries.
The old Executive Directors’ Share Matching Plan expires in 2011
and we have decided to invite the Chief Executive Officer and the
Chief Financial Officer to participate in the MCIP alongside their
senior management colleagues in respect of any bonus awarded
to them for 2011. Under the MCIP approved by shareholders
lastyear, Executive Directors, like other senior managers, will be
required to invest a minimum of 25% of their bonus in shares but
may elect to invest up to 60%. Additional matching shares are
earned from Unilever under the MCIP only to the extent that
stretching performance conditions are met.
Given Unilever’s success in achieving strong trade working capital
levels well ahead of target in 2010, the Committee has decided
to replace that performance indicator. For the annual bonus in
2011, our three main performance indicators will be underlying
sales growth, underlying volume growth and improvement in
underlying operating margin. These align closely with our
long-term strategic goals and continue to raise our standards of
performance in a challenging inflationary environment.
Our new remuneration structure encourages greater commitment
and engagement around the business with clearer long-term
focus. Having noted the step-up in this year’s results, the
Committee will keep the effectiveness of our new approach to
pay and performance under further review during 2011.
Jeroen van der Veer Chairman of the Remuneration Committee
Ann Fudge
Michael Treschow
Paul Walsh
Remuneration Committee
The role of the Remuneration Committee is to make proposals
tothe Boards for decisions on:
• the remuneration and benefits of Directors;
• the remuneration policy for the Unilever Executive and the
Chief Auditor, Group Controller, Chief Legal Officer and
Group Secretary; and
• the design and terms of all share-based incentive plans.
The Committee’s key responsibilities in respect of Executive
Directors include making proposals to the Boards on:
• the remuneration policy;
• individual salary levels, bonuses and other benefits;
• performance frameworks, targets setting and performance
review; and
• determining contractual terms.
The Committee’s Terms of Reference are contained within ‘The
Governance of Unilever’ and are also available on Unilever’s
website at www.unilever.com/investorrelations/corp_governance.
Details of Committee meeting attendance are contained in the
section on ‘Corporate Governance’ on page 48.
During 2010 the Committee comprised Jeroen van der Veer
(Chairman), Michael Treschow, Ann Fudge and Paul Walsh.
While it is the Committee’s responsibility to exercise independent
judgement, the Committee does request advice from
management and professional advisers, as appropriate, to ensure
that its decisions are fully informed given the internal and external
environment. In 2010 the Committee engaged Deloitte LLP to act
as advisor to review the performance conditions proposed for
theGlobal Share Incentive Plan (GSIP) from 2010 onwards and,
where comparisons could be made, to provide assurance that the
Committee had set conditions that were no easier to satisfy than
those which had previously applied. During the year, Deloitte
hasalso provided specific tax services, mainly outside the UK,
andsome technology consultancy services to Unilever. These
additional services did not raise any conflict of interest. The
Committee does not have any formal advisory arrangements
withother professional advisers.
During the year the Committee also sought input from the
ChiefExecutive Officer and the Chief Human Resources Officer
on various subjects including the remuneration of senior
management. The Committee also received legal and compliance
advice from the Chief Legal Officer and Group Secretary.
Executive Directors
Our aims and guiding principles
The overriding aim of the Committee is to ensure that the
remuneration arrangements for Executive Directors support the
longer-term objectives of Unilever and, in turn, the longer-term
interests of shareholders.
This means that we must ensure that:
• the fixed elements of the remuneration package offered
toExecutive Directors are sufficiently competitive to attract
and retain highly experienced and talented individuals; and
• the performance-related elements are structured so that
target levels are competitive but Executive Directors can
onlyearn higher rewards if they exceed the ongoing
standards of performance that Unilever requires.