Unilever 2010 Annual Report Download - page 66

Unilever Annual Report and Accounts 2010 63
Report of the Directors Governance
Committee, find this manifestly unreasonable given the
circumstances or unless dictated by applicable law. The date of
contract for Paul Polman was 7 October 2008 and for Jean-Marc
Huët 19 March 2010. Executive Directors’ contracts end by notice
of either party.
Our remuneration practices
Base salary
Base salaries for Executive Directors are reviewed annually taking
into account our competitive market position, individual
performance, Unilever’s overall performance and levels of
increase in the rest of the organisation.
2010 outcomes
Base salaries for Executive Directors were not increased from
1January 2010. As Executive Directors’ salaries were not
increased in 1 January 2009, this meansthat there have been no
increases for three years.
Pension and other benefits
The policy is that Executive Directors are members of the
all-employee pension arrangement in their home country (or an
alternative of similar value) and make personal contributions at
the same rate as other employees in that arrangement. Both the
Chief Executive Officer and Chief Financial Officer are members
of a defined contribution arrangement.
Executive Directors enjoy similar benefits to those enjoyed by
many other senior management employees of Unilever.
Annual bonus
For 2010 the target bonus for the Chief Executive Officer was
113% of salary and the maximum would have been 200% of
salary. The target bonus opportunity for the Chief Financial Officer
was 100% of salary and the maximum would have been 150% of
salary. Demanding targets for financial results mean that maximum
bonus levels are only payable for exceptional performance.
The Executive Director’s annual bonus opportunity is based on
Unilever’s results referenced against financial targets set at the
beginning of the year. For 2010, targets were set by the
Committee for underlying volume growth, underlying operating
margin improvement and trade working capital improvement
over the previous year. With these results in view, the Committee
then assessed the quality of performance; both in terms of
business results and leadership, including corporate social
responsibility, to determine the actual bonus award for Executive
Directors.
2010 outcomes
The annual bonus awards for 2010 reflect Unilever’s strong
performance achieved across the business and were 160% of
base salary for the Chief Executive Officer and 120% for the
Chief Financial Officer.
Actual performance against the three main indicators for the
annual bonus met or exceeded the mid-point of the performance
ranges set by the Committee at the beginning of 2010. Underlying
volume growth at 5.8% was towards the top end of the range,
well above the market overall and demonstrated the strongest
growth achieved by Unilever in over 30 years. Underlying
operating margin improvement was on target at 20bps and
average trade working capital reduced further than we had
targeted. Based on this, the Committee took the view that
performance was above target and in line with last year despite
overall better results. This rigour accords with our ambition to
consistently raise standards of performance and establish a
stronger performance culture within Unilever.
Share Matching Plan
Under the Share Matching Plan, Executive Directors are required to
invest 25% of their bonus into shares and hold them for a minimum
period of three years. The Executive Directors receive a matching
award of 25% of their annual bonus in the form of NV and PLC
shares. The matching shares normally vest after three years provided
that the underlying shares have been retained during this period
and the Executive Director has not resigned or been dismissed.
The Committee considers that there is no need for further
performance conditions on the vesting of the matching shares
because the number of shares is directly linked to the annual bonus
(which is itself subject to demanding performance conditions). In
addition, during the three-year vesting period the share price of NV
and PLC is influenced by the performance of Unilever. This, in turn,
affects the ultimate value of the matching shares on vesting.
The 2011 grant relating to the annual bonus earned for 2010 will be
the last grant under the Share Matching Plan. From 2011 Executive
Directors, like all other senior managers of Unilever, will participate
in the MCIP.
Global Share Incentive Plan
Executive Directors receive annual awards of NV and PLC shares
under the GSIP. The number of shares that vest after three years
depends on the satisfaction of performance conditions.
The current maximum grant levels were agreed by shareholders
in 2008 and are 200% of salary for the Chief Executive Officer
and just below 180% for other Executive Directors. The vesting
range is between 0% and 200% of grant level.
When the GSIP was introduced in 2007 the performance
conditions were:
• underlying sales growth;
• ungeared free cash flow performance; and
• relative total shareholder return.
In 2010 the performance conditions were changed to the
following:
• underlying sales growth;
• operating cash flow;
• underlying operating margin improvement; and
• relative total shareholder return.
These performance conditions are identical to the performance
conditions of the MCIP.
The new conditions apply to GSIP awards made in 2010 and
onwards and to the final two performance years of the GSIP
awards made in 2009.
The structure of vesting will remain the same as for previous
awards except that for Executive Directors and the Unilever
Executive the four measures will be equally weighted (25% each).