Unilever 2011 Annual Report Download - page 46

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Our requirements and compliance
Requirements and compliance – general
Unilever is subject to corporate governance requirements in the
Netherlands, the UK and as a foreign private issuer in the US. In
this section we report on our compliance with the corporate
governance regulations and best practice codes applicable in the
Netherlands and the UK and we also describe compliance with
corporate governance standards in the US.
Under the European Takeover Directive as implemented in the
Netherlands and the UK, the UK Companies Act 2006 and rules of
the US Securities and Exchange Commission, Unilever is required
to provide information on contracts and other arrangements
essential or material to the business of the Group. We believe we
do not have any such contracts or arrangements.
Our governance arrangements are designed and structured to
promote and further the interests of our companies and their
shareholders. The Boards however reserve the right, in cases
where they decide such to be in the interests of the companies or
our shareholders, to depart from that which is set out in the
present and previous sections in relation to our corporate
governance. Any such changes will be reported in future Annual
Reports and Accounts and, when necessary, through changes to
the relevant documents published on our website. As appropriate,
proposals for change will be put to our shareholders for approval.
Our principal risks and our approach to risk management and
systems of internal control are described on pages 28 to 33.
Further information can be found on our website and in the
document entitled ‘The Governance of Unilever’ which is available
on our website at
www.unilever.com/Investorrelations/corp_governance.
Requirements – European Union
Following implementation of the European Takeover Directive,
certain information is required to be disclosed in relation to
control and share structures and interests of NV and PLC. Such
disclosures, which are not covered elsewhere in this Annual
Report and Accounts, include the following:
• there are no requirements to obtain the approval of NV or PLC,
or of other holders of securities in NV or PLC, for a transfer of
such securities. The NV special ordinary shares may only be
transferred to one or more holders of such shares;
• there are no arrangements by which, with NV’s or PLC’s
co-operation, financial rights carried by securities are held by
a person other than the holder of such securities;
• 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.
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. 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.
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 and has not
included a non-financial performance indicator (Principle II.2 and
bpp II.2.3).
Risk management and control
As a result of the review of the Audit Committee (as described in
its report on pages 46 and 47) the Boards believe 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 2011 (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 Boards believe 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 Boards, at the
proposal of the Remuneration Committee, find 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.
Unilever Annual Report and Accounts 2011
Report of the Directors Governance