Unilever 2011 Annual Report Download - page 54

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During the year the Committee also sought input from the Chief
Executive Officer, the Chief Human Resources Officer and the SVP
Global Head of Reward on various subjects including the
remuneration of senior management. No individual was present
when their own remuneration was being discussed. The
Committee also received legal and governance advice from the
Chief Legal Officer and Group Secretary.
The Committee also carried out an assessment of its own
performance and concluded it was performing effectively.
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 while
remaining appropriate in the context of market practice and
the remuneration structures operated throughout the Group;
• 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; and
• performance measures selected support Unilever’s business
strategy and the ongoing creation of sustained shareholder
value.
The Committee’s guiding principles are therefore that the
remuneration arrangements for Executive Directors should:
• support Unilever’s business strategy aiming to double the size
of the business while reducing our environmental impact
through a focus on markets, customers, innovation and people;
• sharpen Unilever’s performance culture through more
exacting standards;
• increase the difference in reward between modest, target and
outstanding performance achievements;
• support share ownership and strong shareholder alignment;
and
• be simple and transparent.
Below we have summarised the key remuneration policies for
Executive Directors that flow from and support the Committee’s
aims.
The supporting policies
Our emphasis on performance-related pay
It is Unilever’s policy that the total remuneration package for
Executive Directors should be competitive with other global
companies and that a significant proportion should be
performance-related. When assessing the competitiveness of the
package, the Committee considers Unilever’s positioning against
other UK and European companies that are of a similar size and
complexity and have similar global reach to Unilever. Overtwo-
thirds of the target remuneration for the Executive Directors is
linked to performance, with the majority of this linked to
shareholder-aligned longer-term performance.
The Committee typically reviews, at least on an annual basis, the
impact of different performance scenarios on the potential reward
opportunity and pay-outs to be received by Executive Directors
and the alignment of this with the returns that might be received
by shareholders. The Committee believes that the level of
remuneration that can be delivered in the various scenarios is
appropriate for the level of performance delivered and the value
that would be created for shareholders.
The remuneration structure is generally consistent for Executive
Directors and senior management of Unilever. Executive
Directors’ benefits are also established in line with those for other
employees on the basis of local market practices. The Committee
periodically monitors pay and employment conditions of other
employees within Unilever to ensure alignment and consistency
with remuneration of senior management and Unilever’s
remuneration objectives.
The Committee believes that Unilever’s risk management
processes provide the necessary controls to prevent
inappropriate risk taking. For example, when the Committee
reviews the structure and levels of performance-related pay for
Executive Directors and other members of the ULE, it considers
whether these might encourage behaviours incompatible with the
long-term interests of Unilever and its shareholders or that may
raise any environmental, social or governance risks. The
Committee believes that the significant shareholding
requirements placed on Executive Directors and other senior
managers guard against these risks.
Shareholding guidelines
The Articles of Association of NV and PLC do not require Directors
of NV or Directors of PLC to hold shares in NV or PLC. However,
the remuneration arrangements applicable to our Executive
Directors require them to build and retain a personal
shareholding in Unilever: 400% of salary for the Chief Executive
Officer, 300% for other Executive Directors and the members of
the ULE and 150% for the ‘top 100’ management layer below. The
current progress toward reaching the shareholding targets
(based on closing share prices on 30 December 2011) is: Paul
Polman: 744% and Jean-Marc Huët: 255%. Bonuses invested in
shares under the Share Matching Plan and the Management
Co-Investment Plan, including accrued dividends, count towards
the guideline. Unvested GSIP awards and matching shares under
the Share Matching Plan and the Management Co-Investment
Plan that are subject to performance conditions do not count.
Unilever Annual Report and Accounts 2011
Report of the Directors Governance