Unilever 2011 Annual Report Download - page 55

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DIRECTORS’ REMUNERATION REPORT continued
Our linkage between business objectives and
performance-related pay
It is Unilever’s policy for the performance-related pay of Executive
Directors to be linked to key Group measures that are aligned with
strategy, business objectives and shareholder value.
Unilever’s main business objective is to generate a sustainable
improvement in business performance through increasing
volume and underlying sales growth while steadily improving
operating margins and cash flow. There are a number of strategic
priorities which support this objective. It is this combination of
top-line revenue growth and bottom-line profits growth that
Unilever believes will build shareholder value over the longer
term. It is Unilever’s objective to be among the best performers in
its peer group.
In line with these objectives:
the annual bonus measures for the Executive Directors for 2012
are:
• underlying volume growth;
• core operating margin improvement; and
• underlying sales growth.
The Committee also considers the quality of performance; both in
terms of business results and leadership, including corporate
social responsibility, when determining bonus payouts.
The GSIP and the MCIP measures from 2012 onwards are three
year:
• underlying sales growth;
• core operating margin improvement;
• operating cash flow; and
• relative total shareholder return.
Core operating margin improvement has replaced underlying
operating margin improvement for 2012, reflecting the way in
which we measure and assess success against this metric
throughout the business. Core operating margin is calculated
after business restructuring costs, so that these costs will be
treated like any other business costs. Core operating profit will
continue to exclude profits on business proposals, M&A-related
costs, impairments and other one-off items.
Sustainability of our business performance and our impact on the
wider society is very important to Unilever and therefore the
Committee also considers performance in this area when
determining vesting.
Further details are in the Annual Bonus, Share Matching Plan,
GSIP and MCIP sections later in this Directors’ Remuneration
Report.
Claw back
The Committee is authorised to reclaim or ‘claw back’
performance-related pay components paid to Executive Directors
in the event of a significant downward revision of the financial
results of the Group. This includes the annual bonus and awards
that have been made and/or vested shares that have been issued
or transferred under the Share Matching Plan, the GSIP and the
MCIP.
Executive Directors’ contracts
Executive Directors are required to submit themselves for
re-election at the AGMs each year and the Nomination Committee
carefully considers each nomination for reappointment. If
Executive Directors cease to be Directors, this shall be deemed
anotice by Unilever of termination of employment. The Committee
takes the view that the entitlement of Executive Directors to the
security of twelve months’ notice of termination of employment is
in line with both the practice of many comparable companies and
the entitlement of other senior executives in Unilever. It is our
policy to set the level of severance payments for Executive
Directors at no more than one year’s salary, unless the Boards, at
the proposal of the Committee, find this manifestly unreasonable
given the circumstances or unless dictated by applicable law. Any
such payment would typically include amounts in respect of the
Director’s benefits in kind and pension entitlements. Annual
bonus (as estimated by the Committee) and other share-based
awards, would be made pro rata to the date of termination. No
such compensation is payable in the case of summary
termination. 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 or, in the case of summary
termination, without notice.
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.
2011 outcomes
Base salaries for Executive Directors were not increased during
2011. This means that the CEO’s salary has not been increased for
the three years since his appointment and the CFO’s salary has
not been increased for the two years since his appointment.
See below under the section headed ‘Proposed changes from
2012 onwards’ for the policy for 2012.
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. The
ChiefExecutive Officer is a member of a defined contribution
arrangement whilst the Chief Financial Officer withdrew from
hisdefined contribution arrangement during the year and elected
to receive an equivalent cash allowance instead.
Executive Directors enjoy similar benefits to those enjoyed by
many other senior management employees of Unilever.
See below under the section headed ‘Proposed changes from
2012 onwards’ for the policy for 2012.
Annual bonus
For 2011 the target bonus for the Chief Executive Officer was 120%
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.
Stretching targets for financial results mean that maximum bonus
levels are only payable for exceptional performance.
Unilever Annual Report and Accounts 2011
Report of the Directors Governance