Unilever 2015 Annual Report Download - page 45
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Please find page 45 of the 2015 Unilever annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.DEAR SHAREHOLDERS,
As the new ompensaton ommttee har, I am pleased to
present Unlever’s 2015 Drectors’ Remuneraton Report I outlne
below our performance and the decsons we have made on
remuneraton, all of whch have been made n the context of the
ommttee’s long-held remuneraton prncples, as set out on
page 68 of the overnance and Fnancal Report
BUSINESS PERFORMANE AND REMUNERATION
OUTOMES FOR 2015
ANNUAL BONUS ANOTHER YEAR OF ONSISTENT
PERFORMANE DELIVERY
Despte a contnung tougher external envronment, 2015 saw a
good delvery of our targets for fnancal performance, operatonal
excellence and sustanable development Unlever’s efforts to
delver sharper category strateges, greater focus on the core and
the sustaned nvestments we are makng behnd our nnovatons
have mproved growth Despte the ncreasngly volatle
envronment, we acheved underlyng sales growth of 41% wth a
step-up n volume growth and have contnued to grow ahead of our
markets By challengng our costs and takng out any non-value-
added actvty that s not helpng to buld the busness, we delvered
core operatng margn mprovement of 03 percentage ponts
In 2015 the ommttee decded to focus on the mportance of
cash generaton n vew of lower global growth rates by replacng
underlyng volume growth wth growth n free cash flow (FF)
For the purpose of the annual bonus calculatons, we adusted
FF delvery from 48 bllon for one-offs to 43 bllon (up
04 bllon from last year) On a formulac bass the outcome of
Unlever’s 2015 performance was 118% of target Adustng for
qualty of results and relatve performance, the ommttee agreed
an above-par 2015 annual bonus outcome of 110% of target
The ommttee beleves ths represents a far assessment of
Unlever’s overall performance over 2015 Personal performance
of the Executve Drectors has been recognsed by the ommttee
through the remuneraton outcomes for 2015 wth a bonus of
185% of salary (92% of maxmum) for the EO, Paul Polman, and
a bonus of 110% of salary (73% of maxmum) for the former FO,
Jean-Marc Hut
LOBAL SHARE INENTIVE PLAN (SIP) AND
MANAEMENT OINVESTMENT PLAN (MIP)
SUSTAINED PERFORMANE DELIVERY
Over the past three years, Unlever has delvered consstent
fnancal performance Underlyng sales growth durng ths perod
was 38% per annum and core operatng margn mprovement over
the perod was an average of 037 percentage ponts per year,
demonstratng management’s drve for consstent top and bottom
lne growth Unlever also generated strong operatng cash n
the perod, wth cumulatve operatng cash flow of 166 bllon
Total shareholder return (TSR) over ths three-year perod was
below the performance of many of our peers and, as such, no part
of the SIP and MIP awards related to TSR wll vest On the bass
of ths performance, the ommttee determned that the SIP and
MIP awards to the end of 2015 wll vest at 98% of ntal award
levels (e 49% of maxmum for SIP and 65% of maxmum for MIP
(whch s capped at 150% for the Executve Drectors))
EXEUTIVE DIRETOR HANES
Jean-Marc Hut stepped down from the role of FO and Executve
Drector on 1 October 2015 raeme Ptkethly became FO on that
same date and he wll be proposed for electon to the Boards at
the AMs n Aprl 2016 In lne wth our shareholder-approved
Remuneraton Polcy, Jean-Marc Hut was treated as a ‘good
leaver’ for 2013-2015 SIP and MIP awards wth performance
condtons to be measured at the normal vestng date and awards
beng pro-rated for length of servce Full detals of the payment
relatng to Jean-Marc Hut’s cessaton of employment are set
out on page 78 raeme Ptkethly’s remuneraton for hs role as
Executve Drector wth effect from the 2016 AMs s structured
wholly n lne wth our Remuneraton Polcy and detals are set
out on page 69
REMUNERATION FOR 2016
In accordance wth our Remuneraton Polcy, the base salary
of Executve Drectors s revewed every year The ommttee
undertook ths revew n November 2015 Based on hs frmly
establshed and sustaned track record of good performance, the
ommttee beleves further ncreases to the EO’s salary would
be ustfed However, t agreed to Paul Polman’s request to not
ncrease hs base salary n lght of hs vew that the EO should be
rewarded through performance-based pay rather than a salary
ncrease Annual bonus opportunty and SIP and MIP award
levels wll reman unchanged The fees for the current harman
and Non-Executve Drectors wll also be unchanged for 2016
STRATEI LINKAE OF REWARD TO BUSINESS
PERFORMANE
In preparaton for the 2016 annual bonus and long-term ncentve
plan awards, the ommttee has undertaken a revew of the
performance measures and targets that wll determne vestng
of these awards Unlever’s success s drven by contnued focus
on delverng consstent and compettve growth n a sustanable
and proftable manner Accordngly, underlyng sales growth and
core operatng margn mprovement are key measures n our
annual bonus plan and long-term executve ncentve plans ash
flow generaton remans central to the success of the busness
n terms of both returns to shareholders and nvestment for future
growth and therefore remans a performance measure n both our
annual bonus plan (free cash flow) and long-term ncentve plans
(operatng cash flow) The ommttee therefore concluded that the
performance measures for our 2016 annual bonus plan and for the
2016-2018 performance cycle of our long-term executve ncentve
plans should reman unchanged For reasons of commercal
senstvty the target ranges for our performance measures wll be
dsclosed together wth the outcomes of ncentve plans at the end
of the respectve performance perods
REMUNERATION FRAMEWORK
Havng consdered varous alternatves, the ommttee decded not
to make materal changes to Unlever’s remuneraton framework
or Remuneraton Polcy for 2016 The current remuneraton
framework has served Unlever well and ths vew s endorsed
generally by the maorty of our largest shareholders whom
Mchael Treschow and I met n September 2015 Nonetheless, n
advance of the renewal of Unlever’s Remuneraton Polcy and
the SIP n 2017, we are contnung the process wth a further full
revew of our remuneraton framework n 2016
Ths wll ensure that future remuneraton arrangements are
fully algned wth our long-term strategy to delver value to
shareholders and that performance measures for ncentve plans
are transparent and fully algned wth our busness plans The
ommttee’s vews on ths wll be developed over the comng
months and I look forward to consultng our shareholders
and recevng feedback n shapng our proposals to extend, modfy
or replace our Remuneraton Polcy at the 2017 AMs
Ann Fudge
har of the ompensaton ommttee
42 Unilever Annual Report and Accounts 2015Strategic Report
SUMMARY REMUNERATION REPORT
HAIRMAN’S LETTER