Unilever 2015 Annual Report Download - page 74

HAIRMAN’S LETTER
DEAR SHAREHOLDERS,
As the new ompensaton ommttee har, I am pleased to
present Unlever’s 2015 Drectors’ Remuneraton Report I outlne
below our performance and the decsons we have made on
remuneraton, all of whch have been made n the context of the
ommttee’s long-held remuneraton prncples, as set out below
BUSINESS PERFORMANE AND REMUNERATION
OUTOMES FOR 2015
ANNUAL BONUS  ANOTHER YEAR OF ONSISTENT
PERFORMANE DELIVERY
Despte a contnung tougher external envronment, 2015 saw a
good delvery of our targets for fnancal performance, operatonal
excellence and sustanable development Unlever’s efforts to
delver sharper category strateges, greater focus on the core and
the sustaned nvestments we are makng behnd our nnovatons
have mproved growth Despte the ncreasngly volatle
envronment, we acheved underlyng sales growth of 41% wth a
step-up n volume growth and have contnued to grow ahead of our
markets By challengng our costs and takng out any non-value-
added actvty that s not helpng to buld the busness, we delvered
core operatng margn mprovement of 03 percentage ponts
In 2015 the ommttee decded to focus on the mportance of
cash generaton n vew of lower global growth rates by replacng
underlyng volume growth wth growth n free cash flow (FF)
For the purpose of the annual bonus calculatons, we adusted
FF delvery from 48 bllon for one-offs to 43 bllon (up
04 bllon from last year) On a formulac bass the outcome of
Unlever’s 2015 performance was 118% of target Adustng for
qualty of results and relatve performance, the ommttee agreed
an above-par 2015 annual bonus outcome of 110% of target
The ommttee beleves ths represents a far assessment of
Unlever’s overall performance over 2015 Personal performance
of the Executve Drectors has been recognsed by the ommttee
through the remuneraton outcomes for 2015 wth a bonus of
185% of salary (92% of maxmum) for the EO, Paul Polman, and
a bonus of 110% of salary (73% of maxmum) for the former FO,
Jean-Marc Hut
LOBAL SHARE INENTIVE PLAN (SIP) AND
MANAEMENT OINVESTMENT PLAN (MIP) 
SUSTAINED PERFORMANE DELIVERY
Over the past three years, Unlever has delvered consstent
fnancal performance Underlyng sales growth durng ths perod
was 38% per annum and core operatng margn mprovement over
the perod was an average of 037 percentage ponts per year,
demonstratng management’s drve for consstent top and bottom
lne growth Unlever also generated strong operatng cash n
the perod, wth cumulatve operatng cash flow of 166 bllon
Total shareholder return (TSR) over ths three-year perod was
below the performance of many of our peers and, as such, no part
of the SIP and MIP awards related to TSR wll vest On the bass
of ths performance, the ommttee determned that the SIP and
MIP awards to the end of 2015 wll vest at 98% of ntal award
levels (e 49% of maxmum for SIP and 65% of maxmum for MIP
(whch s capped at 150% for the Executve Drectors))
EXEUTIVE DIRETOR HANES
Jean-Marc Hut stepped down from the role of FO and Executve
Drector on 1 October 2015 raeme Ptkethly became FO on that
same date and he wll be proposed for electon to the Boards at
the AMs n Aprl 2016 In lne wth our shareholder-approved
Remuneraton Polcy, Jean-Marc Hut was treated as a ‘good
leaver’ for 2013-2015 SIP and MIP awards wth performance
condtons to be measured at the normal vestng date and awards
beng pro-rated for length of servce Full detals of the payment
relatng to Jean-Marc Hut’s cessaton of employment are set
out on page 78 raeme Ptkethly’s remuneraton for hs role as
Executve Drector wth effect from the 2016 AMs s structured
wholly n lne wth our Remuneraton Polcy and detals are set
out on page 69
REMUNERATION FOR 2016
In accordance wth our Remuneraton Polcy, the base salary
of Executve Drectors s revewed every year The ommttee
undertook ths revew n November 2015 Based on hs frmly
establshed and sustaned track record of good performance, the
ommttee beleves further ncreases to the EO’s salary would
be ustfed However, t agreed to Paul Polman’s request to not
ncrease hs base salary n lght of hs vew that the EO should be
rewarded through performance-based pay rather than a salary
ncrease Annual bonus opportunty and SIP and MIP award
levels wll reman unchanged The fees for the current harman
and Non-Executve Drectors wll also be unchanged for 2016
STRATEI LINKAE OF REWARD TO BUSINESS
PERFORMANE
In preparaton for the 2016 annual bonus and long-term ncentve
plan awards, the ommttee has undertaken a revew of the
performance measures and targets that wll determne vestng
of these awards Unlever’s success s drven by contnued focus on
delverng consstent and compettve growth n a sustanable and
proftable manner Accordngly, underlyng sales growth and core
operatng margn mprovement are key measures n our annual
bonus plan and long-term executve ncentve plans ash flow
generaton remans central to the success of the busness
n terms of both returns to shareholders and nvestment for future
growth and therefore remans a performance measure n both our
annual bonus plan (free cash flow) and long-term ncentve plans
(operatng cash flow) The ommttee therefore concluded that the
performance measures for our 2016 annual bonus plan and for the
2016-2018 performance cycle of our long-term executve ncentve
plans should reman unchanged For reasons of commercal
senstvty the target ranges for our performance measures wll be
dsclosed together wth the outcomes of ncentve plans at the end
of the respectve performance perods
REMUNERATION FRAMEWORK
Havng consdered varous alternatves, the ommttee decded not
to make materal changes to Unlever’s remuneraton framework
or Remuneraton Polcy for 2016 The current remuneraton
framework has served Unlever well and ths vew s endorsed
generally by the maorty of our largest shareholders whom
Mchael Treschow and I met n September 2015 Nonetheless, n
advance of the renewal of Unlever’s Remuneraton Polcy and
the SIP n 2017, we are contnung the process wth a further full
revew of our remuneraton framework n 2016
Ths wll ensure that future remuneraton arrangements are
fully algned wth our long-term strategy to delver value to
shareholders and that performance measures for ncentve plans
are transparent and fully algned wth our busness plans The
ommttee’s vews on ths wll be developed over the comng
months and I look forward to consultng our shareholders
and recevng feedback n shapng our proposals to extend, modfy
or replace our Remuneraton Polcy at the 2017 AMs
Ann Fudge
har of the ompensaton ommttee
67Unilever Annual Report and Accounts 2015 Governance