Report & accounts 2002 in full - Unilever
Report & accounts 2002 in full - Unilever
Report & accounts 2002 in full - Unilever
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50 Remuneration report<br />
Remuneration package<br />
The remuneration package of the directors consists of a base<br />
salary, allowances and benefits <strong>in</strong> k<strong>in</strong>d, annual performance<br />
bonus, long-term <strong>in</strong>centive arrangements and pension<br />
provision. The details are as follows:<br />
1. Base salary<br />
Base salaries are set by the Remuneration Committee and<br />
are fixed <strong>in</strong> the currency appropriate to the country <strong>in</strong> which<br />
the <strong>in</strong>dividual is based. Whilst one overall salary framework<br />
applies to all directors, separate salary ranges are agreed<br />
each year for directors based <strong>in</strong> cont<strong>in</strong>ental Europe, the UK<br />
and the US.<br />
2. Allowances and benefits <strong>in</strong> k<strong>in</strong>d<br />
Directors enjoy similar benefits to many other employees of<br />
the <strong>Unilever</strong> Group. These <strong>in</strong>clude private medical <strong>in</strong>surance,<br />
the use of company cars (or cash <strong>in</strong> lieu) and assistance with<br />
relocation costs when mov<strong>in</strong>g from one country to another.<br />
They also receive an allowance to cover small out-of-pocket<br />
expenses not covered by the reimbursement of their<br />
bus<strong>in</strong>ess enterta<strong>in</strong><strong>in</strong>g expenses. In addition, the UK-based<br />
directors receive an allowance, where applicable, to<br />
compensate for the fact that some of their remuneration<br />
is paid <strong>in</strong> the Netherlands.<br />
3. Annual performance bonus<br />
The annual bonus can range between 0% and 100% of<br />
base salary. This bonus is based on achievement of specific<br />
corporate and personal targets which are set by the<br />
Remuneration Committee at the beg<strong>in</strong>n<strong>in</strong>g of each year.<br />
Up to the equivalent of 80% of base salary is paid by<br />
reference to corporate targets and up to 20% of base<br />
salary is paid by reference to personal targets.<br />
The corporate targets are based on a comb<strong>in</strong>ation of the<br />
<strong>in</strong>crease <strong>in</strong> earn<strong>in</strong>gs per share (BEIA) and underly<strong>in</strong>g sales<br />
growth of the lead<strong>in</strong>g brands for the year <strong>in</strong> question.<br />
Personal targets are based on agreed key objectives relative<br />
to the director’s specific responsibilities.<br />
At the end of each year the Remuneration Committee<br />
reviews the results aga<strong>in</strong>st the targets which had been<br />
set previously.<br />
For <strong>2002</strong> the earn<strong>in</strong>gs per share (BEIA) target range was<br />
exceeded and underly<strong>in</strong>g sales growth <strong>in</strong> the lead<strong>in</strong>g brands<br />
was <strong>in</strong> the upper half of the target range. Moreover the<br />
personal key objectives set for each director were generally<br />
achieved. Details of the payments made for <strong>2002</strong> are shown<br />
<strong>in</strong> the remuneration table.<br />
One quarter of the annual bonus for directors is delivered<br />
<strong>in</strong> the form of NV and PLC shares and the directors are<br />
then awarded an equivalent number of ‘match<strong>in</strong>g shares’.<br />
These match<strong>in</strong>g shares are described as form<strong>in</strong>g part of the<br />
long-term <strong>in</strong>centive arrangements (see below).<br />
<strong>Unilever</strong> Annual <strong>Report</strong> & Accounts and Form 20-F <strong>2002</strong><br />
4. Long-term <strong>in</strong>centive arrangements<br />
Directors are eligible to be considered for participation<br />
<strong>in</strong> three long-term <strong>in</strong>centive arrangements as follows:<br />
(a) Match<strong>in</strong>g shares<br />
As expla<strong>in</strong>ed above, one quarter of the annual bonus is<br />
delivered <strong>in</strong> the form of NV and PLC shares. The Group then<br />
awards an equivalent number of match<strong>in</strong>g shares. These<br />
match<strong>in</strong>g shares vest three years after grant provided that<br />
the orig<strong>in</strong>al ‘bonus shares’ have been reta<strong>in</strong>ed for the<br />
three-year period and that the director has not resigned<br />
or been dismissed dur<strong>in</strong>g that period.<br />
Apart from these latter conditions no further performance<br />
conditions apply to the vest<strong>in</strong>g of the match<strong>in</strong>g shares. The<br />
Remuneration Committee considers that, as the level of the<br />
award is directly l<strong>in</strong>ked to the payment of the annual bonus<br />
(to which performance conditions do apply), there is no need<br />
for further performance conditions on the vest<strong>in</strong>g of the<br />
award. The Remuneration Committee also wishes to<br />
encourage directors to hold shares <strong>in</strong> the company they serve<br />
to further align the <strong>in</strong>terests of the directors with those of the<br />
shareholders <strong>in</strong> general. The necessity to hold the ‘bonus<br />
shares’ for a m<strong>in</strong>imum of a three-year period (dur<strong>in</strong>g which<br />
time the share price will be <strong>in</strong>fluenced by the performance<br />
of the Group) re<strong>in</strong>forces this commitment on the part<br />
of the director and is also consistent with the sharehold<strong>in</strong>g<br />
requirement described on page 55. In addition, the<br />
Remuneration Committee believes that the three-year period<br />
to vest<strong>in</strong>g of the ‘match<strong>in</strong>g shares’ supports, as far as is<br />
possible, the retention of key executives.<br />
(b) Share options<br />
Directors are able to participate <strong>in</strong> the UK Employee<br />
ShareSave Plan and the Netherlands Employee Option Plan,<br />
which are both All-Employee plans. The US-based director<br />
is able to participate <strong>in</strong> the North American Employee Stock<br />
Purchase Plan. These plans are referred to <strong>in</strong> note 29 on<br />
pages 103 to 111.<br />
In addition, directors participate <strong>in</strong> the Executive Option<br />
Plans, as described <strong>in</strong> note 29 on pages 103 and 106<br />
to 108.<br />
The Remuneration Committee has established benchmark<br />
grant levels, described as the ‘normal’ allocation, to assist<br />
each year <strong>in</strong> decid<strong>in</strong>g on actual grant levels under the<br />
Executive Option Plans. The Committee has reviewed these<br />
normal allocations <strong>in</strong> <strong>2002</strong> and has concluded that they are<br />
still <strong>in</strong> l<strong>in</strong>e with those awarded by other companies with<br />
which we compare ourselves.