• Fixed elements – base salary and fixed allowance
• Linked to short-term performance – annual bonus
• Linked to long-term performance – MCIP and GSIP
The following section sets out Unilever’s 2013 remuneration policy which remains unchanged from previous years.
Element Purpose Operation Opportunity Performance Changes Supporting
and link to metrics made to information
strategy policy
Base salary Supports the Set by the Boards on the Unilever’s policy is n/a None For 2013, base salaries for
recruitment recommendation of the to set the reference Executive Directors are:
and retention of Executive Directors of the
Committee and generally reviewed once a year against three reference points:
point for all Executive Director salaries at around median • CEO – £1,010,000 • CFO – £714,000 calibre required to implement our strategy.
(i) peers in other global companies of a similar financial size (market capitalisation and turnover) and complexity to Unilever, taking into consideration factors such as the number of employees, human capital complexity and international nature of the business*;
against an appropriate peer group and then to set individual base salary levels at an appropriate level relative to that reference point by taking into consideration the individual’s skills, experience and
(ii) the individual’s performance.
skills, experience and
performance; and The Boards, on the proposal of the (iii) pay and conditions
across the wider
Committee, apply that approach to organisation.
Base salaries may be
manage the base salary levels of the Executive Directors. reviewed more often than
annually in exceptional circumstances. Base salary changes are usually effective from 1 January.
Fixed Provides a The fixed allowance is Unilever’s policy is n/a None For 2013, fixed allowances
allowance competitive reviewed periodically by to set the reference for Executive Directors are: alternative to
the provision of itemised
the Committee against market benchmarks based on other companies of a
point for fixed allowances at or below median against
• CEO – £250,000 • CFO – £300,000
benefits and similar size and complexity an appropriate peer For the CFO, this includes
pension. in line with the approach group and then housing allowance, which is
Simplifies the package. Delinks increases in benefits and allowances from increases in base salary. to base salary. Changes in the fixed allowance are usually effective from 1 January.
to make as few variations as possible based on individual circumstances. The Boards, on the proposal of the Committee, apply that approach to manage the fixed
being phased out to nil in 2015. At current rates the CFO’s fixed allowance will be reduced to £260,000 per annum in 2014 and to £220,000 per annum in 2015.
Paid in cash. allowances of the
Executive Directors.
Element Purpose Operation Opportunity Performance Changes Supporting
and link to metrics made to information
strategy policy
Other benefits Provides certain Provision of death, disability Social security n/a None For 2013, the accrual
plus pension benefits on a and medical insurance obligation in CEO’s for the CEO’s conditional
cost-effective cover and actual tax return country of residence supplemental pension
basis. preparation costs. dependent on will be capped at £117,123.
Unilever will also pay earnings in year. For details of benefits
the CEO’s social security Conditional provided during 2012 see
obligation in the CEO’s supplemental pension page 77.
country of residence to accrual capped from
protect him against the 2012 onwards at 12%
difference between the of the lower of actual
employee social security base salary or 2011
obligations in his country base salary (£920,000)
of residence versus the UK. plus 3% pa.
In line with the commitments made to the CEO upon recruitment, he also receives a conditional supplemental pension accrual to compensate him for the arrangement forfeited on leaving his previous employer. This supplemental pension accrual is conditional on the CEO remaining in employment with Unilever to age 60 and subsequently retiring from active service or his death or total disability prior to retirement.
Annual bonus The annual Unilever targets set Target bonus Annual bonus None For 2013 bonuses,
bonus has annually to ensure they opportunities (as awards are financial performance
been designed are appropriately stretching percentage of base based on: actual will be assessed against
to support for the delivery of threshold, salary) are: performance the following metrics:
our business strategy and the ongoing enhancement of shareholder value through a focus on the delivery of annual financial, strategic and operational objectives.
target and maximum performance. Payouts, determined by the Committee, depend on actual performance against targets, the quality of results and performance against personal performance goals. Annual bonuses may be subject to ‘clawback’ in the event of a significant downward revision of the financial results
• CEO – 120% • other Executive Directors – 100% Maximum bonus opportunities (as percentage of base salary) are: • CEO – 200% • other Executive Directors – 150% against Unilever targets, the quality of results and performance against personal performance goals. Performance metrics are selected to support the annual business strategy and the enhancement of shareholder value.
• underlying sales growth (1/3);
• underlying volume growth (1/3); and
• core operating margin improvement (1/3). In determining annual bonus awards the Committee also assesses the delivery against personal performance goals and the quality of performance; in terms of both business
of the Group. Unilever targets results and leadership,
Unless otherwise determined by the Committee, Executive Directors are required to invest at least 25% of their annual bonus into the MCIP (see page 66).
and personal performance goals for the Executive Directors are set by the Committee on an annual basis and may be changed as appropriate.
including corporate social responsibility and progress against the delivery of USLP goals.
DIRECTORS’ REMUNERATION REPORT continued
Element Purpose Operation Opportunity Performance Changes Supporting
and link to metrics made to information
strategy policy
Management The MCIP Executive Directors are Vesting of the The Committee None Performance metrics
Co-Investment encourages required to buy Unilever’s matching shares sets three-year for 2013 awards which
Plan (MCIP) senior shares out of their after-tax ranges between 0% performance are measured over the The key terms
of the MCIP were approved by shareholders at the 2010 AGM. management to shift their focus firmly towards the sustained delivery of high performance results over the longer term by requiring them to invest at least 25% of their annual bonus in Unilever’s shares and hold those shares for at least 3 years.
annual bonus. They must invest at least 25% and may invest up to 60% of the value of their gross annual bonus in Unilever’s shares (investment shares) and receive a corresponding number of performance- related shares (matching shares), which will vest only after three years subject to: • Unilever’s performance
against long-term MCIP targets over the next three years;
• continued employment; and
and 150% of the grant level, dependent on actual performance against long-term MCIP targets. As such, the maximum award of matching shares for the CEO and CFO (as a percentage of base salary), assuming a maximum bonus, maximum deferral under the MCIP and maximum performance under the MCIP, would be
targets for each MCIP matching share award and may change these for future awards as the Committee considers appropriate. Performance metrics are linked to Unilever’s clearly stated growth ambition and our long-term business strategy.
three-year period 2013-2015 are described under the GSIP on page 67.
The Committee considers that using the same performance metrics across both the MCIP and GSIP is appropriate, as the performance metrics used reflect our key strategic goals and maintain the alignment of our incentive plans to delivering our clearly stated growth ambition. Given that we use four different performance metrics, the Committee
These shares • maintenance of the 180% of base salary believes that the proportion
can earn underlying investment and 135% of base of remuneration linked to
additional shares. salary respectively. each performance condition
matching shares to the extent that long-term performance targets are met.
Awards under the MCIP may be subject to ‘clawback’ in the event of a significant downward revision of the financial results
is not excessive.
of the Group.
Awards under the MCIP are subject to ‘ultimate remedy’ whereby the Committee may adjust awards where the result is considered unfair.
Element Purpose Operation Opportunity Performance Changes Supporting
and link to metrics made to information
strategy policy
Global Share The GSIP Awards of shares are made Target awards of The Committee None Awards made in 2013
Incentive Plan incentivises annually with vesting conditional shares set three-year are subject to four equally
(GSIP) Executive conditional on Unilever’s under the GSIP each performance weighted long-term The key terms
of the GSIP were approved by shareholders at the 2007 AGM. Directors to achieve Unilever’s clearly stated growth ambition by delivering sustained high performance and sustainable returns for shareholders over the longer term.
performance against long-term targets over the next three years.
Awards under the GSIP may be subject to ‘clawback’ in the event of a significant downward revision of the financial results of the Group.
Awards under the GSIP are subject to ‘ultimate remedy’ whereby the Committee may adjust awards where the result is considered unfair.
year (as a percentage of base salary) are limited to: • CEO – 200% • other Executive
Directors – 178% The vesting range for awards of conditional shares is between 0% and 200% of the grant level. Accordingly the maximum award of shares under the GSIP are (as a percentage of base salary):
targets for each conditional GSIP award and may change these for future awards as the Committee considers appropriate. Performance metrics are linked to Unilever’s clearly stated growth ambition and its long-term business strategy.
performance metrics over the three-year period 2013-2015: • underlying sales growth; • core operating margin
improvement;
• cumulative operating cash flow; and
• relative total shareholder return.
For the three business focused metrics, 25% of awards vest for threshold performance and 200% for the GSIP (150% for the MCIP) • CEO – 400%
• other Executive
vest for maximum performance.
Directors – 356% Against the TSR comparator
group, comprising 19 other companies (20 including Unilever), 60% vests if Unilever is ranked 10th (which is 53rd percentile performance against this group), 100% vests if Unilever is ranked 7th and 200% for the GSIP (150% for the MCIP) vests if Unilever is ranked 3rd or above.
Further details of the TSR comparator group are set out on page 73.
When determining the level of vesting the Committee also considers the underlying performance of the business to ensure the payouts are appropriate.
DIRECTORS’ REMUNERATION REPORT continued