Unilever wants seniors to invest bonus back in company, freezes pay again

Source :31 May 2010, 0238 hrs IST,Kala Vijayraghavan,ET Bureau



MUMBAI: Unilever, the global consumer goods giant, has frozen the base salaries for executive directors and senior management members for the second consecutive year even as it formalises a new plan that will allow managers to invest a chunk of their bonus in company’s stock.

Coined as the ‘Management Co-Investment Plan’, senior Unilever managers worldwide will have the opportunity to invest as much as 60% of their annual cash bonus in Unilever shares and receive a corresponding award of performance shares. The new plan replaces the existing Share Matching Plan and encourages managers to take a greater financial interest in the performance of the company and the value of Unilever shares over the long term.

From 2010, the bonus or the variable pay will be subject to a clawback arrangement in the event of a significant downward revision of results. In clawback, the previously given benefits are taken back due to specially arising circumstances.

The changes are being spearheaded by Paul Polman, who took over as the CEO in January 2009. Polman, the first outsider to become the CEO, was given the task to revive the fortunes of the Anglo-Dutch MNC. One of his first moves was to freeze salaries of senior managers—a decision the company management has extended for the second year.

The proposals, structured as part of Unilever’s `pay for performance’ mantra, have been outlined in the company’s 2010 annual general meeting notice, and are the outcome of a remuneration committee’s findings. The committee reviewed the share-based reward arrangements that apply to executive directors and other executives across Unilever subsidiaries.

With effect from 2010, the shareholding commitment is being increased from 150% to 400% base salary of the chief executive and from 150% to 300% base salary for other executive directors and members of the Unilever executive. Unilever will seek shareholder’s approval to ratify the changes.

A Unilever spokesperson said “The proposed new remuneration policy is aimed at supporting Unilever’s drive for profitable growth and a level of performance amongst the best of our peers. The wider share ownership, and the revised measures for Global Share Incentive Plan (GSIP), will encourage greater commitment, engagement and alignment with our shareholders”.

The performance shares will vest after three years, depending on Unilever’s performance, continued employment and maintenance of the underlying investment. The vesting of 40% of the shares under award has been based on Unilever’s relative total shareholder return (TSR) against a comparator group of 20 other companies.

Mr Polman also issued a warning over the risk of overheating in China and India. “Unilever’s focus of disproportionate attention is India. There is still much to do in India but we are confident we are doing the right things. Local, low cost competition has been winning share at our expense and recently, international branded players have rediscovered the opportunity for growth in India” he said in an analyst presentation post 2010 first quarter results..

Unilever is now upgrading 30% of its portfolio and rolling out the improved mixes faster to other markets, Mr Polman said. The CEO is keen that Hindustan Unilever delivers growth even as rival Procter & Gamble and Nestle step up focus on the fast-growing Indian market. HUL, which once commanded about half the market for many products, is fighting to protect turf from nimbler rivals such as Godrej Consumer and P&G.

Earlier in a chat with ET, Unilever Asia & Africa president Harish Manwani said: “We want to inculcate a performance culture where people should feel rewarded for the results, for what they produce and not for the way they talk or just on account of a good bureaucracy. We want to do away with that and now there is a lot of transparency around in terms of clarity.”