04/09/2003 : Unilever largely endorses the principles of the draft code for corporate governance that was presented by the Tabaksblat Committee.
It is of great importance that the Netherlands has a corporate governance code that conforms to high standards. The code is expected to make an important contribution to the confidence that shareholders and other stakeholders have in the functioning and management of Dutch publicly listed companies. Unilever will be able to comply with the code to a substantial extent. However, the company does have some critical comments to make about the draft code. These relate in particular to some proposals that deviate from customary international practice and to the level of detail throughout the code.
"We have noted with approval the fact that the Tabaksblat Committee has set itself high standards", said Unilever chairman Antony Burgmans. "It can undoubtedly be described as an historic document, and one that is of great importance for Dutch industry. We subscribe to the ‘comply or explain’ rule, and we also consider it a good thing that supervision of compliance with the code is in the hands of shareholders. However, we do feel that the draft code is generally too much ‘rule-based’, too little ‘principle-based’ and goes into too much detail. Some provisions are excessively tailored to the Dutch situation. This is an impediment to Dutch multinationals like Unilever."
The present set-up will lead to an unnecessarily large number of cases in which companies will have to explain why they depart from the provisions included in the code, yet without one being able to conclude from this that their corporate governance is inadequate. Foreign investors will principally judge a company’s corporate governance by reading its annual report, and may possibly not be aware of the existence of the Dutch code. If an explanation has to be given regularly in that annual report as to why the company does not comply with the specific provisions of the Dutch code, then an impression of a defective corporate governance structure will be wrongly created.
Unilever advocates the view that companies should decide together with their shareholders on which corporate governance structure suits the company best. In this way much more justice can be done to the structure that is applied in, say, big multinational companies like Unilever. Nor should the company have any duty of public justification in cases where one or more departures from the code have been accepted by its shareholders. Also, having to depart from the code in an unnecessarily large number of cases could be countered by including a provision in the code to the effect that the explanation of departures from the code is in itself a form of compliance.
Unilever has concrete objections to specific principles and provisions which will lead to problems in recruiting and retaining Dutch and foreign executive directors and supervisory or non-executive directors. This relates, for instance, to the regulation that makes it obligatory for them to invest solely in listed investment funds or via discretionary management of their securities. It should be sufficient if the company encouraged directors to place their securities under discretionary management and also facilitated this, for example by bearing the costs.
Unilever also feels that the provision to the effect that variable pay should be limited to 50% of the remuneration is undesirable and an example of unnecessary detail. The ratio between the fixed and variable remuneration components forms part of the remuneration policy that is submitted to shareholders and this should suffice. Both good and not so good performances should be clearly reflected in the variable pay component.
The number of supervisory or non-executive directorships that may be held by one person is in Unilever’s view another example of an overly specific quantification. The company subscribes to the principle that executive and supervisory or non-executive directors should continuously assure themselves that they are capable of fulfilling their duties properly. The limit of five supervisory or non-executive directorships that is currently proposed does not offer any guarantee that this principle will be implemented. The own sense of responsibility of the relevant persons, the company and its shareholders should take precedence.
Unilever hopes that its response to the draft code of the Tabaksblat Committee will contribute to the establishment of a code that provides safeguards for high-quality corporate governance in the Netherlands. Unilever’s complete response can be found on its website: www.unilever.com.
Unilever response - PDF
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