Corporate Governance of Unilever

Corporate Governance of Unilever

“I believe that nothing can be greater than a business, however small it may be, that is governed by conscience; and that nothing can be meaner or more petty than a business, however large, governed without honesty and without brotherhood.”

William Hesketh Lever

Transparency and accountability are the two basic tenets of Corporate Governance. Responsible corporate conduct is integral to the way Unilever do business. Its actions are governed by its values and principles, which are reinforced at all levels within the Company. Employees at Unilever are committed to doing things the right way which means taking business decisions and acting in a way that is ethical and is in compliance with the applicable legislation. Its Code of Business Principles is an extension of its values and reflects its continued commitment to ethical business practices and regulatory compliance. Unilever acknowledge its employees individual and collective responsibilities to manage their business activities with integrity.

To succeed, Unilever’s employees believe, requires highest standards of corporate behavior towards everyone they work with, the communities they touch and the environment on which they have an impact. This is their way to sustainable, profitable growth and creating long term value for its shareholders, its people and its business partners. The Board of Directors (‘the Board’) of Company is responsible for and committed to sound principles of Corporate

Governance in the Company. The Board plays a crucial role in overseeing how the management serves the short and long term interests of shareholders and other stakeholders. This belief is reflected in Unilever’s governance practices, under which we strive to maintain an effective, informed and independent Board. Unilever keeps its governance practices under continuous review and benchmark itself to the best practices across the globe.

Employee Involvement:

Unilever’s people share the Company’s passion towards sustainable development which is encouraged by volunteer programs. Employees contribute to various organizations throughout the year in the form of monetary support and skill development. Contributions through the payroll program for Aga Khan University Hospital, The Citizens Foundation and UN World Food Program resulted in a collection of over Rs. 2 million. Employees also participated in an internal campaign called ‘Red Balloon Day’ to support child health care programs run by Save the Children and raised Rs. 300,000 in a day. Additionally its employees also spent time with TCF students to educate them about hand washing on ‘Global Hand washing Day’ and other TCF volunteer programs. Over 400 employees participated in one or more activities during the year.

Code of Corporate Governance

The management of the Company is committed to good corporate governance and complying with the best practices. As required under the Code of Corporate Governance, the Directors are pleased to state as follows:

·         The financial statement speared by the management of the Company present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

·         Proper books of account of the listed Company have been maintained.

·         Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.

·         International Financial Reporting Standards have been followed in preparation of financial statements and any departure there from has been adequately disclosed.

·         The system of internal control is sound in design and has been effectively implemented and monitored. The Audit Committee includes two non-executive directors including the chairman of the committee.

·         There are no significant doubts upon the Company's ability to continue as a going concern.

·         There has been no departure from the best practices of corporate governance, as detailed in the listing regulations.

·         Statements regarding the following are included in this annual report:

·         Number of Board meetings held and attendance by directors.

·         Key financial data for the last six years.

·         Pattern of shareholding.

Subsidiary Companies and Consolidated Financial Statements

The financial statements of the under-mentioned subsidiaries of Unilever Pakistan Limited are included in the consolidated financial statements. None had any significant or material business transactions during the year.

·         Lever Chemicals (Private) Limited

·         Levers Associated Pakistan Trust (Private) Limited

·         Sadiq (Private) Limited

Holding Company

Through its wholly owned subsidiary, Unilever Overseas Holdings Limited (UOHL), UK, Unilever PLC, a company incorporated in the United Kingdom, is the holding company, owning 75.07% of the shares in Unilever Pakistan Limited.

Auditors

The Auditors, Messrs A. F. Ferguson & Co., Chartered Accountants, retire at the conclusion of the Annual General Meeting. Being eligible, they have offered themselves for re-appointment.

General Meeting of Shareholders

The Annual General Meeting of Shareholders (AGMS) is the Company’s highest governance body. It has the authority to appoint and terminate the Commissioners and Directors, and decides on other critical matters pertaining to the Company’s business and operations including the amount of the Directors’ and Commissioners’ remuneration, the payment of dividends and distribution of profits, the approval of the Annual Report, the appointment of the independent auditor, amendments to the Articles of Association, and the delegation of authority to the Boards to follow up matters discussed and agreed at the AGMS. 

Unilever’s most recent AGMS was held on 29 May 2012. The AGMS ratified the audited financial statements and approved the Annual Report for 2011; approved the payment of the final and interim dividends for 2011; approved changes in the composition of the Board of Commissioners and Board of Directors; authorized the President Commissioner to determine the remuneration for the members of the Board of Commissioners and Board of Directors for the year 2012; authorized the  Board of Commissioners to designate a registered form of accountants to audit the Company’s financial statements for the year ending 31 December 2012. 

Board of Directors

BoD is responsible for the management and setting the strategic direction of Unilever, and for managing, utilizing and maintaining the Company’s assets in a manner consistent with the Company’s objectives. The BoD is also authorized to represent the Company on any matter, including in a Court of Justice; to bind the Company to other parties and other parties to the Company; and to perform any and all actions, pertaining both to management as well as other affairs, within the boundaries set by the Articles of Association. 

Audit Committee

Unilever’s Audit Committee supports the oversight function of the BoC by reviewing and providing assurance on the integrity of Unilever Pakistan’s financial statements; risk management and internal control; compliance with legal and regulatory requirements; the external auditor’s performance, qualifications and independence; and the implementation of the internal audit function. The Audit Committee coordinates closely with the Internal Audit Unit and the External Auditor. 

The responsibilities of the Audit Committee are articulated in the Audit Committee Charter, and include the following:

·         Reviewing the financial information that the Company intends to disclose;

·         Reviewing the Company’s compliance with capital market laws and other relevant regulations;

·         Reviewing and evaluating the audits performed by the internal audit;

·         Reviewing the Company’s risk exposure and the implementation of risk management and internal control arrangements by the BoD;

·         Reviewing and reporting to the BoC any complaints about the Company;

·         Overseeing relations with the external auditors and consulting regularly with them during the course of the audit; 

·         Reviewing and updating the Audit Committee Charter when necessary. 

Corporate Secretary & Investor Relations

The Corporate Secretary is the principal liaison between Unilever and its shareholders, the capital market authorities, investors, analysts and the public, and has a central role in ensuring transparency in the Company’s disclosures and communications, both internal and external. The Corporate Secretary’s responsibilities include: 

·         Monitoring the Company’s compliance with the Company Law and other relevant laws and provisions, the Articles of Association, and capital market rules and related statutory regulations, in close coordination with the Corporate Legal Services Department;

·         Maintaining regular communications with the capital market regulatory agencies,  on all matters pertaining to governance, corporate actions and material transactions;

·         Ensuring that shareholders, the media, investors, analysts and the general public are kept regularly informed about the Company’s actions, financial position and other material matters;

·         Attending all Board meetings and recording the minutes of the meetings;

·         Ensuring that the Boards are kept up-to-date with any relevant regulatory changes and understand their implications. 

Delisting

The majority shareholder of the Company, Unilever Overseas Holdings Limited (UOHL) made an announcement on November 28, 2012 of its intention to acquire all of the ordinary shares held by the other shareholders of the Company at a proposed share price of Rs 9,700 per ordinary share, and to seek the delisting of the shares of the Company from the stock exchanges in

Pakistan, in accordance with the voluntary delisting provisions of the Listing Regulations. Consequently, the Board of Directors of the Company at their meeting held on December 3, 2012 considered and resolved to accept the proposal made by the majority shareholder.

Thereafter the Company submitted the formal application for delisting and the required information to the stock exchanges vide its letter dated January 24, 2013 and February 13, 2013. The said delisting application is currently under consideration with the Karachi, Lahore and Islamabad Stock Exchanges.

Business Risk and Future Outlook

Profitable, consistent and competitive growth requires reshaping the business. Addition of new categories and brands will entail a period of sustained investment with consequent impact on profit. Growth of both, new and existing categories is impacted by inflationary pressure, economic and political uncertainty, power shortages and volatile law and order conditions. The highly competitive nature of the Fast Moving Consumer Goods (FMCG) business will require higher advertising spends than hitherto. Counterfeiting remains a challenge as brands become more popular. Evasion of taxes in tea, which represents a third of our business, remains an issue particularly with the increase in sales tax in February 2013.

Faced with these challenges, we continue to focus on our agenda of strengthening our market leadership through continuous innovations, increased consumer focus, deepening the distribution and a strong performance culture within the organization. Our people remain crucial for the continued growth of the business.

Its because of Unilever’s Corporate Governance that make it compete in the market with unique strategies and policies. It CG help it maintain its customers loyalty, brand name, employees satisfaction and to maintain its competitive position in the market.