Unilever draws up new metrics to reward directors

Girding up to fight growth pressures globally, Unilever is doubling down on performance-led pay cheques for its directors across the globe after its shareholders flagged excessive pay amid fears of uncertain business environments and intense competition this year. The Anglo-Dutch consumer giant has implemented a new reward framework across markets including India with metrics more closely aligned to value creation. A new directors' remuneration policy has replaced operating margin to absolute profitability as a performance measure after shareholders voted against a proposed 20% pay increase for CEO Hein Schumacher.

Unilever's new growth plan is to do fewer things better, and with greater impact. In India, HUL sold off its water purification business as part of this focus.


In 2023, a bonus outcome of 150% of target opportunity was determined for the executive directors at Unilever which was reduced to 115% of target.

"The committee considered numerous data points when assessing our competitiveness performance and concluded that we are not winning sufficient market share in a number of key markets. The committee also concluded that our share price performance was below expectations," Unilever said in its 2023 annual report, adding that it will cascade the same approach for remuneration across its 15,000 managers worldwide.

In addition, performance measures for 2024 have been updated to replace underlying operating margin (UOM) with underlying operating profit growth.

An HUL spokesperson said it is aligned with Unilever's reward philosophy and provides a market-competitive total reward opportunity that has a strong linkage to the company's performance culture. "The intent of these policies is to ensure that the principles of the reward philosophy are followed in its entirety. The ultimate objective is to gain a competitive advantage by creating a reward proposition that inspires employees to deliver the company's promise to consumers and achieve value for our shareholders," the spokesperson added.

Last fiscal, HUL's sales expanded 2%, while net profit grew less than 2%. That's a steep decline from FY23, when revenues had risen 16% and net profit increased 13%. The fall in sales and profit growth reflected in remuneration too. During FY24, the percentage increase in the median remuneration of managers at HUL was 7.8%, down from 10.73% in FY23.

In FY24, MD Rohit Jawa's salary grew 4%, while Madhusudhan Rao, executive director for beauty and personal care, saw a 6% reduction in his remuneration. Other executive directors like Dev Bajpai, head of legal saw a 10% hike while remuneration of HR head Anuradha Razdan and chief financial officer Ritesh Tiwari Dev increased 11% each.

India's price-sensitive consumer industry has faced a demand crunch after companies raised sticker prices by almost a quarter in the past two years to offset the impact of input costs. These had first climbed in the immediate aftermath of global supply chain disruptions spawned by mobility and business curbs deployed to contain the spread of the coronavirus.

Subsequently, record low policy rates in the world's richest countries and the Ukraine conflict caused commodity prices to spike. In the past few quarters, companies have been slashing prices amid visible consumer preference for cheaper products, but the strategy hasn't helped boost volumes just yet. HUL's performance has been below street expectation with its 11th consecutive quarter of mid-to-low single-digit volume growth.

HUL accounts for more than 12% of Unilever's global sales and its second biggest market after the US in terms of revenue. The maker of Rin detergent is also the market leader in most segments it operates in India with nearly 75% of its portfolio either gaining or retaining shares.