LONDON (Reuters) - Unilever Plc’s (ULVR.L) shareholders approved a new executive pay policy on Wednesday, but the Anglo-Dutch consumer goods group faced a bruising backlash at what is expected to be its last annual general meeting in London.
Some 35.8 percent of shareholders opposed Unilever’s move to a consolidated “fixed pay” structure, in a blow to a company already facing big questions over its decision to consolidate its headquarters in the Netherlands.
Shareholders in Unilever NV UNc.AS are also due to vote on the pay proposal at Thursday’s Dutch annual general meeting.
“We recognise that some investors and proxy voting agencies are concerned about how some of these changes will work in practice,” Chairman Marijn Dekkers said in central London.
Influential shareholder advisory firm Institutional Shareholder Services (ISS) had advised shareholders to vote against the policy, expressing concern about increases in fixed pay and size of potential bonuses.
Steve Clayton, a portfolio manager at Hargreaves Lansdown, said his firm approved Unilever’s remuneration plans, but he could see why others rejected it.
“In an ideal world they’d pay less ... but Unilever has to compete,” he said. “We felt it wasn’t completely out of step.”
Dekkers said extra safeguards had been put in place to ensure that incentive payments are fully justified, while the management co-investment plan for the next three years will be capped at 150 percent.
“In the months ahead we will consult further with our shareholders,” Dekkers said.
Several shareholders expressed concern at the London meeting that they would be unable to participate at next year’s AGM, which is expected to take place in the Netherlands.
Dekkers defended the move, saying it had nothing to do with protectionism or Dutch takeover rules, as some have speculated.
The decision to collapse Unilever’s dual-headed structure was aimed at strategic flexibility, and the Netherlands was a natural choice given the Dutch company accounts for 55 percent of the group and the Dutch shares are more liquid, he said.
If the maker of Dove soap and Ben & Jerry’s ice cream had a protective mindset, it would not cancel Dutch preference shares that allow certain shareholders a greater voice than others.
“That is an illustration of the fact that we are not chasing protectionism,” Dekkers said.
Memos released last month by the Dutch government showed that the scrapping of a Dutch tax on dividends was “decisive” in the choice.
Dekkers said the 88-year-old dual-headed structure was now a hindrance in a fast-changing retail and consumer environment.
When asked about the latest potential change to the British retail landscape - Sainsbury’s (SBRY.L) plan to combine with Asda and cut some prices by 10 percent - Chief Executive Paul Polman sought to ease concerns.
“I never heard a retailer say publicly that they are going to increase prices. Retailers seek to appeal to consumers by saying ‘I fight for you to lower prices’,” Polman said.
Unilever products would continue to be “available at good value”, he added.
Britain will remain “very, very important” to Unilever, Chairman Dekkers said, noting that it will have two of its business units based in London and will continue to spend 1 billion pounds ($1.4 billion) a year in resources in the country.
Shareholders are expected to vote on the Netherlands move around the end of the third quarter, with it expected to happen towards the end of the year. The company is in talks to see if it can remain a component of London’s FTSE 100 index, and is gearing up for meetings with FTSE Russell which decides on inclusion.
Unilever shares fell 1.5 percent in London and 2.3 percent in Amsterdam.
Reporting by Martinne Geller; Editing by Adrian Croft/Mark Potter/Alexander Smith