Paul Polman, chief executive officer of Unilever NV, poses for a photograph with a selection of Unilever products at their headquarters in London, U.K., on Wednesday, Aug. 24, 2016. Unilever manufactures branded and packaged consumer goods, including food, detergents, fragrances, home, and personal care products. Photographer: Simon Dawson/Bloomberg
Analysts said Paul Polman and other executives could have been in line for higher payout had the Kraft Heinz bid succeeded © Bloomberg

The chief executive of Unilever received a 39 per cent pay rise last year, boosted in part by a stronger share price after the aborted $143bn bid last year by Kraft Heinz, the US food group.

Paul Polman’s total salary of €11.7m in 2017 was up from €8.4m the year before, according to the Anglo-Dutch group’s annual report published on Wednesday. It was the highest amount paid to the chief executive since he assumed the role nine years ago.

The pay increase was mainly because of an increase in the value of two long-term incentive plans, linked to performance measures. The targets include underlying sales growth, total shareholder return and operating profit margins, as well as progress in achieving the group’s environmental targets.

Unilever’s share price was boosted for most of last year by a series of investor promises after the Kraft Heinz bid, including a commitment to raise operating profit margins and a €5bn share buyback. The shares have weakened in recent months on concerns about unfavourable currency movements.

Mr Polman and senior managers could have been in line for a far more substantial payout had Kraft Heinz, which made an initial offer of $50 a share, succeeded in taking over the company, according to analysts.

Graeme Pitkethly, director of finance, also had his pay packet increase — by 50 per cent — to €3.1m.

Mr Polman’s base salary will increase for the first time since 2013 by 5 per cent to €1.8m. His salary is set in sterling but paid in euros and took a hit this year from a more unfavourable exchange rate. His annual bonus was similar to last year’s figure at €2.3m.

The consumer products group has overhauled its pay structure and requires Mr Polman and other senior executives to invest their annual bonus in Unilever shares in order to maintain their rate of pay.

“This further strengthens long-term executive commitment and continues to drive our executives to apply an owner’s mindset in everything they do,” according to the remuneration committee.

The programme to incentivise managers with shares is aimed at generating a more entrepreneurial culture within one of the world’s largest multinationals.

This is similar to the meritocratic ownership culture that has proved so successful to the investments of 3G Capital, the private equity group which, with Warren Buffett’s Berkshire Hathaway investment group, holds a majority stake in Kraft Heinz.

Unilever is in the process of simplifying its pay structure for senior managers by aiming to scrap one of the long-term incentive schemes next year.

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