Unilever weighs executive pay revamp after £115bn Kraft Heinz offer

Unilever (NYSE: UL - news) is weighing a radical overhaul of the way it pays its top executives in the wake of a takeover approach by Kraft Heinz (Swiss: KHC.SW - news) that has triggered a review of the Marmite and Pot Noodle owner's business.

Sky News has learnt that Unilever, the FTSE-100 consumer goods behemoth, has been consulting on a revised remuneration policy that would have seen the maximum sum payable to Paul Polman, chief executive, slashed by more than £1m.

Investors said that Unilever had been close to finalising a new executive reward structure when Kraft Heinz's approach was made earlier this month, but that the tight timetable for publishing its annual report meant the pay revamp was now unlikely to take place this year.

Further discussions are said to have taken place in the last 48 hours, but the Anglo-Dutch company, whose empire includes Lynx deodorant and Magnum (BSE: MAGNUML.BO - news) ice cream, may now be forced to put its pay policy to a binding shareholder vote both this year and next.

Unilever rebuffed an initial offer from Kraft Heinz that would have represented the largest ever takeover of a British company, with management, investors and the Government strongly opposing it.

The US food group's interest has, however, sparked a wider debate about the efficiency with which Mr Polman is running Unilever, prompting it to announce this week that it is "conducting a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders".

This review, which will be completed within six weeks, is expected to lead to asset sales, cost-cutting initiatives and potentially more radical corporate activity.

Some investors are said to have expressed dissatisfaction with the proposals originally tabled by Unilever's remuneration committee chair, leading to a revised framework to be drawn up in recent weeks.

One shareholder briefed on the plans said the company was proposing to increase the maximum annual bonus award for executive directors from 200% of salary to 225%.

However, it was also planning to consolidate two long-term share incentive plans into a single scheme, a move that would reduce the maximum payout from 580% of salary to 450%.

Under the new structure, Mr Polman would have to invest all of his post-tax bonus in Unilever shares in order to qualify for the maximum payout, reflecting a move by listed companies to oblige executives to increase their shareholdings.

Mr Polman earned basic pay in 2015 of almost £1.4m, with his total package worth £10.4m.

Unilever's annual report for 2016 is expected to be published next week, and is likely to allude to its plans for the eventual overhaul of its executive pay structure.

Unilever declined to comment, although an insider said on Friday that "for executive directors the current structure of the package, including short and long-term incentive opportunities, will remain unchanged in 2017".