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Introduction to HUL
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company, touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal Care Products and Foods & Beverages. The companys Turnover is Rs. 17,523 crores (for the financial year 2009 - 2010) HUL is a subsidiary of Unilever; one of the worlds leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about 40 billion in 2009 Unilever has about 52% shareholding in HUL. Hindustan Unilever was recently rated among the top four companies globally in the list of Global Top Companies for Leaders by a study sponsored by Hewitt Associates, in partnership with Fortune magazine and the RBL Group. The company was ranked number one in the Asia-Pacific region and in India. The mission that inspires HUL's more than 15,000 employees, including over 1,400 managers, is to help people feel good, look good and get more out of life with brands and services that are good for them and good for others. It is a mission HUL shares with its parent company, Unilever, which holds about 52 % of the equity. The Quarterly result of the company is reflected in balance sheet of March 2010 given below

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COMPANY STRUCTURE OF HUL

Board of Directors The Board of Directors as repositories of the corporate powers act as a guardian to the Company as also the protectors of shareholders interest. Management Committee The day-to-day management of affairs of the Company is vested with the Management Committee which is subjected to the overall superintendence and control of the Board. The Independent Directors are paid sitting fees of Rs. 20,000/- for attending every meeting of the Board or Committee thereof and commission on profits at the rate of Rs. 5 lakhs for each year, in terms of the approval of the shareholders at the Annual General Meeting of the Company. It is proposed to seek approval of the shareholders for renewal of the above resolution for further period of 5 years and enhancing the overall limits of remuneration payable to the Non-Executive Directors. The Non-Executive Directors, who continuously serve minimum three terms of three years each, are also entitled for a cash retirement commission of Rs. 10 lakhs at the time of retirement. The Board of Directors of HUL The Board of Directors of the Company represents an optimum mix of professionalism, knowledge and experience. The total strength of the Board of Directors of the Company is Ten Directors comprising Non-Executive Chairman, four Executive Directors and five Non-Executive Independent Directors.
NAME Mr. Harish Manwani Mr. Nitin Paranjpe Mr. R. Sridhar Mr. Gopal Vittal Mr Pradeep Banerjee Mr. D. S. Parekh Mr. A. Narayan Mr. S. Ramado rai Dr. R. A. Mashelkar 3 | Page DESIGNATION Chairman CEO and Managing Director Chief Financial Officer Executive Director, Home & Personal Care Executive Director, Supply Chain Independent Director Independent Director Independent Director Independent Director

Audit Committee The Audit Committee of the Company is entrusted with the responsibility to supervise the Companys internal control and financial reporting process. The Audit Committee also looks into controls and security of the Companys critical IT applications. Constitution of the Audit Committee NAME
Mr. D. S. Parekh Mr. A. Narayan Mr. S. Ramadorai

DESIGNATION
Independent Director Independent Director Independent Director

Remuneration Committee The Remuneration Committee is vested with all the necessary powers and authority to ensure appropriate disclosure on the remuneration of whole-time Directors and to deal with all the elements of remuneration package of all such Directors within the limits approved by the members of the Company. The Compensation Committee administers the stock option plan of the Company. Constitution of the Remuneration & Compensation Committee NAME DESIGNATION
Mr. A. Narayan Mr. S. Ramadorai Dr. R. A. Mashelkar Independent Director Independent Director Independent Director

Shareholder and Investor Grievances Committee The Committee specifically looks into redressing of investors complaints with respect to transfer of shares, non-receipt of shares, and non-receipt of declared dividends and ensures expeditious share transfer process. The Committee also monitors and reviews the performance and service standards of the Registrar and Share Transfer Agents of the Company and provides continuous guidance to improve the service levels for investors. Constitution of the Shareholder and Investor Grievances Committee NAME DESIGNATION
Mr. Nitin Paranjpe Mr. A. Narayan Mr. R. Sridhar 4 | Page CEO and Managing Director Independent Director Chief Financial Officer

Corporate Governance Rating Parameters (GMI Ratings)

This project analyses the corporate governance practices of Hindustan Unilever Limited (HUL). The models offered by GMI Ratings followed here. Since the intricacies of the actual factor weightage and importance were not explicitly mentioned so we have attributed certain values as per our judgment and assumptions. The company is rated based on the following parameters:A) Board Accountability B) Financial Disclosure & Internal Controls C) Corporate Behavior D) Market for Control & Shareholder Rights E) Remuneration

A) Board Accountability
PARAMETER
Combined Chair/CEO Has a designated lead or senior non-executive director 2/2 Yes Non-executive Chair Non-executive Chair is independent Directors subject to annual election by all shareholders 2/2 Yes Uses, or has adopted, some form of majority voting in the election of directors. Discloses corporate governance policies or guidelines 2/2 Yes All directors attended at least 75% of the board meetings and committee meetings in the last fiscal year. The company discloses an over-boarding policy limiting the number of directorship held by non-executive directors. 2/2 Yes 0/1 No 2/2 Yes 2/2 Yes 0/2 No

MARKS REASONS
5/5 No Non-executive Chairman

The company discloses an over-boarding policy limiting the number of directorship held by executive directors.

0/1 No

Non-executive directors have a formal session without the executive members at least once a year

0/1 No

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Board policy is for the non-executive directors to meet in executive session before or after every board meeting, time permitting. At least one director serves on the boards of four or more public companies Executive Chairman, Chief Executive Officer or Managing Director (as applicable) serves on the boards of three or more public companies. Related-party transactions involving officers or directors in the past three years. Related-party transactions involving the Chairman, CEO, President, COO or CFO or a relative thereof, or the controlling shareholder, if any, within the last three years. Discloses a code of ethics for senior executives or the employee code of ethics also covers senior executives All non-executive directors own shares after excluding options held. All executive directors own shares after excluding options held. Within the last three years, company has failed to adopt the specific recommendations (or a comparable alternative) of a shareholder proposal approved by a majority vote.

0/1 No

2/4 Yes 2/2 No

1/1 No 1/1 No

5/5 Yes 0/1 No 0/1 No 2/2 No

Overall Rating B) Financial Disclosure & Internal Controls

PARAMETER MARKS REASONS
Audit committee wholly composed of independent members. 5/5 Yes At least one member of the audit committee serves on the 2/2 Yes. boards of four or more public companies. At least one non-executive member of the audit committee has expertise in accounting or financial management. 3/3 Yes.

7.5

Mr. D.S. Parekh 11 Mr. S. Ramadorai 12 Dr. R. A. Mashelkar 6 Chairman of the Committee, Mr. D. S. Parekh, is the financial expert for the Committee.

Non-executive members of the audit committee with expertise in accounting or financial management form a majority of the committee. Chair of the audit committee is non-executive and has expertise in accounting or financial management.

1/2 No

3/3 Yes. Chairman of the Committee, D. S. Parekh, is financial expert for Committee.

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At least one non-executive member of the audit committee has substantial industry knowledge Non-executive members of the audit committee with substantial industry knowledge form a majority of the committee Chair of the audit committee is non-executive and has substantial industry knowledge. Currently under formal investigation for accounting Irregularities. Had a material earnings restatement in the past three years (greater than five percent of net income or $25M, whichever is less) Has taken two or more unusual and non-recurring charges (representing five percent or more of revenue, five percent or more of shareholders equity (net assets) or more than $500M in total) within the last three years. Someone other than senior management (such as the audit committee, shareholders or the board) has sole authority to hire and fire the companys outside auditor.

1/3 No 0/1 No

0/1 No 3/3 No 2/2 No

2/2 No

5/5 Yes

3/3 Yes. This rests on Risk Assessment, Operational Controls Assessment and Policy Compliance at all levels. Financial & nonfinancial controls review procedures and Guidelines are issued annually by Corporate Risk Management department in line with Sarbanes-Oxley (s. 404) requirements. 3/3 Yes 0/1 No. Unit heads are responsible for implementing these Operational Control Assurance procedures to confrm effectiveness of the financial and non-financial controls in that unit and to correct any instances of weaknesses identified. 0/1 No

Makes comprehensive disclosures on its enterprise risk management policies (ERM) in its annual report or in other publicly available sources.

The board has adopted a separate committee or subcommittee responsible for oversight of risk management.

At least one non-executive member of the risk committee or the board has expertise in risk management.

At least one non-executive member of the risk committee has substantial industry knowledge

Overall Rating
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8.25

C) Corporate Behavior
PARAMETER
Company/Current/Former senior executive) has been cited, settled, or been found guilty of by either national or supranational authorities for some breach of law involving non-accounting issues within the last year. Has been charged with three or more serious workplace safety violations within the last two years Alleged by a responsible party that the company used sweat shops as sub-contractors within last three years.

MARKS REASONS
No The Company is involved in certain legal cases

(1/4) (3/4) No (2/4) No

Has a policy addressing workplace safety or is mentioned in the annual report

(3/4)

Alleged by a responsible party that the company used child Labor for any means (under 14 or the minimum in market, whichever is higher) within last 3 years.

(3/4)

Discloses its environmental policies

(5/5)

Any charges for employee & companys interest conflicts & legal cases Discloses its policy regarding corporate level political donations. Company (or a current or former senior executive) has been subject to formal investigation for material issue other than accounting irregularities within last year. Company (or a current or former senior executive) has pending criminal litigation against it, has been found guilty within the last 3 years, or has pled the equivalent of no contest in such litigation in the past three years, or has been under criminal investigation within the last 3 years.

NO (3/4)

Yes. The Company is a signatory to the United Nations Global Compact Programme and is fully committed to the principles of the UN Global Compact. No. The Company is a signatory to the United Nations Global Compact Programme. Yes. United Nations Global Compact Programme covers environmental policies of the company. No. Whistle Blower Policy is to provide appropriate avenues to the employees to bring to the attention of the Management any issue which is perceived to be in violation or in conflict with the fundamental business principles of the Company.

(1/4) No No (4/4)

No (3/3)

Overall Rating

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D) Market for Control & Shareholder Rights

PARAMETER MARKS REASONS
Unilever and its associates have 52.02% of the shares of company this shows that market for control for other stake holders is less. Therefore control with other stake holders is less when it comes to strategic decision. The Company regularly interacts with shareholders through multiple channels of communication such as result announcement, annual report, media releases, and Companys website. The quarterly, half-yearly and annual results of the Company's performance are published in leading newspapers such as Times of India and Hindu Business Line. These results are also made available on the website of the Company. HUL has a Share Transfer Transmission Committee to look into share transfer and related applications received from shareholders, with a view to ease and quicken the transfer procedures. HUL has taken this unique initiative of Alternative Dispute Redressal meetings wherein aggrieved investors come face to face and get a chance to settle their dispute. During the financial year ended 31st March, 2010, 73 complaints were received from the shareholders. All the complaints have been redressed to satisfaction of shareholders / investors and none of them were pending as on 31st March, 2010.

Market For Control

4.75/10

Communication to Shareholders

8/10

Ease of transfer of shares 7.5/10

Query Redressal

8.5/10

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Enforcement of Code of conduct for employees

7.5/10

To avoid the misuse of rights by employees and other stakeholders and maintain discipline. HUL has implemented The Code of Business Principles which is the Company's statement of values and represents the standard of conduct which all the employees are expected to meet in their business endeavors. It forms the benchmark against which the world at large is invited to judge the Company's activities. The Code reflects HUL commitment to principles, integrity, transparency and fairness.

Confidential voting with no or reasonable exceptions

7/10

Overall Rating E) Remuneration

PARAMETER
Remuneration committee wholly composed of independent members. Discloses specific numeric performance targets for the upcoming fiscal year for at least one of the performance objectives (not just a target award percentage of salary) Discloses a policy requiring company executives to retain some or all of the shares acquired through stock options for a period of time after the options have been exercised The retention period for some or all shares issued upon

6.5

MARKS REASONS 4/4 0/1 YES NO YES NO 0/2 NO YES Bonus/reward philosophy of the Company is to pay market competitive reward with a strong linkage to performance. Remuneration Committee

2/2

exercise of stock options is 3 years or longer 0/2

Some or all shares issued upon exercise of stock options are required to be held until retirement.

Discloses a policy requiring company executives to retain some or all of restricted shares for some time after they have completed their performance conditions.

2/2

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ensures the effective recognition of performance & encourages a focus on achieving superior operational results.
The retention period for some or all restricted shares that

have met all performance conditions is 3 years or longer 0/1

Some or all restricted shares that have met all performance

NO YES The remuneration payable to Non-Executive Directors is decided by the Board of Directors subject to the overall approval of shareholders of the Company. YES Remuneration Committee deals with all elements of remuneration package of all the Executive Directors i.e. salary, benefits, bonuses, stock options, pension etc. including details of fixed component and performance linked incentives, along with the performance criteria.

conditions are required to be held until retirement 0/1 NO

Shareholders have the ability to affect remuneration policy through shareholder approval of the remuneration committee report, the proxy's Compensation Discussion and Analysis section or something comparable ("Say on Pay").

4/4

The remuneration committee has discretion to alter the criteria and/or incentive targets for management after being established or has power to grant incentives or bonuses on a discretionary basis.

3/3

Claw back policy for any bonuses, options and/or other compensation based on accounts that end up being restated at a later date (beyond Sarbanes-Oxley Act requirements).

0/1 NO

Discloses stock ownership guidelines for the CEO. 1/1 YES

Discloses stock ownership guidelines for the rest of senior management. Discloses stock ownership guidelines for non-executive directors Percent potential dilution as a result of stock options outstanding. Percent potential dilution as a result of stock options outstanding, plus stock options approved for grant but not yet granted.

1/1 YES 1/1 NO 1/2 14% 1/2 13%

Overall Rating

6.4

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CONCLUSION GMI RATINGS:

HUL is a global corporate governance research and risk rating firms. GMI believes that corporate governance is a road to sustainable, profitable growth and creating long term value for shareholders and business partners. The founder of unilever William Hesketh Lever quoted " I believe that nothing can be greater than a business, however small itrating Criteria Weight age Individual Weighted may be, that is governed by conscience; and that nothing can be meaner or more petty than a business, ratings however large, governed without honesty and without brotherhood. We have taken six Board Accountability 24.5% 7.5 1.83 parameters of GMI ratings in our report .i.e. Board Accountability, Financial Disclosure and Financial Disclosure 24.5% 8.25 2.02 Internal Controls, Shareholder Rights, Remuneration, Market for Control, Corporate Behavior and Internal Controls and have given suitable rating Shareholder Rights 20% for them considering various parameters mentioned above. The 6.5 1.30 overall rating received by HUL is 7.19 which clearly depicts that HUL over the years has Remuneration 15% 6.4 0.96 been following average standards of corporate governance. Market for Control 8% 6.5 0.52 Corporate Behavior 8% 7 0.56

Overall Rating

7.19

All companies rated by GMI are scored on a scale of 1.0 (lowest) to 10.0 (highest). A GMI rating of 9.0 or higher is considered to be well above-average. A rating of 7.5 to 8.5 is considered to be above-average, 6.0 to 7.5 is considered average, 3.5 to 5.5 is considered to be below-average, and 3.0 or less is considered well below-average by GMI.

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