Corp Governance Report 2010 En

8/12/2019 Corp Governance Report 2010 En

1/41

CorporateGovernanceReport 2010includingCompensationReport 2010


2/41

CorporateGovernanceReport 2010


3/41

Situation at31 December 2010

3333

1.1.11.21.3

Group structure and shareholdersGroup structureSigni cant shareholdersCross-shareholdings

4444

4445

2.2.12.22.3

2.42.52.62.7

Capital structureCapitalConditional capitalChanges in capital

Shares and par ticipation cer ti catesPro t sharing certi catesLimitations on transferability and nominee registrationsConvertible bonds and options

667

10101213

3.3.13.23.33.43.53.6

Board of Directors (1)

Members of the Board of DirectorsProfessional background and other activities and functionsElections and terms of of ceInternal organisational structureDe nition of areas of responsibilityInformation and control instruments vis--vis the Executive Board (2)

14141518

4.4.14.24.3

Executive BoardMembers of the Executive BoardProfessional background and other activities and functionsManagement contracts

18 5. Compensations, shareholdings and loans

18181919

1919

6.6.16.26.3

6.46.5

Shareholders participationVoting rights and representation restrictionsStatutory quorumsConvocation of the General Meeting of shareholders

Inclusion of item on the agendaInscriptions into the share register

191919

7.7.17.2

Change of control and defence measuresDuty to make an offerClauses on change of control

2020202020

8.8.18.28.38.4

AuditorsDuration of the mandate and term of of ce of the lead auditorAuditing feesAdditional feesSupervisory and control instruments pertaining to the audit

21 9. Information policy

22 General Organisation of Nestl S.A.

23 Appendix 1: Compensation Report 2010

35 Appendix 2: Articles of Association of Nestl S.A.

(1) T he full Board of Directo rs Regulations and Committe e Charters are published on www.nestl e.com.(2) The term Executive Committee, as used in the SIX Directive, is replaced by Executive Board throughout this document.


4/41

Corporate Governance Report 2010

The Nestl Corporate Governance Report 2010 followsthe SIX Swiss Exchange Directive on Information Relatingto Corporate Governance and takes into account the SwissCode of Best Practice for Corporate Governance. Additionalinformation can be found in the Compensation Report

(Appendix 1).To avoid duplication of information, cross-referencing toother reports is made in some sections, namely the AnnualReport 2010, the 2010 Financial Statements that comprisethe Consolidated Financial Statements of the Nestl Groupand the Financial Statements of Nestl S.A., as well as theArticles of Association of Nestl S.A., whose full text canbe consulted in Appendix 2 or on www.nestle.com.

The 2010 Consolidated Financial Statements of theNestl Group comply with International Financial ReportingStandards (IFRS) issued by the International AccountingStandards Board (IASB) and with the Interpretations issuedby the International Financial Reporting InterpretationsCommittee (IFRIC). Where necessary, these disclosureshave been extended to comply with the requirementsof the SIX Swiss Exchange Directive.

1. Group structure and shareholders1.1 Group structure

Please refer to the Annual Report 2010 for the overviewof Directors and Of cers.

1.1.1 Description of the issuers operational group structureFor the general organisation chart of Nestl S.A., referto page 22 of this document. The Groups Management

structure is represented in the analysis by operatingsegments (refer to Note 3 of the 2010 ConsolidatedFinancial Statements of the Nestl Group).

1.1.2 All listed companies belonging to the issuers groupPlease refer to page 48 of the Annual Report 2010for Nestl S.A.s registered of ces, its stock exchangelisting and quotation codes and information on marketcapitalisation.

Please refer to the 2010 Consolidated FinancialStatements of the Nestl Group, page 118 for a listof the principal af liated and associated companies,

with an indication of their company names, registeredof ce, share capital, place of listing, securities ISINnumbers, their market capitalisation and the Companysparticipation.

1.1.3 The non-listed companies belonging to the issuersconsolidated entitiesPlease refer to the 2010 Consolidated FinancialStatements of the Nestl Group, page 118 forthe enumeration of the principal af liated and

associated companies, with an indication of theircompany names, registered of ce, share capitaland the Companys participation.

1.2 Signi cant shareholdersOn 31 December 2010, Nestl S.A. held, togetherwith a Nestl subsidiary, 208 094 259 treasury sharesrepresenting 6% of the share capital, including51 735 000 shares repurchased under Nestl S.A.sShare Buy-Back Programme of CHF 25 billioncompleted on 17 June 2010 and 139 930 000 sharesrepurchased under the ongoing Share Buy-BackProgramme of CHF 10 billion launched on 29 June 2010(refer to Note 18 of the 2010 Consolidated FinancialStatements of the Nestl Group). During 2010, theCompany published on the electronic publicationplatform of the SIX Swiss Exchange three disclosurenoti cations pertaining to the holding of its ownshares. The threshold of 5% was exceededon 8 January 2010, fell below this percentageon 24 June 2010 as a consequence of the capitalreduction effected by the Company and exceeded 5%again on 9 September 2010 in relation with the ShareBuy-Back Programme.

With respect to nominees, Chase Nominees Ltd,

London, was a registered holder of 339 309 290 shares,i.e. 9.8% of the shares of the Company as at31 December 2010. At the same date, Citibank N.A.,as a depositary for the shares represented by AmericanDepositary Receipts, was the registered holderof 242 273 273 shares, i.e. 7% of the shares ofthe Company. Also on 31 December 2010,Nortrust Nominees Ltd was a registered holderof 119 275 671 shares of the Company, representing3.4% of the shares.

1.3 Cross-shareholdings

The Company is not aware of cross-shareholdingsexceeding 5% of the capital or voting rights on bothsides.

Preliminary remarks


5/41

4 Corporate Governance Report 2010

2. Capital structure2.1 Capital

The ordinary share capital of Nestl S.A. isCHF 346 500 000. The conditional share capital isCHF 10 000 000. Nestl S.A. does not have any

authorised share capital.

2.2 Conditional capitalThe share capital may be increased in an amount notto exceed CHF 10 000 000 by issuing up to100 000 000 registered shares with a nominal valueof CHF 0.10 each through the exercise of conversionrights and/or option rights granted in connection withthe issuance by Nestl or one of its subsidiariesof newly or already issued convertible debentures,debentures with option rights or other nancial marketinstruments. Thus the Board of Directors has at itsdisposal a exible instrument enabling it, if necessary,to nance the activities of the Company throughconvertible debentures.

For a description of the group of bene ciaries andof the terms and conditions of the issue of conditionalcapital, refer to art. 3 bis of the Articles of Associationof Nestl S.A.

2.3 Changes in capitalThe share capital was reduced three times in the lastthree nancial years as a consequence of severalShare Buy-Back Programmes launched by theCompany; the resulting cancellations of shares

were approved at the Annual General Meetingsof 10 April 2008, 23 April 2009 and 15 April 2010.

In 2008, the Annual General Meeting also resolveda 1-to-10 share split with a corresponding increaseof the shares and reduction of the nominal value fromCHF 1. to CHF 0.10. Simultaneously, the share capitalwas reduced by the cancellation of 10 072 500 sharesof a nominal value of CHF 1. from CHF 393 072 500to CHF 383 000 000. In 2009, the share capital wasreduced by 180 000 000 shares to CHF 365 000 000.

In 2010, the share capital was further reduced by185 000 000 shares to CHF 346 500 000. For the

breakdown of capital (equity) for 2010, 2009 and2008 see the changes in equity in the 2010 and 2009Consolidated Financial Statements of the Nestl Group.

2.4 Shares and participation certi catesNestl S.A.s capital is composed of registeredshares only. The number of registered shares witha nominal value of CHF 0.10 each, fully paid up,was 3 465 000 000 at 31 December 2010.

According to art. 11 par. 1 of the Articlesof Association, each share recorded in the shareregister as a share with voting rights confers the rightto one vote to its holder. See also point 2.6.1 below.

Shareholders have the right to receive dividends.There are no participation certi cates.

2.5 Pro t sharing certi catesThere are no pro t sharing certi cates.

2.6 Limitations on transferability and nomineeregistrations

2.6.1 Limitations on transferability for each sharecategory, along with an indication of statutorygroup clauses, if any, and rules for grantingexceptionsAccording to art. 5 par. 5 lit. a of the Articlesof Association, no person or entity shall be registeredwith voting rights for more than 5% of the sharecapital as recorded in the commercial register.The limitation on registration also applies to personswho hold some or all their shares through nomineespursuant to that article. Legal entities that are linkedto one another, through capital, voting rights,management or in any other manner, as well as

all natural persons or legal entities achieving anunderstanding or forming a syndicate or otherwiseacting in concert to circumvent the regulationsconcerning the limitation on registration orthe nominees, shall be counted as one person ornominee (art. 5 par. 7 of the Articles of Association).The limitation on registration also applies to sharesacquired or subscribed by the exercise of subscription,option or conversion rights (art. 5 par. 10 of the Articlesof Association). See also art. 5 par. 6 and 9 of theArticles of Association and point 2.6.3 below.

2.6.2 Reasons for granting exceptionsin the year under reviewPlease refer to points 2.6.3 and 6.1.2 below.


6/41


2.6.3 Admissibility of nominee registrations, alongwith an indication of percent clauses, if any, andregistration conditionsPursuant to art. 5 par. 6 and 9, the Board of Directorshas issued regulations concerning nominees, setting

forth rules for their entry as shareholders in the shareregister. These regulations allow the registration of: Nominees N (N as Name of bene cial owner

disclosed): where trading and safekeeping practicesmake individual registration of bene cial ownersdif cult or impractical, shareholders may registertheir holdings through a Nominee N with votingrights, subject to the speci c understanding thatthe identity and holdings of bene cial owners areto be disclosed to the Company, periodically orupon request. Voting rights of Nominees are tobe excercised on the basis of voting instructionsreceived from the bene cial owners. Holdings ofa Nominee N, or Nominees N acting as an organisedgroup or pursuant to a common agreement, may notexceed 5% of the share capital of the Company.Holdings exceeding the 5% limit (respectively thelimit xed by the Board of Directors, see 6.1.2) areregistered without voting rights. The responsibilityfor disclosure of bene cial owners and their holdingsresides with the nominees registered in the shareregister.

Nominees A (A as Anonymous bene cial owner):registration without voting rights.

2.6.4 Procedure and conditions for cancelling statutoryprivileges and limitations on transferabilityPlease refer to point 6.1.3 below.

2.7 Convertible bonds and optionsAs at 31 December 2010, there were 1 400 000outstanding put options sold by a Nestl subsidiary onNestl S.A. shares, which if exercised would represent0.04% of the share capital of the Company. (a)

(a) Ratio 1:1; 600 000 options: maturity 18 March 2011 / strike price CHF 48.00; 800 000 options: maturity 21 December 2012 / strike price CHF 52.00.


7/41


3. Board of Directors3.1 Members of the Board of Directors

First Term

Name Year of birth Nationality Education/Quali cations (a) election expires

Peter Brabeck-Letmathe 1944 Austrian Economics 1997 2013

ChairmanPaul Bulcke 1954 Belgian Economics and Business 2008 2011CEO Administration

Andreas Koopmann 1951 Swiss Mechanical Engineering 2003 20111st Vice Chairman and Business Administration

Rolf Hnggi 1943 Swiss Law and Finance 2004 20112nd Vice Chairman

Jean-Ren Fourtou 1939 French Ecole Polytechnique 2006 2012

Daniel Borel 1950 Swiss Physics and Computer Science 2004 2012

Jean-Pierre Meyers 1948 French Economics 1991 2011

Andr Kudelski 1960 Swiss Physics 2001 2013

Carolina Mller-Mhl 1968 Swiss Political Science 2004 2012

Steven G. Hoch 1954 American/Swiss International Relations 2006 2013and Economics

Nana Lal Kidwai 1957 Indian Economics and Business 2006 2011Administration

Beat Hess 1949 Swiss Law 2008 2011

Titia de Lange 1955 Dutch Biochemistry 2010 2013

Jean-Pierre Roth 1946 Swiss Economics and Finance 2010 2013

(a) For more complete information on quali cations: please refer to individual CVs on www.nestl e.com.

a) Management tasks of the members of theBoard of DirectorsWith the exception of Paul Bulcke, all members ofthe Board of Directors are non-executive members.

Peter Brabeck-Letmathe is active Chairman andhas certain responsibilities for the direction andcontrol of the Group including the Nestl HealthScience Company and Nestls engagements withGalderma and LOral. The main duties of the Boardpersuant to Swiss law are summarised in 3.5.1.

b) Information on non-executive members of theBoard of DirectorsWith the exception of Peter Brabeck-Letmathe, allnon-executive members of the Board of Directorsare independent, were not previously membersof the Nestl management and have no important

business connections with Nestl.c) Cross-involvementPeter Brabeck-Letmathe and Jean-Pierre Meyersare on the Board of Directors of both Nestl andLOral.


8/41


3.2 Professional background and other activitiesand functions

Peter Brabeck-Letmathe, ChairmanPeter Brabeck-Letmathe joined the NestlGroups operating company as a salesman

in Austria in 1968. Between 1970 and 1987,he held a series of responsibilities in LatinAmerica. In 1987, he was transferred to

Nestls International Headquarters in Vevey,Switzerland, as Vice President and was namedExecutive Vice President in 1992. At the Annual GeneralMeeting of Shareholders in June 1997, Peter Brabeck-Letmathe was elected member of the Board ofNestl S.A. In 1997, the Board of Directors of Nestl S.A. appointed him Chief Executive Of cer (CEO). In 2001,he was elected Vice Chairman and in 2005 Chairmanof the Board of Directors. Asof 10 April 2008, Peter Brabeck-Letmathe relinguishedhis function as CEO remaining Chairman of the Boardof Directors.

As a Nestl S.A. representative, he serves as ViceChairman of LOral S.A., France.

Peter Brabeck-Letmathe is also Vice Chairmanof the Board of Directors of Credit Suisse Group,Switzerland, and member of the Boards of the ExxonCompany, Texas, USA and of Delta Topco Limited,Jersey.

In addition, he is a member of the European RoundTable of Industrialists, Belgium, a member of theFoundation Board of the World Economic Forum,

Switzerland, as well as a member of the FoundationBoard of the Verbier Festival, Switzerland.

Paul Bulcke, CEOPaul Bulcke began his career in 1977as a nancial analyst for Scott GraphicsInternational in Belgium before movingto the Nestl Group in 1979 as a marketingtrainee. From 1980 to 1996, he held various

responsibilities in Nestl Peru, Nestl Ecuador andNestl Chile before moving back to Europe as ManagingDirector of Nestl Portugal, Nestl Czech and Slovak

Republic, and Nestl Germany. In 2004, he wasappointed as Executive Vice President, responsiblefor Zone Americas. As of April 2008, Paul Bulcke waselected member of the Board of Directors of Nestl S.A.and the Board appointed him Chief Executive Of cer(CEO).

As a representative of Nestl, Paul Bulcke servesas Co-Chairman of the Supervisory Board of Cereal

Partners Worldwide, Switzerland.Furthermore, Paul Bulcke is Board member of the

Consumer Goods Forum and co-chairs its GovernanceCommittee.

Andreas Koopmann, 1st Vice ChairmanAndreas Koopmann began his careerin 1979 as Assistant to the Chairmanand CEO of Bruno Piatti AG, Switzerlandand from 1980 to 1982 was Assistant toa Group Executive at Motor Columbus AG

Holding, Switzerland. From 1982, he was at BobstGroup, starting as Vice President of Engineering andManufacturing in Roseland, New Jersey, USA. In 1989,he returned to Switzerland, holding a number of seniorpositions in the company, including member of theGroup Executive Committee in charge of Manufacturing.He was a member of the Board of Directors for BobstGroup from 1998 to 2002 and was appointed as CEOin 1995, a position he held until May 2009. As of 2010,Andreas Koopmann was appointed Chairman ofAlstom (Suisse) S.A. and Country President of theGroup.

Presently, he serves as Vice Chairman of Swissmemin Switzerland and as Board member of Credit SuisseGroup, Switzerland, CSD Group, Switzerland andGeorg Fischer AG, Switzerland.

Rolf Hnggi, 2nd Vice ChairmanIn 1970 Rolf Hnggi started his career

as a nancial and investment analystat Swiss Bank Corporation, Switzerland,before moving on to the Union Bankof Switzerland and then to the Baselland

Cantonal Bank, Switzerland. In 1976 he joined ZurichInsurance Company and in 1986 became a memberof the Corporate Executive Board and Head of nanceand investments in securities, worldwide. He wasappointed Deputy CEO of Zurich Insurance Companyin 1988, serving as a Board member from 1993to 1997, before becoming a private consultant.

From 1994 to April 2009, Rolf Hnggi also served a

Chairman of Rd, Blass & Cie AG, Bankers,Switzerland.Presently, he is a member of the Board of Trustees

of the Foundation Luftbild Schweiz, Switzerland;a member of the Foundation Board, Werner Abegg-Fonds, Switzerland; and also sits on the AdvisoryBoard for the Mastercourse of Advanced Studiesin Applied History at the University of Zurich,


9/41


Switzerland.Jean-Ren Fourtou

Jean-Ren Fourtou began his careerat Bossard & Michel in 1963. He becameCEO of Bossard Consultants in 1972 and

later Chairman and CEO of the BossardGroup from 1977 to 1986.From 1986 to 1999, he served as Chairman and

CEO of Rhne-Poulenc Group, and when Hoechstand Rhne-Poulenc merged to create Aventis in 1999,he became Vice Chairman of the Management Boardand Managing Director of the company until 2002.Since 2005, he has been Chairman of the SupervisoryBoard of Vivendi, where he was Chairman and CEOfrom 2002 to 2005.

Jean-Ren Fourtou is Chairman of the SupervisoryBoard of Canal+ Group and of the Bordeaux UniversityFoundation, France. He also serves as a Board memberof Sano -Aventis, France and of Maroc Tlcom,Morocco.

Daniel BorelDaniel Borel is the co-founder of Logitech.He served as Chairman and CEOof Logitech S.A. from 1982 to 1988 andof Logitech International S.A. from 1992to 1998. Since 1998, he has served as

Chairman of Logitech International S.A. As ofJanuary 2008, Daniel Borel handed over the of ceof Chairman remaining a member of the Board of

Directors of Logitech International S.A.In addition, he serves as Chairman of swissUp,

a Foundation for Excellence in Education in Switzerland,and is a member of the Board of De tech Foundation,Switzerland.

Jean-Pierre MeyersFrom 1972 to 1980, Jean-Pierre Meyerswas attached to the directorate of nancialaffairs at Socit Gnrale. During thesame time he was Assistant Professorat the Ecole Suprieure de Commerce in

Rouen, France. From 1980 to 1984, he was a Directorof the bank Odier Bungener Courvoisier. Jean-PierreMeyers has been a Board member of LOral S.A.,France, since 1987 and Vice Chairman since 1994.He has also served as Vice Chairman of theBettencourt-Schueller Foundation since 1988.

In addition, Jean-Pierre Meyers is a member ofthe Supervisory Board of Tthys S.A.S. in France.

Andr KudelskiAndr Kudelski started his career in 1984at Kudelski SA, Switzerland, as a researchand development engineer. After working

in Silicon Valley, he returned to Kudelski SAin 1986 and was appointed productmanager for Pay-TV solutions. From 1989 to 1990,he was the director of the Pay-TV division (NagraVision)before taking over the position of Chairman and CEOof the Kudelski Group in 1991. In addition, he becameChairman of Nagra Plus SA, a joint venture ofKudelski SA and Canal Plus in 1992.

Andr Kudelski serves on the Board of Directorsand the Audit Committee of Dassault Systmes SA,France, and Edipresse Group, Switzerland. Furthermore,he is a Board member of HSBC Private BankingHoldings (Suisse) S.A. and Vice Chairman of theBoard of Directors of the Swiss-American Chamberof Commerce.

Carolina Mller-MhlCarolina Mller-Mhl started her career asa PR consultant. In 1999 she served asVice Chairperson of the Board of Directorsof Mller-Mhl Holding AG and becamePresident of the Mller-Mhl Group in 2000.

Carolina Mller-Mhl is a Board member ofNZZ Mediengruppe, Switzerland and of SMG,Schweizerische Management Gesellschaft. She is also

Chairperson of Hyos Invest Holding AG, Switzerland,and a Board member of Orascom DevelopmentHolding AG, Switzerland.

In addition, she is a member of the FoundationBoard of Pestalozzianum, Switzerland, a member ofthe Advisory Board of the Swiss Economic Forum,a member of the Board of the Pestalozzi Foundationand a founding member and Co-President of theForum Bildung. She was nominated as a Young GlobalLeader 2007 by the World Economic Forum, and doesa lot of work in the socio-political eld, witha particular commitment to education policy and

gender issues.


10/41


Steven G. HochSteven G. Hoch started his career in 1978at the Chemical Bank in New York andZurich, where he held a series of positionsin commercial banking, principally advising

multi-national companies. Steven G. Hochwas Senior Vice President and a member of theManagement Committee at Bessemer TrustCompany, N.A., New York, from 1990 to 1994, anda member of the Executive Committee and Head ofClient Service at Pell Rudman Trust Company, Boston,from 1994 to 2002. In 2002, he founded HighmountCapital, LLC, a US-based investment management

rm where he is a Senior Partner.Steven G. Hoch is also a Board member of the

American Swiss Foundation, a trustee of the WoodsHole Oceanographic Institution, USA, and a memberof the National Board of the Smithsonian Institution,USA.

Nana Lal KidwaiNana Lal Kidwai started her careerin 1982 and until 1994 was at ANZGrindlays Bank Plc.

From 1994 to 2002, she was ViceChairperson and Head of Investment

Banking at Morgan Stanley India before movingto HSBC. Currently, she is Country Head of the HSBCGroup of Companies in India and a Group GeneralManager of the Bank. In 2010, she was appointed

to the Board of HSBC Asia Paci c.She serves the Government of India on the Audit

Advisory Board of the Comptroller & Auditor Generalof India, the National Science and TechnologyEntrepreneurship Development Board, the NationalIntegration Council and the Indo-German ConsultativeGroup. She is Chairperson of the Indian AdvisoryCouncil of the City of London and the Foundationof the International Award for Young People, India.Her involvement with educational institutions includesthe India Board of John Hopkins School of AdvancedInternational Studies, Harvard Business School and

the Advisory Boards of IIM Ahmedabad and IITMumbai. She is on the Board of Grassroots TradingNetwork for Women a not-for-pro t organisationto empower underprivileged women and on the IndiaAdvisory Board of the Prince Charles Charities.

Nana Lal Kidwai was given the Padma Shri Awardby the Indian government in 2007.

Beat HessBeat Hess started his career in 1977at BBC Brown Boveri Ltd in Badenas Legal Counsel where he was promotedto General Counsel in 1986. From 1988

to 2003, he was Senior Group Of cer,General Counsel and Secretary for ABB Ltd in Zurich.From 2003 until his retirement in January 2011, BeatHess is Group Legal Director and a member of theGroup Executive Committee of Royal Dutch Shell plc,The Hague, The Netherlands, responsible onworldwide level for legal and intellectual propertyservices as well as for the Shell Compliance Of ce.

Beat Hess is a member of the Board of Holcim Ltd,Switzerland. He is also a member of the The HagueAcademy of International Law and a member of theSupervisory Board of the The Hague Institute for theInternationalisation of Law.

Titia de LangeTitia de Lange earned her doctoral andpost-doctoral degrees in biochemistryin Amsterdam, London and San FranciscoIn 1997, she was appointed Professorat the Rockefeller University, New York,

where, since 1999 she holds as well the Leon HessProfessorship. In 2006 she became Associate Directorof the Anderson Cancer Center at that same University.Titia de Lange is also an elected member of theAmerican National Academy of Sciences and has

worked extensively with the National Institutesof Health. In addition to these research activities,she currently serves on many scienti c advisoryboards and award committees of universities andother research centres around the world, as well ason review panels and editorial boards. Furthermore,she has been awarded numerous honours and awardssince 1980.

For Nestl, Titia de Lange serves as a member ofthe Nestl Nutritional Council (NNC) a group ofinternational experts who advise Nestl on nutrition.


11/41


Jean-Pierre RothJean-Pierre Roth spent his whole careerat the Swiss National Bank, which he joinedin 1979. After various senior positions,he was appointed a member of the Swiss

Governing Board in 1996 before becomingits Chairman in 2001 until 2009. From 2001 he wasa member of, and since 2006 the Chairman of, theBoard of Directors of the Bank of InternationalSettlements until his retirement in 2009. Jean-PierreRoth also served as Swiss Governor of the InternationalMonetary Fund from 2001 until 2009 and as a Swissrepresentative on the Financial Stability Boardfrom 2007 until 2009.

As of 2010, Jean-Pierre Roth has been a member ofthe Board of Swatch Group AG and a member of theFoundation Board and Programme Committeeof Avenir Suisse, Switzerland. Since 1 July 2010,he has served as Chairman of the Board of Directorsof Geneva Cantonal Bank as well as Board memberof the global (re)insurance company Swiss Re.

3.3 Elections and terms of of ceThe Annual General Meeting has the competenceto elect and remove the members of the Board. Inprinciple, the initial term of of ce of a Board memberis three years. Outgoing Directors are re-eligible. Each

year the Board is renewed by rotation in a way that,after a period of three years, all members will havebeen subject to re-election.

The Board of Directors elects, for a one-year term,the Chairman, the Chief Executive Of cer (CEO), twoVice Chairmen and the members of the Committees.

The term of of ce of a Board member expires nolater than the Annual General Meeting following his orher 72nd birthday.

For the principles of the selection procedure:see point 3.4.2 below (Nomination Committee).

For the time of rst election and remaining termof of ce see point 3.1 above.

3.4 Internal organisational structure3.4.1 Allocation of tasks within the Board of Directors

Chairmans and Corporate Compensation Nomination AuditGovernance Committee Committee Committee Committee

Peter Brabeck-Letmathe (Chair) Chairman

Paul Bulcke CEO

Andreas Koopmann (Chair)1st Vice Chairman

Rolf Hnggi (Chair)2nd Vice Chairman

Jean-Ren Fourtou

Daniel Borel (Chair)

Jean-Pierre Meyers

Andr Kudelski

Carolina Mller-Mhl

Steven G. Hoch Nana Lal Kidwai

Beat Hess

Titia de Lange

Jean-Pierre Roth


12/41


3.4.2 Tasks and area of responsibility for each Committeeof the Board of Directors (1)

The powers and responsibilities of each Committeeare established in the applicable Committee Charter,which is approved by the Board. Each Committee is

entitled to engage outside counsel.Each Committee annually performes a self-evaluation and reviews the adequacy of its Charter.

The Chairmans and Corporate GovernanceCommittee consists of the Chairman, the two ViceChairmen, the Chief Executive Of cer (CEO) and othermembers as elected by the Board. It liaises betweenthe Chairman and the full Board of Directors in orderto act as a consultant body to the Chairman and toexpedite whenever necessary the handling of theCompanys business. The Committee annually reviewsthe Corporate Governance of the Company taking intoaccount the input received from shareholders andother stakeholders and prepares recommendations forthe Board. Minutes of the meetings are made availableto the full Board.

The Compensation Committee is chaired by anindependent and non-executive member of the Board,the other members are one Vice Chairman anda minimum of two other non-executive members ofthe Board of Directors. All members are independent.The Compensation Committee determines theprinciples for remuneration of the members of the

Board and submits them to the Board for approval.It oversees and discusses the remuneration principlesfor the Company and the Group. In addition, it proposesthe remuneration of the Chairman, the CEO andapproves the individual remunerations of the membersof the Executive Board. It reports on its decisions tothe Board and keeps the Board updated on the overallremuneration policy of the Group.

The Nomination Committee includes a Chairperson,who is an independent and non-executive memberof the Board; the other members are the Chairman

of the Board of Directors and a minimum of twoindependent and non-executive members of theBoard. The Nomination Committee establishes theprinciples for the selection of candidates to the Board,selects candidates for election or re-election andprepares a proposal for the Boards decision. It alsoreviews the nominations to the Executive Board.

The candidates to the Board must possess thenecessary pro les, quali cations and experience todischarge their duties. Newly appointed Boardmembers receive an appropriate introduction into thebusiness and affairs of the Company and the Group.

If required, the Nomination Committee arranges forfurther training. It reviews, at least annually, theindependence of the members of the Board andit prepares the annual self-evaluation of the Board.The Committee performs the short and long-termsuccession planning based on a rigorous process toensure the balanced composition of the Board andcombining the appropriate independence, diversity,quali cations and expertise.

The Audit Committee consists of a Vice Chairman,who chairs the Committee, and a minimum of twoother members of the Board, excluding the CEO andany former member of the Executive Board. At leastone member has to have recent and relevant nancialexpertise, the others must be familiar with theissues of accounting and audit. In dischargingits responsibilities, it has unrestricted access tothe Companys management, books and records.The Audit Committee supports the Board of Directorsin its supervision of nancial controls through a directlink to KPMG (external auditors) and the Nestl GroupAudit (corporate internal auditors). The AuditCommittees main duties include the following: to discuss Nestls internal accounting procedures

to make recommendations to the Board ofDirectors regarding the nomination of externalauditors to be appointed by the shareholders

to discuss the audit procedures, includingthe proposed scope and the results of the audit

to keep itself regularly informed on importantndings of the audits and of their progress

to oversee the quality of the internal and externalauditing

to present the conclusions on the approval of theFinancial Statements to the Board of Directors

to review certain reports regarding internal controls

and the Groups annual risk assessment. The AuditCommittee regularly reports to the Boardon its ndings and proposes appropriate actions.The responsibility for approving the AnnualFinancial Statements remains with the Board ofDirectors.

(1) For complete information please refer to the Regulations of the Board of Directo rs and Committ ee Charters on www.nestle.com.


13/41


3.4.3 Work methods of the Board of Directorsand its CommitteesThe Board meets as often as necessary, at leastquarterly, and on notice by the Chairman or by theperson designated by him. In addition, the Board mustbe convened as soon as a Board member requeststhe Chairman to call a meeting. All Committeesprovide a detailed report to the full Board at eachmeeting in a dedicated Chairmanss session.

The Board reserves one full day per year to discussthe strategic long-term plan of the Company. Inaddition, every year the Board visits one operatingcompany for three to ve days, in 2010 Nestl in theUnited States of America. The average attendance atthe Board meetings was 100%. Board meetings, withthe exception of certain Chairmans and in camerasessions, are attended by all members of the ExecutiveBoard. In addition, selected members of the ExecutiveBoard and senior management participate in certainCommittee meetings.

At each Board meeting the Chairmen of the variousCommittees report on their Committees activities.

3.5 De nition of areas of responsibilityThe governing bodies have responsibilities as follows:

3.5.1 Board of DirectorsThe Board of Directors is the ultimate governing bodyof the Company. It is responsible for the ultimatesupervision of the Group. The Board attends to allmatters which are not reserved for the Annual GeneralMeeting or another governance body of the Companyby law, the Articles of Association or speci cregulations issued by the Board of Directors.

The Board has the following main duties:a) the ultimate direction of the Company, in particular theconduct, management and supervision of the businessof the Company, and the provision of necessarydirections;

b) the determination of the Companys organisation;c) the determination of accounting and nancial control

principles, as well as the principles of nancial planning;

d) the appointment and removal of the Chairman and theVice Chairmen, of the Committee membersand members of the Executive Board;

e) the ultimate supervision of the Chairman and themembers of the Executive Board, in particular withrespect to their compliance with the law, the Articlesof Association, the Board Regulations and instructionsgiven from time to time by the Board;

f) the preparation of the Annual Report, the AnnualGeneral Meeting and execution of its resolutions;

g) the noti cation of the court in the event ofoverindebtedness;

h) the discussion and approval of: the Groups long-term strategy and annual

investment budget; major nancial operations; any signi cant policy issue dealing with the

Companys or the Groups general structure orwith nancial, commercial and industrial policy;

Corporate Governance Principles of the Company; the review of and decision on any report submitted

to the Board;

the Groups annual risk assessment.

3.5.2 Executive BoardThe Board of Directors delegates to the CEO, withthe authorisation to subdelegate, the power to managethe Companys and the Groups business, subject tolaw, the Articles of Association and the Regulationsof the Board of Directors.

The CEO chairs the Executive Board and delegatesto its members individually the powers necessary forcarrying out their responsibilities, within the limits

xed in the Executive Boards Regulations.

Meetings held in 2010 Frequency Average duration (hours)

Board of Directors of Nestl S.A. 8 times 3:40

Chairmans and Corporate Governance Committee 8 times 4:30

Compensation Committee 3 times 1:50

Nomination Committee 3 times 1:05

Audit Committee 3 times 2:40


14/41


3.6 Information and control instrumentsvis--vis the Executive BoardThe Board of Directors, on a regular basis, is informedon material matters involving the Companys and theGroups business. Members of the Executive Board

attend the Board of Directors meetings and report onsigni cant projects and events. Regular written reportsare also provided. The Chairman and the CEO ensurethe proper information ow between the ExecutiveBoard and the Board of Directors.

The Board of Directors receives regular reportsfrom the Boards Committees, the Chairman, the CEO,as well as from the Executive Board. The minutesof Committee meetings are made available to the fullBoard. The Board pays a visit to a major market everyyear, where it meets members of senior management.

Furthermore, the Audit Committee reviews thenancial performance and assesses the effectiveness

of the internal and external audit processes as well asthe internal risk management organisation andprocesses.

Members of the Executive Board and other seniormanagement attend the Audit Committee meetings,except for certain in camera sessions.

Additional information and control instrumentsinclude:

The external auditors, KPMG (auditors of Nestl S.A.and of the Consolidated Financial Statements ofthe Nestl Group), who conduct their audit incompliance with Swiss law and in accordance with

Swiss Auditing Standards and with InternationalStandards on Auditing.

The Nestl Group Audit function, the corporateinternal auditors, which has a direct link to the AuditCommittee. It comprises a unit of internationalauditors who travel worldwide, completing auditassignments.

Group Risk Services, the corporate risk managementunit, providing assistance to all corporate entitieswith regard to risk management, loss prevention,claims handling and insurance. A top-level riskassessment is performed once a year for all

businesses. For more information, please referto Note 23 of the 2010 Consolidated FinancialStatements of the Nestl Group.

Group Compliance and other risk and control-relatedfunctions provide additional guidance and oversight.Risk and compliance activities are regularly coordinatedthrough the Group Compliance Committee to ensurea holistic, entity-wide approach. For more information,please refer to page 44 of the Annual Report 2010.


15/41


4. Executive Board4.1 Members of the Executive Board

Name Year of birth Nationality Education/Current function

Paul Bulcke 1954 Belgian Economics and Business AdministrationCEO

Werner Bauer 1950 German Chemical EngineeringEVP: Chief Technology Of cer: Innovation,Technology and R&D

Frits van Dijk 1947 Dutch EconomicsEVP: Zone Asia, Oceania and Africa (incl. Middle East)

Luis Cantarell 1952 Spanish EconomicsEVP: Zone Americas (USA, Canada, Latin America, Caribbean)

Jos Lopez 1952 Spanish Mechanical EngineeringEVP: Operations, GLOBE

John J. Harris 1951 American Business AdministrationEVP: Nestl Waters

James Singh 1946 Canadian Business AdministrationEVP: Finance and Control, Legal, IP, Tax, Treasury,Global Nestl Business Services

Laurent Freixe 1962 French Business AdministrationEVP: Zone Europe

Petraea Heynike 1947 South African/ Psychology, English, Mathematical StatisticsBritish EVP: Strategic Business Units, Marketing,

Sales and Nespresso

Marc Caira 1954 Canadian MarketingDeputy EVP: Nestl Professional

Jean-Marc Duvoisin 1959 Swiss Economics and Political ScienceDeputy EVP: Human Resources

Doreswamy Nandkishore 1958 Indian Electrical Engineering and Postgraduate in Management(Nandu) Deputy EVP: Nestl Nutrition

David P. Frick 1965 Swiss LawSVP: Corporate Governance, Compliance and Corporate Services

(EVP: Executive Vice President; SVP: Senior Vice President)

For complete information: please refer to individual CVs on www.nestle.com.


16/41


4.2 Professional background and other activitiesand functionsPaul BulckePlease refer to point 3.2 above.

Werner BauerWerner Bauer began his career in 1975as an Assistant Professor in ChemicalEngineering at the University of Erlangen-Nrnberg. In 1980, he was appointedProfessor in Chemical Engineering at the

Technical University, Hamburg, and in 1985 he obtainedthe Directorship of the Fraunhofer Institute for FoodTechnology and Packaging and a position as Professorin Food Biotechnology, Technical University, Munich.

In 1990, Werner Bauer became Head of the NestlResearch Center, Lausanne, moving on to becomeHead of Nestl Research and Development in 1996.After serving as Technical Manager and then MarketHead for Nestl Southern and Eastern Africa Region,he moved to the position of Executive Vice Presidentand Head of Technical, Production, Environment,Research and Development in 2002. In 2007, he wasappointed Chief Technology Of cer, Head of Innovation,Technology, Research and Development.

As a representative of Nestl, Werner Baueralso undertakes the following duties: Chairman ofthe Supervisory Board of Nestl Deutschland AG;Board member of LOral S.A. in France; member ofthe Supervisory Board of Cereal Partners Worldwide,

Switzerland; Chairman for both Life Ventures S.A. andNutrition-Wellness Venture AG, Switzerland; Chairmanof So nol S.A. in Switzerland.

He is also a member of the Board of Trustees forthe Bertelsmann Foundation in Germany as well asa member of the Bertelsmann Verwaltungsgesellschaftin Germany, and is a Board member of the SwissSociety of Chemical Industries.

Frits van DijkFrits van Dijk joined Nestl in 1970 asa sales representative for the UK before

holding a series of positions in India andthe Philippines from 1972 to 1979. Hereturned to Europe to work in Nestls

Beverages Division before again returning to Asia

in 1982 where he took on a number of portfolios andwas appointed Managing Director of Nestl Japan in1995. In 2000, he was appointed Chairman and CEO ofNestl Waters Worldwide (formerly Perrier Vittel S.A.)and in May 2005 he became Executive Vice President

for Zone Asia, Oceania, Africa and Middle East.As a representative of Nestl, Frits van Dijk isChairman of Beverage Partners Worldwide S.A. anda member of the Supervisory Board of Cereal PartnersWorldwide, Switzerland. Furthermore, he is a Boardmember of OSEM Investments Ltd, Israel; QualityCoffee Products Ltd, Thailand; Nestl Central andWest Africa Ltd (Ghana); Nestl (China) Limited;Nestl (Malaysia) Bhd.; Nestl Pakistan Ltd andPresident Commissioner of both P. T. Nestl Indonesiaand P. T. Nestl Indofood Citarasa Indonesia.

Luis CantarellIn 1976, Luis Cantarell joined NestlEspaa S.A. and was appointed Head ofCoffee Marketing in 1987 and later Head the Nutrition Division of Nestl Spain. In 199he transferred to Nestls International

Headquarters in Vevey, Switzerland, taking worldwideresponsibility for Coffee Marketing within the Coffee& Beverages Strategic Business Unit. He returned toSpain in 1996 as Division Manager. From 1998 to 2001,he was Managing Director of Nestl Portugal S.A.,and in 2001 was nominated Senior Vice Presidentin charge of the Groups Nutrition Strategic Business

Division. In 2003, he was appointed DeputyExecutive Vice President, before taking the position inNovember 2005 as Executive Vice President, Nestin charge of Zone Europe (until 1 November 2008

As of September 2008, Luis Cantarell was appointeExecutive Vice President for Zone Americas.

As a representative of Nestl, Luis Cantarell servesas Chairman of Nestl Brasil Ltda, Nestl BrasilHolding Ltda and Nestl Chile S.A. He is also Co-Chairman of the Supervisory Board of Dairy PartnersAmericas (Switzerland and New Zealand) and isa member of the Supervisory Board of Cereal Partners

Worldwide, Switzerland.In addition, Luis Cantarell is a Board member ofthe Swiss-Latin American Chamber of Commerce andTreasurer of the Swiss-American Chamber of Commerce.


17/41


Jos LopezJos Lopez joined Nestl in 1979as Engineering Trainee. From 1983 to 1995,he completed various technicalassignments in Spain, USA, Japan and

France. In 1995, he was appointedTechnical Manager of the Oceania Region, becomingin 1997 the Operations Director responsible forTechnical, Supply Chain and Exports. In 1999,Jos Lopez became Market Head responsible forthe Malaysian/Singaporean Region; in 2003, he wasappointed Market Head of Nestl Japan. As ExecutiveVice President of Operations since 2007, Jos Lopezis responsible for Procurement, Manufacturing,Supply Chain, Quality Management, Health & Safety,Environment and Engineering. As of 2008, he hasalso been in charge of GLOBE (Global BusinessExcellence; IS/IT).

As a representative of Nestl, Jos Lopez servesas Chairman of Nestrade S.A.

Presently, Jos Lopez is Vice Chairman of theManagement Board of GS1 (formerly EAN International)in Belgium and a member of the Advisory Board of theUniversity of Cambridges Programme for SustainabilityLeadership (CPSL).

John J. HarrisJohn J. Harris began his career in 1974as a Marketing Management Trainee atCarnation Company in the United States

(acquired by Nestl in 1985). From 1974 to1987, John J. Harris held various positions

in both Friskies PetCare and Carnation Products Division.In 1987, he was promoted to Vice President andGeneral Manager of the Carnation Products Division.

In 1997, he was transferred to the Friskies PetCareDivision as Vice President and General Manager andwas instrumental in Friskies PetCares acquisitionof Alpo Pet Foods, announced in January 1995.In January 1997, John J. Harris was named Senior VicePresident of Nestl S.A. in Vevey responsible for theNestl Worldwide PetCare Strategic Business Unit.

In March 1999, he returned to Nestl USA as Presidentof Friskies PetCare Company. In early 2001, he wasnominated Chief Worldwide Integration Of cerfollowing the acquisition of Ralston Purina Company.

He was nominated Chief Executive Of cer of NestlPurina PetCare Europe in 2002 and received addedresponsibility for Asia, Oceania and Africa in 2005.

Effective December 2007, John J. Harris wasappointed Executive Vice President of Nestl S.A. andChairman and Chief Executive Of cer of Nestl Waters.

James Singh

James Singh joined Nestl Canada, Inc.in 1977 as a Financial Analyst. In 1980,he became Manager Financial Analysisand Planning, moving on to Director ofFinance FoodServices and then Vice

President Finance and Treasurer. In 1993, JamesSingh was appointed Senior Vice President Financebefore taking his position as Executive Vice Presidentand Chief Financial Of cer of Nestl Canada, Inc. in1995. In 2000, he was transferred to NestlsInternational Headquarters in Vevey, Switzerland asSenior Vice President in charge of Mergers &Acquisitions, Joint Ventures, Divestments, CorporateReal Estate and Corporate Venturing Investments aswell as for special strategic corporate projects. As ofJanuary 2008, James Singh has been appointedExecutive Vice President and Chief Financial Of cerwith responsibility for Finance and Control, Legal,Treasury, Intellectual Property and Tax departments aswell as the Global Nestl Business Services.

As a representative of Nestl, James Singh isChairman of Nestl Capital Advisers S.A. and of NestlInternational Travel Retail S.A.; he is a Board memberof both Life Venture S.A. and Nutrition-WellnessVenture AG.

Laurent FreixeLaurent Freixe joined Nestl Francein 1986 as a sales representative and gotincreasing responsibilities in the eld ofsales and marketing. In 1999, he becamea member of the Management Committee

and was nominated Head of the Nutrition Division.In 2003, Laurent Freixe became Market Head of NestlHungary. In January 2007, he was appointed MarketHead of the Iberian Region taking responsibility forSpain and Portugal. As of November 2008, Laurent

Freixe has been serving as Executive Vice Presidentin charge of Zone Europe.As a representative of Nestl, he is Chairman of

Nestl Entreprises S.A.S. in France, Nestl Suisse S.A.and Socit des Produits Nestl S.A. in Switzerlandas well as Board member of Lactalis Nestl Produits


18/41


Frais S.A.S. in France and member of the SupervisoryBoard of Cereal Partners Worldwide, Switzerland.

In addition, Laurent Freixe is a member of theForeign Investment Advisory Council of Russia,a Board member of Association des Industries de

Marque (AIM) in Belgium, member of the Board andExecutive Committee of the CIAA, member of theLiaison Committee with the CIAA and member ofthe Executive Board of ECR Europe in Belgium.

Petraea HeynikePetraea Heynike started at Nestl UKin 1972, working in the Frozen Food andCulinary areas. After an assignment atNestls International Headquarters inVevey, Switzerland, she held several

positions in Malaysia, South Africa, and the UnitedStates, before joining Nestl Canada as Head of theIce Cream business.As Market Head of Nestl Canada from 2004 to 2006,Petraea Heynike then helped establish strong marketpositions in categories such as frozen food, infantnutrition, ice cream and, in particular, confectionery.As of 2006, she held the position of Senior VicePresident Confectionery Strategic Business Unit Global. Effective March 2009, Petraea Heynike wasappointed Executive Vice President of Nestl S.A.responsible for the Strategic Business Units, Marketingand Sales, and Nespresso.

As a representative of Nestl, Petraea Heynike

serves as Chairperson of Nestl Nespresso S.A.,as Vice Chairperson of both Life Ventures S.A. andNutrition-Wellness Venture AG and as a member ofthe Board of Beverage Partners Worldwide S.A.

Petraea Heynike is also an Advisory Board memberof Pierre Marcolini Con seur in Belgium and a memberof the Deans Advisory Council of the Schulich Schoolof Business in Canada.

Marc CairaMarc Caira started at Nestl Canada in 1977.In 1986, he was appointed Regional Sales

Vice President and then, in 1990, VicePresident FoodServices, eventually servingas President of FoodServices & Nescaf

Beverages for Nestl Canada from 1997 to 2000.In October 2000, Marc Caira joined Parmalat

Canada and became President and CEO of ParmalatNorth America in 2004.

In May 2006, Marc Caira returned to Nestl andwas appointed Deputy Executive Vice President in

charge of FoodServices Strategic Business Divisionwhich became Nestl Professional, a globallymanaged business unit, in 2009.

Jean-Marc Duvoisin

Jean-Marc Duvoisin joined Nestl in 1986after a short period at the Centre he startedhis international career in the area of Sale& Marketing, rst in Colombia, and thenin Central America until 1997 as a Busine

Executive Manager in the Dairy, Infant Nutrition andCereal sector. He came back to the Centre to ZoneAMS as Operation Manager for two years after whichhe returned to Latin America where he assumed therole of Country Manager in 1999 in Ecuador. Hebecame Market Head of the Bolivarian Region(Colombia, Ecuador and Venezuela) in 2003 andMarket Head of Mexico in 2004. From 2007,Jean-Marc Duvoisin held the position of Senior VicePresident, Head of Corporate Human Resources.Effective January 2010, he was appointed to theExecutive Board of Nestl S.A. as Deputy ExecutiveVice President, Human Resources and CentreAdministration.

As a representative of Nestl, Jean-Marc Duvoisinserves as Chairman of Nestl Pension Funds and asa Board member of Nestl Capital Advisers S.A.

Doreswamy (Nandu) NandkishoreNandu Nandkishore joined Nestl in 1989

in India where, over the next seven years,he took on increasing responsibilities,mainly in marketing. His international carestarted in 1996 when he was transferred to

Indonesia to run the Confectionery Business Unit.In 2000, after a short period at Nestls InternationalHeadquarters in Vevey, Switzerland, he returned toIndonesia where he was promoted to Market Headof Indonesia in March 2003. In April 2005, NanduNandkishore became Market Head of Nestl Philippines,which he ran until October 2009, when he returnedto Nestls International Headquarters in Vevey,

Switzerland to take up the role of Global BusinessHead, Infant Nutrition at Nestl Nutrition.As of September 2010, Nandu Nandkishore was

appointed to the Executive Board of Nestl S.A. asDeputy Executive Vice President in charge of NestlNutrition including Infant Nutrition, PerformanceNutrition and Weight Management.


19/41


David P. FrickDavid P. Frick began his career in 1991with a clerkship in the Meilen District Courtin Zurich and as an assistant to the BankingLaw Chair at Zurich University Law School.

From 1994, he was an attorney in theInternational Corporate and Litigation practice groupsof Cravath, Swaine & Moore, the New York law rm.

In 1999, he became Group General Counsel andManaging Director of Credit Suisse Group, Zurich,where he was appointed a Member of the ExecutiveBoard and served as the companys Head of Legaland Compliance.

David P. Frick joined Nestl S.A. in 2006 and servesas Senior Vice President, Corporate Governance,Compliance and Corporate Services.

He is a member of the Board of Economiesuisse andchairs its Legal Commission. He also represents Nestlat SwissHoldings and serves on the SIX RegulatoryBoard, the Committee on Extraterritoriality for theInternational Chamber of Commerce in Paris and theLegal Committee for the Swiss-American Chamber ofCommerce.

4.3 Management contractsThere are no management contracts with third partiesat Nestl.

5. Compensations, shareholdings and loansPlease refer to the Compensation Report, Appendix 1

of this document.

6. Shareholders participation6.1 Voting rights and representation restrictions6.1.1 All voting rights restrictions, along with

an indication of statutory group clauses and ruleson granting exceptions, particularly in the case

of institutional voting rights representativesOnly persons entered in the share register asshareholders with voting rights may exercise thevoting rights or the other rights related thereto(art. 5 par. 2 of the Articles of Association).

No person may exercise, directly or indirectly,voting rights, with respect to own shares or sharesrepresented by proxy, in excess of 5% of the sharecapital as recorded in the commercial register. Legalentities that are linked to one another through capital,voting rights, management or in any other manner,as well as all natural persons or legal entities achievingan understanding or forming a syndicate or otherwiseacting in concert to circumvent such a limit shall becounted as one shareholder (art. 11 par. 2 of the Articlesof Association; see art. 11 par. 3 of the Articles ofAssociation, which set out exceptions to this votingrestriction).

In order to permit the exercise of voting rights inrespect of shares deposited with banks, the Boardof Directors may grant exceptions to certain banksto vote shares deposited by their clients which inaggregate are in excess of 5% of the share capital(art. 11 par. 4 of the Articles of Association).

In order to facilitate trading of the shares on the

Stock Exchange, the Board of Directors has issuedregulations authorising certain nominees to exceedthe 5% limit to be registered as nominees with votingrights.

6.1.2 Reasons for granting exceptions in the yearunder reviewIn order to permit the exercise of voting rights inrespect of shares deposited with banks, the Boardof Directors has granted exceptions to certain banksto vote shares deposited by their clients.

In order to facilitate trading of the shares on the

Stock Exchange, the Board of Directors has authorisedcertain nominees to exceed the 5% limit to beregistered as nominees with voting rights.


20/41


6.1.3 Procedure and conditions for abolishing statutoryvoting rights restrictionsA resolution to amend the provisions of the Articlesof Association relating to:

(i) restrictions on the exercise of voting rights and the

change or removal of such restrictions, or(ii) the limitation on registration or the limitation on votingrights and the change or removal of such limitationsrequires a majority of two thirds of the sharesrepresented and the absolute majority of the nominalvalue represented at the General Meeting (art. 13 ofthe Articles of Association). See also art. 11 par. 4of the Articles of Association.

6.1.4 Statutory rules on participation in the GeneralMeeting of shareholders if they differ from applicablelegal provisionsThere are no restrictions to the legal regime providedby Swiss Law. Shareholders with voting rights mayhave their shares represented by the proxy of theirchoice.

6.2 Statutory quorumsPlease refer to art. 13 of the Articles of Association.

6.3 Convocation of the General Meetingof shareholdersNestl S.A. statutory rules (art. 7 to 9 of the Articlesof Association) do not differ from applicable legalprovisions. An Extraordinary General Meeting

requested by one or more shareholders whosecombined holdings represent at least 10% of the sharecapital as recorded in the commercial register must beheld as promptly as practicable following such request(art. 8 par. 2 of the Articles of Association).

6.4 Inclusion of item on the agendaOne or more shareholders with voting rights whosecombined holdings represent at least 0.15% of theshare capital as recorded in the commercial registermay request that an item be included in the agendaof the General Meeting by making the request in

writing to the Board of Directors at the latest 45 daysbefore the meeting and specifying the agenda itemsand the proposals made (art. 9 par. 2 and 3 of theArticles of Association).

6.5 Inscriptions into the share registerThe relevant date to determine the shareholders rightto participate in the General Meeting on the basis ofthe registrations appearing in the share register is setby the Board of Directors in the invitation to the

General Meeting.

7. Change of control and defence measures7.1 Duty to make an offer

Nestl S.A. does not have a provision on opting outor opting up in the Articles of Association.

Thus, the provisions regarding the legallyprescribed threshold of 33 % of the voting rightsfor making a public takeover offer set out in art. 32of the Swiss Stock Exchange Act are applicable.

7.2 Clauses on change of controlThere are no such agreements.


21/41


8. Auditors8.1 Duration of the mandate and term of of ce

of the lead auditorKPMG Klynveld Peat Marwick Goerdeler S.A. were

rst appointed on 22 May 1993, and KPMG S.A.

(replacing KPMG Klynveld Peat Marwick Goerdeler S.A.)were rst appointed on 23 April 2009 as auditors ofNestl S.A.

On 15 April 2010 KPMG S.A. (hereafter KPMG)were appointed as auditors of Nestl S.A. and of theConsolidated Financial Statements of the Nestl Groupfor a term of of ce of one year.

The audit report is signed jointly by two KPMGpartners on behalf of KPMG. The rst year thatMr Mark Baillache, in his capacity as lead auditor,signed the Financial Statements of Nestl S.A. and theConsolidated Financial Statements of the Nestl Groupwas for the year ending 31 December 2006.

8.2 Auditing feesThe total of the auditing fees paid to the auditorsfor 2010 amounts to CHF 49 million, of which KPMG,in their capacity as Group auditors, receivedCHF 46 million.

8.3 Additional feesFees paid to the auditors for 2010 related to additionalservices amounts to CHF 11 million, of which KPMGreceived CHF 1.5 million for tax services andCHF 1.5 million for other various non-audit services

(mainly IS/IT advisory support).

8.4 Supervisory and control instruments pertainingto the auditKPMG presents to the Audit Committee a detailedreport on the conduct of the 2010 Financial Statementsaudit, the ndings on signi cant nancial accountingand reporting issues together with the ndings onthe internal control system as well as an overviewof issues found during the interim audit.

In 2010, KPMG participated in all three AuditCommittee meetings at the end of which they met

with the Audit Committee without the Groupsmanagement being present.Nestl Group Audit (corporate internal auditors) met

three times with the Audit Committee. In addition, thehead of internal audit regularly met with the Chairmanof the Audit Committee for interim updates.

The Audit Committee reviews annually theappropriateness of retaining KPMG as the auditor ofthe Nestl Group and Nestl S.A., prior to proposingto the Board and to the Annual General Meeting ofNestl S.A. the election of KPMG as auditors. The

Audit Committee assesses the effectiveness of thework of the auditors in accordance with Swiss law,based on their understanding of the Groups business,control, accounting and reporting issues, togetherwith the way in which matters signi cant at Grouplevel or in the statutory accounts are identi ed andresolved.

The Audit Committee is also informed on the workof KPMG through regular brie ngs of its Chairman.The lead auditor is rotated every seven years inaccordance with Swiss law. Audit fees are ultimatelyapproved by the Audit Committee.

The Group and KPMG have agreed on clearguidelines as to audit services which it is appropriatefor KPMG to provide. These services include duediligence on mergers, acquisitions and disposals andtax and business risk assurance and IS/IT advisorysupport. These guidelines ensure KPMGsindependence in their capacity as auditors to theGroup. KPMG monitors its independence throughoutthe year and con rms its independence to the AuditCommittee annually.


22/41


9. Information policyInvestor Relations guiding principlesNestl is committed to managing an open andconsistent communication policy with shareholders,potential investors and other interested parties. The

objective is to ensure that the perception of thoseparties about the historical record, current performanceand future prospects of Nestl is in line withmanagements understanding of the actual situationat Nestl. The guiding principles of this policy are thatNestl gives equal treatment to shareholders in equalsituations, that any price-sensitive information ispublished in a timely fashion and that the informationis provided in a format that is as full, simple, transparentand consistent as possible.

MethodologyNestl produces each year a detailed Annual Report,which reviews the business. It also provides detailedaudited Financial Statements for the year underreview, prepared according to the InternationalFinancial Reporting Standards (IFRS). These arecomplemented by the Half-Yearly Report.

Nestl publishes its full-year and half-year results,and its rst-quarter and nine-months sales gures;it also publishes press releases at the time of anypotentially price-sensitive event, such as signi cantacquisitions and divestments, joint ventureagreements and alliances. Major announcements,such as results of corporate activity, are accompanied

by a presentation which is broadcast live on theInternet and which anyone can choose to access,whether or not that person is a shareholder.

Furthermore, Nestl has an active investor relationsprogramme, including both group meetings andone-to-one meetings. This includes the Annual GeneralMeeting, as well as presentations at the time of itsfull-year and half-year results. The Group also hasa programme of roadshows, which take place in most

nancial centres around the world, and hosts themedevents for institutional investors and investmentanalysts at which members of line management give

an overview of their particular areas of responsibility.These meetings focus either on recently announcednancial results, recent corporate activity or the

longer-term strategy of the Group; they are not anoccasion for the disclosure of new information whichmight encourage an investment decision.

Speci cally on governance topics, the Companyengages into an active dialogue with investors throughregular Chairmans roundtables, surveys and bilateralexchanges which are reported to the Chairmans andCorporate Governance Committee or the Board.

The Company utilises the World Wide Web(www.nestle.com) to ensure a rapid and equitabledistribution of information. Nestl does not just relyon people visiting the site to be updated on the latestdevelopments within the Group: anyone can sign upon the site to be alerted automatically by Nestlwhenever there is a change to the Investor RelationsWeb site; also press releases are distributed to majorwire and news services. There are links tonon- nancial information that may be of interest toinvestors, including areas such as the environment,sustainability, the Nestl Corporate Business Principlesand the Nestl Human Resources Policy.

The Nestl Investor Relations Department can becontacted, either through the Web site, or by telephone,fax, e-mail or letter.

ContactInvestor RelationsNestl S.A., Avenue Nestl 55CH-1800 Vevey (Switzerland)Tel. + 41 (0)21 924 35 09Fax + 41 (0)21 924 28 13E-mail: [email protected]


23/41


General Organisation of Nestl S.A.31 December 2010

Chairmanof the Board

Chief Executive Of cer

Zone AOA:Asia, Oceania and Africa

Zone AMS:Americas

Executive Board

P. BulckeW. BauerF. van DijkL. CantarellJ. LopezJ. J. HarrisJ. SinghL. FreixeP. HeynikeM. CairaJ.-M. DuvoisinD. Nandkishore

D. P. Frick

CorporateCommunications Human Resources

Corporate GovernanceCompliance &

Corporate Services

Operations Finance & Control Strategic Business Units,Marketing and Sales

Nestl WatersNestl Nutrition

Zone EUR:Europe

InnovationTechnology and R&D

Nestl Professional

P. Brabeck-Letmathe

P. Bulcke

F. van Dijk L. Cantarell

R. Ramsauer J.-M. DuvoisinD. P. Frick

J. Lopez J. Singh P. Heynike

J. J. HarrisD. Nandkishore

L. Freixe

W. Bauer

M. Caira


24/41

Appendix 1:CompensationReport 2010


25/41

24 Corporate Governance Report 2010 Appendix 1

IntroductionThe future success of Nestl is dependent on its abilityto attract, motivate and retain good people. Among thevarious programmes to support this ambition isa competitive remuneration policy. Nestl believes

in a performance culture as well as good corporategovernance and corporate social responsibility.

Therefore, remuneration at Nestl is based on the followingprinciples: pay for performance to support the short-term and

long-term objectives; compensation aligned with long-term Group strategy

and shareholders interests; coherence in our remuneration plans and levels

throughout the Company; appropriate balance of xed and variable remuneration

depending on hierarchical level to ensure a directparticipation in results achieved.

As last year, the Compensation Report shall be submittedto the advisory vote of the shareholders at the next AnnualGeneral Meeting.

Changes to the compensation systemThis report describes Nestls compensation system for 2010.The Compensation Committee has decided on the followingmaterial changes to our compensation system for 2011 : the range at which Performance Share Units (PSUs)

shall vest was extended to between 0% (instead of 50%)to 200% of the initial grant thus introducing symmetry

between the upside and the downside and ensuringmaximum alignment with shareholders interest.

for the PSUs, additional performance criteria will beconsidered in the future (in addition to the relative NestlTotal Shareholder Return against the STOXX Europe 600Food & Beverage Index).

compensation for the Chairman of the Board will be paidin the form of cash and Nestl S.A. shares, which areblocked for three years. The use of stock options will bediscontinued.

Compensation Report 2010


26/41

Corporate Governance Report 2010 Appendix 1

GovernanceThe Board of Directors has the overall responsibility for de ning the compensation principles used in the Group. It approvesthe compensation of the members of the Board, its Chairman, the CEO and the Executive Board as a whole.

The governance for setting the compensation of the members of the Board of Directors and the Executive Board isde ned as follows:

Compensation of Recommended by Approved byChairman of the Board, CEO andExecutive Board as a whole

Compensation Committee Board of Directors (a)

Non-executive members of the Board of Directors Compensation Committee Board of Directors (b)

Members of the Executive Board CEO together wi th Chai rman Compensation Committee

(a) Chairman as well as CEO not voting on own compensati on.(b) Members not voting on own compensation to the extent that Committee fees are concerned.

Compensation Committee (CC)The CC is governed by the Compensation Committee Charter. The Committee consists of the Chairperson who is anindependent and non-executive member of the Board, one of the Vice Chairmen of the Board and two other non-executivemembers of the Board.

The members of the CC and its Chairperson are appointed by the Board of Directors for a period of one year.On 31 December 2010, the composition of the CC was as follows:

Chairman Members

Mr Daniel Borel Mr Andreas Koopmann

Mr Jean-Ren Fourtou

Mr Jean-Pierre Meyers


27/41


Compensation 2010 for the members of the Board of DirectorsBoard membership fees and allowancesWith the exception of the Chairman and the CEO, each member of the Board of Directors receives a Board membershipfee of CHF 280 000 and an Expense Allowance of CHF 15 000. These gures have remained unchanged since 2006.

Members of a Board Committee receive the following additional fees:

Chair Members

Chairmans and Corporate Governance Committee (a) CHF 200 000

Compensation Committee CHF 100 000 CHF 40 000

Nomination Committee CHF 100 000 CHF 40 000

Audit Committee CHF 150 000 CHF 100 000

(a) The Chairman and the CEO receive no Committee fee.

Committee membership on 31 December 2010

Chairmans and CorporateGovernance Committee

CompensationCommittee

NominationCommittee

AuditCommittee

Peter Brabeck-Letmathe (Chair)

Paul Bulcke

Andreas Koopmann (Chair)

Rolf Hnggi (Chair)

Jean-Ren Fourtou

Daniel Borel (Chair)

Jean-Pierre Meyers

Andr Kudelski

Carolina Mller-Mhl

Steven G. Hoch

Nana Lal Kidwai

Beat Hess

Titia de Lange

Jean-Pierre Roth

The above fees and allowances cover the period between the Annual General Meeting 2010 and the Annual GeneralMeeting 2011. Board membership and the Committee fees are paid 50% in cash and 50% in Nestl S.A. shares, whichare subject to a two-year blocking period.

The number of Nestl S.A. shares is determined by taking the closing price of the share on the SIX Swiss Exchange onthe ex-dividend date of the respective nancial year, discounted by 11% to account for the blocking period of two years.In 2010 the value was CHF 45.61.


28/41


Summary of compensation

Cash in CHF (a)

Number

of shares Discounted value

of shares in CHF (b)T

remuneratio

Peter Brabeck-Letmathe, Chairman (c) see details below 8 326 344

Paul Bulcke, Chief Executive Of cer (c)

Andreas Koopmann, 1st Vice Chairman 325 000 6 049 275 910 600 910Rolf Hnggi, 2nd Vice Chairman 330 000 6 147 280 380 610 380

Jean-Ren Fourtou 275 000 5 074 231 438 506 438

Daniel Borel 205 000 3 708 169 131 374 131

Jean-Pierre Meyers 175 000 3 122 142 402 317 402

Andr Kudelski 205 000 3 708 169 131 374 131

Carolina Mller-Mhl 175 000 3 122 142 402 317 402

Steven G. Hoch 175 000 3 122 142 402 317 402

Nana Lal Kidwai 205 000 3 708 169 131 374 131

Beat Hess 205 000 3 708 169 131 374 131

Titia de Lange 155 000 2 732 124 613 279 613

Jean-Pierre Roth 155 000 2 732 124 613 279 613

Total for 2010 2 585 000 46 932 2 140 684 13 052 028

Total for 2009 2 275 000 56 792 1 891 390 11 654 226

(a) The cash amount includes the expense allowance of CHF 15 000.(b) Nestl S.A. shares received as part of the Board membership and the Committee fees are valued at the closing price of the share on the SIX Swiss Exchange

on the ex-dividend date, discounted by 11% to account for the blocking period of two years.(c) The Chairman and the Chief Executive Of cer re ceive neither Board membership or Committee fees nor expense allowance.

During 2010, two new Board members joined the Board.Peter Brabeck-Letmathe, in his capacity as active Chairman, received a xed compensation as well as a variable

compensation linked to a speci c set of objectives independently set by the Board payable in Nestl S.A. shares, whichare blocked for three years. He also received, for the last time, Long-Term Incentives in the form of stock options. Thisin particular re ects certain responsibilities for the direction and control of the Group including the Nestl Health Science

Company and the direct leadership of Nestls interests in Galderma and LOral. He also represents Nestl at the EuropeanRound Table of Industrialists and at the Foundation Board of the World Economic Forum (WEF). All correspondingcompensation is included in the disclosed amount. His total compensation was:

2010 2Number Value in CHF Number Value in CHF

Fixed compensation 1 600 000 1 600 0

Variable compensation (discounted value of shares) 80 475 3 526 424 63 668 2 686 83

Long-Term Incentives (fair value at grant) 477 600 3 199 920 660 000 3 201 00

Total compensation 8 326 344 7 487 83


29/41


Share and stock option ownership of the non-executive members of the Board of Directorsand closely related parties on 31 December 2010

Number of

shares held (a)Number of

options held (b)

Peter Brabeck-Letmathe, Chairman 1 850 652 3 093 600

Andreas Koopmann, 1st Vice Chairman 67 034 Rolf Hnggi, 2nd Vice Chairman 66 405

Jean-Ren Fourtou 22 773

Daniel Borel 199 796

Jean-Pierre Meyers 1 422 508

Andr Kudelski 46 396

Carolina Mller-Mhl 164 942

Steven G. Hoch 177 578

Nana Lal Kidwai 12 576

Beat Hess 12 176

Titia de Lange 2 732

Jean-Pierre Roth 2 732

Total as at 31 December 2010 4 048 300 3 093 600

Total as at 31 December 2009 3 426 908 3 791 000

(a) Including blocked shares.(b) The ratio is one option for one Nestl S.A. share.

LoansThere are no loans to non-executive members of the Board of Directors.


30/41


Principles of compensation for membersof the Executive BoardPrinciplesThe compensation programmes for members of theExecutive Board are based on three major objectives:

Pay for performanceAs a direct re ection of this objective, the Total DirectCompensation package for the members of the ExecutiveBoard includes a xed Annual Base Salary and a variablepart, which is a combination of a Shor t-Term (Annual) Bonusand Long-Term Incentives. For the members of theExecutive Board, the variable and performance-related partmakes up between 50% and 80% of the Total DirectCompensation. The criteria and objectives which are usedare re ecting performance as well as the quality andsustainability of such performance and risk considerations.All variable compensation includes maximum award limits.

Alignment with long-term company strategy andshareholders interestsExecutive compensation is aligned with company strategyand shareholders interests. Part or all of any Short-TermBonus is paid in the form of Nestl S.A. shares instead ofcash. Long-Term Incentives are provided in the form ofPerformance Share Units (PSUs), Stock Options on Nestl S.A.shares or Restricted Stock Units (RSUs). All share-basedelements have restriction periods of three years. This wayof compensating presents a balance between annual andLong-Term Incentives and underlines the close connection

and alignment between the interests of the members of theExecutive Board and the shareholders.

Compensation to be internationally competitiveTo ensure that the remuneration of the membersof the Executive Board is internationally competitive,the Compensation Committee is using the followingbenchmarks: STOXX Europe 50 companies (without nancial industry

companies): this is our primary benchmark and includesthe largest European companies which are of a sizecomparable to Nestl;

European Fast Moving Consumer Goods companies:this is a secondary benchmark and includes large andmedium sized European companies which are operatingin the same industry sector as Nestl;

Swiss Market Index (SMI) companies: as anothersecondary benchmark this index includes industrialcompanies which are headquartered in Switzerland andre ects Swiss remuneration practices.

Nestl targets its remuneration to be between the median andthe 75th percentile of the benchmark. Whenever appropriate,the benchmark values are adjusted for the size of Nestl.

Periodically, the Compensation Committee uses theservices of Towers Watson, a reputed international

compensation consultancy, to provide a detailed marketcomparison. The results of the study con rmed that TotalDirect Compensation is broadly in line with the marketmedian, adjusted for the size of Nestl.

Elements of Executive Board compensationThe total compensation package consists of the followingelements:

1. Annual Base SalaryThe Annual Base Salary is the foundation of the totalcompensation. It also serves as the basis for determiningthe second element, the Short-Term Bonus, and the thirdelement, the Long-Term Incentives. It is reviewed annuallyby the CC based upon the individual contribution and withthe objective to keep it competitive against our chosenpeer groups.

2. Short-Term BonusThe Short-Term Bonus or annual bonus is expressed asa bonus target, which is a percentage of the Annual BaseSalary. The objectives to be reached are set at the beginningof each year; they include collective as well as individualobjectives and re ect the Companys strategy. Collectiveobjectives are Nestl Group measurable operational

objectives such as organic growth, real internal growth (RIG),EBIT performance, capital expenditure and one or twoadditional speci c objectives used by the Board to evaluateperformance. They also include certain non- nancial targets.Individual objectives are determined by the CEO for eachmember of the Executive Board. In case an executivereaches all objectives in full, the bonus payout willcorrespond to the targeted level. If one or more objectivesare not reached, the bonus is reduced. Accordingly, paymentre ects the achievement of targets.

For the CEO, 100% of the target is made up by NestlGroup objectives as described above. For the other

members of the Executive Board, 30% of the target isallocated to Nestl Group objectives and 70% is determinedon the basis of individual (quantitative and qualitative)as well as other collective objectives (e.g. objectives ofthe Zone, Globally Managed Business or Function).For competitive reasons Nestl does not further specifythe details of its objectives.


31/41


In 2010, the following target levels were applicable(expressed in % of Annual Base Salary): CEO: 200% Executive Vice President: 100% Deputy Executive Vice President: 80%.

The bonus payout can reach a maximum of 130% of thetarget. There is no guarantee for the payout of a minimumbonus.

A minimum of half of the CEOs bonus is payable in theform of Nestl S.A. shares. Other members of the ExecutiveBoard can elect to receive part or all of their bonus in theform of Nestl S.A. shares instead of cash. Nestl S.A. sharestaken instead of cash are subject to a three-year blockingperiod. For purposes of the conversion of cash into shares,the conversion value of a Nestl S.A. share is determinedas the average closing price of the last ten trading days ofJanuary of the year of the payment of the bonus. The valueof these shares is determined by taking the conversionvalue discounted by 16.038% to account for the three-yearblocking period.

3. Long-Term IncentivesMembers of the Executive Board are eligible to receiveLong-Term Incentives in the form of Stock Options underthe Management Stock Option Plan (MSOP) and PerformanceShare Units under the Performance Share Unit Plan (PSUP).The target grant value for Long-Term Incentives is 200% ofthe Annual Base Salary for the CEO and 100% of the AnnualBase Salary for the other members of the Executive Board.One half of the Long-Term Incentives grant is provided

in the form of Stock Options and the other half in the formof Performance Share Units. The fair value of Long-TermIncentives at grant is determined by using generally acceptedpricing models.

The Management Stock Option Plan (MSOP) providesnon-tradable options on Nestl S.A. shares . Each optiongives the right to purchase at the exercise price one Nestl S.A.share. The exercise price for the Stock Options correspondsto the average Nestl S.A. share price of the last ten tradingdays preceding the grant date. The Stock Options vest threeyears after the grant. Upon vesting, the options have an

exercise period of four years before they expire.

The Performance Share Unit Plan (PSUP) was introducedat the beginning of 2009 and provides units which entitleparticipants to receive freely disposable Nestl S.A. sharesat the end of the three-year restriction period.

The level at which PSUs vest shall be determined by thedegree by which the performance measure of the PSUP hasbeen met. The performance measure is the relative Total

Shareholder Return of the Nestl S.A. share compared tothe STOXX Europe 600 Food & Beverage Index. The Boardfor the time being considers the Total Shareholder Returnthe most objective benchmark as it re ects additionalperformance criteria such as EPS. In 2010 the range

at which PSUs shall vest was between 50% to 200%of the initial grant, thus providing additional performancecriteria to ensure alignment with strategy and shareholdersinterests.

The Restricted Stock Unit Plan (RSUP) provides unitswhich entitle participants to receive freely disposableNestl S.A. shares at the end of the three-year restrictionperiod on a one for one ratio.

4. Other bene tsThe Company limits other bene ts to a minimum. Typicalelements are a car allowance (there are no company carsprovided to the members of the Executive Board),a contribution towards health insurance premiums as well aslong-service awards in line with company policy, as offeredto other employees. Those Executive Board members whohave been transferred to Switzerland from other Nestllocations can receive bene ts in line with the NestlCorporate Expatriation Policy.

5. Pension bene tsExecutive Board members domiciled in Switzerland areaf liated to the Nestl Pension Plan in Switzerland like allother employees. The Plan is designed as a de ned

contribution plan with a retirement pension objective,expressed as a percentage of the Annual Base Salary.

This means that the pensionable earnings include theAnnual Base Salary, but not the variable compensation(Short-Term Bonus or Long-Term Incentives). Any part ofthe Annual Base Salary which exceeds the ceiling prescribedby the Swiss Pension Law is covered directly by the Company.

Share ownership policyThe Company does not have a share ownership policyrequiring members of the Executive Board to own and holdNestl S.A. shares.

LoansThe Company does not, as a rule, grant loans, except thatit may provide advances free of interest and generallyrepayable over a three-year period to members of theExecutive Board who have been transferred to Switzerlandfrom other Nestl locations in line with the Nestl CorporateExpatriation Policy.


32/41


Contracts of employment and severance paymentsMembers of the Executive Board are normally subject to a generally applicable notice period of six months. During thistime, unless there was termination for cause, entitlement to Annual Base Salary and pro-rated Short-Term Bonus continue.There are no severance or change of control provisions (golden parachutes).

BenchmarksSee above principles of compensation for members of the Executive Board.

Compensation 2010 for members of the Executive BoardThe total compensation paid to members of the Executive Board in 2010 was CHF 48 809 452

Compensation for members of the Executive Board in CHF

2010

2009

Annual Base Salary 13 481 667 12 916 667

Short-Term Bonus (cash) 10 407 086 7 973 387

Short-Term Bonus (discounted value of Nestl S.A. share) 7 199 363 6 558 682

Stock Options (fair value at grant) 7 217 910 7 203 220

Performance Share Units (fair value at grant) 7 563 929 7 438 676Restricted Stock Units (fair value at grant) 379 819 276 889

Other bene ts 2 559 678 756 043

Total 48 809 452 43 123 564

The Company also made contributions of CHF 3 689 774 towards future pension bene ts of the Executive Boardsmembers in line with Nestls Pension Bene t Policy described above (2009: CHF 1 114 968).

The above compensation table includes the following:

2010 2009

Number of Nestl S.A. shares granted 164 294 155 419

Number of Stock Options granted under the MSOP 1 077 300 1 485 20

Date post:	03-Jun-2018
Category:	Documents
Upload:	vu-pham
View:	219 times
Download:	0 times

Corp Governance Report 2010 En

Documents