corp governance report 2011 en

8/2/2019 Corp Governance Report 2011 En

1/42

Corporate Governance Report 2011


2/42

1. Groupstructureandshareholders

1.1 Group structure

1.2 Signifcant shareholders

1.3 Cross-shareholdings

2. Capitalstructure

2.1 Capital

2.2 Conditional capital

2.3 Changes in capital

2.4 Shares and participation certifcates2.5 Proft sharing certifcates

2.6 Limitations on transerability and nominee registrations

2.7 Convertible bonds and options

3. BoardofDirectors(1)

3.1 Members o the Board o Directors

3.2 Proessional background and other activities and unctions

3.3 Elections and terms o ofce

3.4 Internal organisational structure

3.5 Defnition o areas o responsibility

3.6 Inormation and control instruments vis--vis the Executive Board (2)

4. ExecutiveBoard

4.1 Members o the Executive Board

4.2 Proessional background and other activities and unctions

4.3 Management contracts

5. Compensations,shareholdingsandloans

6. Shareholdersparticipation

6.1 Voting rights and representation restrictions

6.2 Statutory quorums

6.3 Convocation o the General Meeting o shareholders

6.4 Inclusion o item on the agenda

6.5 Inscriptions into the share register

7. Changeofcontrolanddefencemeasures

7.1 Duty to make an oer

7.2 Clauses on change o control

8. Auditors

8.1 Duration o the mandate and term o ofce o the lead auditor

8.2 Auditing ees

8.3 Additional ees

8.4 Supervisory and control instruments pertaining to the audit

9. Informationpolicy

GeneralOrganisationofNestlS.A.

Appendix1:CompensationReport2011

Appendix2:ArticlesofAssociationofNestlS.A.

Situationat 3

31December2011 3

3

3

4

4

4

4

44

4

5

6

6

7

10

11

13

14

15

15

16

19

19

19

19

20

20

20

20

20

20

20

21

21

21

21

21

22

23

25

37

(1) The ull Board o Directors Regulations and Committee Charters are published on www.nestle.com.

(2) The term Executive Committee, as used in the SIX Directive, is replaced by Executive Board throughout this document.


3/42

Corporate Governance Repor t 2011

Preliminary remarks

The Nestl Corporate Governance Report 2011 ollows the

SIX Swiss Exchange Directive on Inormation relating to

Corporate Governance and takes into account the Swiss

Code o Best Practice or Corporate Governance. Additional

inormation can be ound in the Compensation Report

(Appendix 1).To avoid duplication o inormation, cross-reerencing to

other reports is made in some sections, namely the Annual

Report 2011, the 2011 Financial Statements that comprise

the Consolidated Financial Statements o the Nestl Group

and the Financial Statements o Nestl S.A., as well as the

Articles o Association o Nestl S.A., whose ull text can be

consulted in Appendix 2 or on www.nestle.com.

The 2011 Consolidated Financial Statements o the Nestl

Group comply with International Financial Reporting

Standards (IFRS) issued by the International Accounting

Standards Board (IASB) and with the Interpretations issued

by the International Financial Reporting Interpretations

Committee (IFRIC). Where necessary, these disclosures

have been extended to comply with the requirements o

the SIX Swiss Exchange Directive.

1. Groupstructureandshareholders

1.1 Groupstructure

Please reer to the Annual Report 2011 or the overview

o Directors and Ofcers.

1.1.1 Description o the issuers operational group structure

For the general organisation chart o Nestl S.A.,

reer to page 23 o this document. The Groups

Management structure is represented in the analysisby operating segments (reer to Note 3 o the 2011

Consolidated Financial Statements o the Nestl Group).

1.1.2 All listed companies belonging to the issuers group

Please reer to page 48 o the Annual Report 2011 or

Nestl S.A.s registered ofces, its stock exchange

listing and quotation codes and inormation on market

capitalisation.

Please reer to the 2011 Consolidated Financial

Statements o the Nestl Group, page 120 or a list o

the principal afliated and associated companies,

with an indication o their company names, registeredofce, share capital, place o listing, securities ISIN

numbers, their market capitalisation and the

Companys participation.

1.1.3 The non-listed companies belonging

to the issuers consolidated entities

Please reer to the 2011 Consolidated Financial

Statements o the Nestl Group, page 120 or th

enumeration o the principal afliated and asso

companies, with an indication o their companyregistered ofce, share capital and the Compan

participation.

1.2 Signicantshareholders

On 31 December 2011, Nestl S.A. held, togeth

a Nestl subsidiary, 128 020 079 treasury share

representing 3.9% o the share capital, includin

75 200 000 shares repurchased under Nestl S

Share Buy-Back Programme o CHF 10 billion

completed on 6 September 2011 (reer to Note

the 2011 Consolidated Financial Statements o

Nestl Group). During 2011, the Company publi

on the electronic publication platorm o the SIX

Exchange one disclosure notifcation pertaining

holding o its own shares. This holding ell belo

threshold o 5% on 22 June 2011 as a conseque

the capital reduction eected by the Company.

With respect to nominees, Chase Nominees

London, was a registered Nominee N (reer to p

2.6.3. below) o 346 904 083 shares, i.e. 10.5%

shares o the Company as at 31 December 2011

same date, Citibank N.A., London, as a deposita

the shares represented by American Depositary

Receipts, was the registered holder o 243 575

shares, i.e. 7.4% o the shares o the Company. on 31 December 2011, Nortrust Nominees Ltd,

London, was a registered Nominee N o 112 86

shares o the Company, representing 3.5% o th

shares.

Further, Mellon Bank N.A., Everett, was a reg

Nominee N o 109 326 112 shares, i.e. 3.3% o t

shares o the Company as at 31 December 2011

1.3 Cross-shareholdings

The Company is not aware o cross-shareholdin

exceeding 5% o the capital or voting rights on

sides.


4/42

4 Corporate Governance Repor t 2

2. Capitalstructure

2.1 Capital

The ordinary share capital o Nestl S.A. is

CHF 330 000 000. The conditional share capital is

CHF 10 000 000. Nestl S.A. does not have any

authorised share capital.

2.2 Conditionalcapital

The share capital may be increased in an amount

not to exceed CHF 10 000 000 by issuing up to

100 000 000 registered shares with a nominal value o

CHF 0.10 each through the exercise o conversion

rights and/or option rights granted in connection with

the issuance by Nestl or one o its subsidiaries o

newly or already issued convertible debentures,

debentures with option rights or other fnancial market

instruments. Thus the Board o Directors has at its

disposal a exible instrument enabling it, i necessary,

to fnance the activities o the Company through

convertible debentures.

For a description o the group o benefciaries and

o the terms and conditions o the issue o conditional

capital, reer to art. 3bis o the Articles o Association

o Nestl S.A.

2.3 Changesincapital

The share capital was reduced three times in the last

three fnancial years as a consequence o several Share

Buy-Back Programmes launched by the Company; the

resulting cancellations o shares were approved at the

Annual General Meetings o 23 April 2009, 15 April 2010and 14 April 2011.

In 2009, the Annual General Meeting resolved to

reduce the share capital by 180 000 000 shares to

CHF 365 000 000.

In 2010, the share capital was urther reduced

by 185 000 000 shares to CHF 346 500 000. In 2011,

the Annual General Meeting approved a reduction

o the share capital by 165 000 000 shares to

CHF 330 000 000.

For the breakdown o capital (equity) or 2011,

2010 and 2009 see the changes in equity in the 2011

and 2010 Consolidated Financial Statements o theNestl Group.

2.4 Sharesandparticipationcerticates

Nestl S.A.s capital is composed o registered

shares only. The number o registered shares with

a nominal value o CHF 0.10 each, ully paid up,

was 3 300 000 000 at 31 December 2011.

According to art. 11 par. 1 o the Articles oAssociation, each share recorded in the share registe

as a share with voting rights coners the right to

one vote to its holder. See also point 2.6.1 below.

Shareholders have the right to receive dividends.

There are no participation certifcates.

2.5 Protsharingcerticates

There are no proft sharing certifcates.

2.6 Limitationsontransferability

andnomineeregistrations

2.6.1 Limitations on transerability or each share category

along with an indication o statutory group clauses, i

any, and rules or granting exceptions

According to art. 5 par. 5 o the Articles o Associatio

no person or entity shall be registered with voting

rights or more than 5% o the share capital as

recorded in the commercial register. The limitation o

registration also applies to persons who hold some

or all their shares through nominees pursuant to that

article. Legal entities 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 achieving an understanding or orming a

syndicate or otherwise acting in concert to circumvethe regulations concerning the limitation on registrati

or the nominees, shall be counted as one person or

nominee (art. 5 par. 7 o the Articles o Association).

The limitation on registration also applies to shares

acquired or subscribed by the exercise o subscriptio

option or conversion rights (art. 5 par. 10 o the

Articles o Association). See also art. 5 par. 6 and 9

o the Articles o Association and point 2.6.3 below.

2.6.2 Reasons or granting exceptions

in the year under review

Please reer to points 2.6.3 and 6.1.2 below.


5/42


2.6.3 Admissibility o nominee registrations, along with an

indication o percent clauses, i any, and registration

conditions

Pursuant to art. 5 par. 6 and 9 o the Articles o

Association, the Board o Directors has issued

regulations concerning nominees, setting orth rulesor their entry as shareholders in the share register.

These regulations allow the registration o:

Nominees N (N as Name o benefcial owner

disclosed): where trading and saekeeping practices

make individual registration o benefcial owners

difcult or impractical, shareholders may register

their holdings through a Nominee N with voting

rights, subject to the specifc understanding that

the identity and holdings o benefcial owners are to

be disclosed to the Company, periodically or upon

request. Voting rights o Nominees are to be

exercised on the basis o voting instructions received

rom the benefcial owners. Holdings o a Nominee N,

or Nominees N acting as an organised group or

pursuant to a common agreement, may not exceed

5% o the share capital o the Company. Holdings

exceeding the 5% limit (respectively the limit fxed

by the Board o Directors, see point 6.1.2 below) are

registered without voting rights. The responsibility

or disclosure o benefcial owners and their

holdings resides with the nominees registered in

the share register.

Nominees A (A as Anonymous benefcial owner):

registration without voting rights.

2.6.4 Procedure and conditions or cancelling

statutory privileges and limitations on transerability

Please reer to point 6.1.3 below.

2.7 Convertiblebondsandoptions

As at 31 December 2011, there were 8 500 000

outstanding put options, sold, in the context o global

liquidity management, by a Nestl subsidiary on

Nestl S.A. shares, which i exercised would represent

0.26% o the share capital o the Company.(a)

(a) Ratio (or all options) 1:1; 1 000 000 options: maturity 21 December 2012 / strike price CHF 47.00; 300 000 options: maturity 20 July 2012 / strike p

CHF 51.00; 900 000 options, maturity 17 August 2012 / strike price CHF 51.00; 600 000 options: maturity 24 August 2012 / strike price CHF 51.00;

options: maturity 21 September 2012 / strike price CHF 51.00; 250 000 options: maturity 16 November 2012 / strike price CHF 51.00; 300 000 optio

maturity 17 August 2012 / strike price CHF 52.00; 300 000 options: maturity 24 August 2012 / strike price CHF 52.00; 300 000 options: maturity 21

ber 2012 / strike price CHF 52.00; 900 000 options: maturity 19 October 2012 / strike price CHF 52.00; 800 000 options: maturity 16 November 201

price CHF 52.00; 1 150 000 options maturity 23 November 2012 / strike price CHF 52.00; 800 000 options: maturity 21 December 2012 / strike pric

CHF 52.00.


6/42


3. BoardofDirectors

3.1 MembersoftheBoardofDirectors

First Term

Name Year o birth Nationality Education/Qualifcations (a) election expires

Peter Brabeck-Letmathe 1944 Austrian Economics 1997 2013

ChairmanPaul Bulcke 1954 Belgian Economics and Business 2008 2014

CEO Administration

Andreas Koopmann 1951 Swiss Mechanical Engineering 2003 2014

1st Vice Chairman and Business Administration

Rol Hnggi 1943 Swiss Law and Finance 2004 2014

2nd 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 2014

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 2013

and Economics

Nana Lal Kidwai 1957 Indian Economics and Business 2006 2014

Administration

Beat Hess 1949 Swiss Law 2008 2014

Titia de Lange 1955 Dutch Biochemistry 2010 2013

Jean-Pierre Roth 1946 Swiss Economics and Finance 2010 2013

Ann M. Veneman 1949 American Law and Political Science 2011 2014

(a) For more complete inormation on qualifcations: please reer to individual CVs on www.nestle.com.

a) Management tasks o the members

o the Board o Directors

With the exception o Paul Bulcke, all members othe Board o Directors are non-executive members.

Peter Brabeck-Letmathe is active Chairman and has

certain responsibilities or the direction and control

o the Group including the Nestl Health Science

Company and Nestls engagements with LOral,

Galderma and Laboratoires innov.

b) Inormation on non-executive members

o the Board o Directors

With the exception o Peter Brabeck-Letmathe, all

non-executive members o the Board o Directors

are independent, were not previously members

o the Nestl management and have no importantbusiness connections with Nestl.

c) Cross-involvement

Peter Brabeck-Letmathe and Jean-Pierre Meyers

are on the Board o Directors o both Nestl and

LOral.


7/42


3.2 Professionalbackgroundandotheractivities

andfunctions

PeterBrabeck-Letmathe,Chairman

Peter Brabeck-Letmathe joined the Nestl

Groups operating company as a salesman

in Austria in 1968. Between 1970 and 1987,he held a series o responsibilities in Latin

America. In 1987, he was transerred to

Nestls International Headquarters in Vevey,

Switzerland, as Vice President and was named

Executive Vice President in 1992. At the Annual

General Meeting o Shareholders in June 1997, Peter

Brabeck-Letmathe was elected member o the Board

o Nestl S.A. In 1997, the Board o Directors o

Nestl S.A. appointed him Chie Executive Ofcer

(CEO). In 2001, he was elected Vice Chairman and in

2005 Chairman o the Board o Directors. As o

10 April 2008, Peter Brabeck-Letmathe relinquished

his unction as CEO remaining Chairman o the Board

o Directors.

As a Nestl S.A. representative, he serves as Vice

Chairman o LOral S.A., France.

Peter Brabeck-Letmathe is also Vice Chairman

o the Board o Directors o Credit Suisse Group,

Switzerland, and member o the Boards o the Exxon

Mobil Corporation, Texas, USA and o Delta Topco

Limited, Jersey.

In addition, he is a member o the European Round

Table o Industrialists, Belgium, a member o the

Foundation Board o the World Economic Forum,

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

PaulBulcke,CEO

Paul Bulcke began his career in 1977

as a fnancial analyst or Scott Graphics

International in Belgium beore moving

to the Nestl Group in 1979 as a marketing

trainee. From 1980 to 1996, he held various

responsibilities in Nestl Peru, Nestl Ecuador and

Nestl Chile beore moving back to Europe as

Managing Director o Nestl Portugal, Nestl Czech

and Slovak Republic, and Nestl Germany. In 2004,he was appointed as Executive Vice President,

responsible or Zone Americas. As o April 2008, Paul

Bulcke was elected member o the Board o Directors

o Nestl S.A. and the Board appointed him Chie

Executive Ofcer (CEO).

As a representative o Nestl, Paul Bulcke se

as Co-Chairman o the Supervisory Board o Ce

Partners Worldwide, Switzerland.

Furthermore, Paul Bulcke is a Board membe

Roche Holding Ltd., Switzerland as well as o th

Consumer Goods Forum and co-chairs its GoveCommittee.

AndreasKoopmann,1stViceChairman

Andreas Koopmann began his caree

1979 as Assistant to the Chairman a

CEO o Bruno Piatti AG, Switzerland

rom 1980 to 1982 was Assistant to

Group Executive at Motor Columbu

Holding, Switzerland. From 1982, he was at Bo

Group, starting as Vice President o Engineering

Manuacturing in Roseland, New Jersey, USA.

1989, he returned to Switzerland, holding a num

senior positions in the company, including mem

o the Group Executive Committee in charge o

Manuacturing. He was a member o the Board

Directors or Bobst Group rom 1998 to 2002 an

was appointed as CEO in 1995, a position he he

May 2009. As o 2010, Andreas Koopmann was

appointed Chairman o Alstom (Suisse) S.A. and

Country President.

Presently, he serves as Vice Chairman o Sw

in Switzerland and as Board member o Credit S

Group, Switzerland, CSD Group, Switzerland an

Georg Fischer AG, Switzerland.

RolfHnggi,2ndViceChairman

In 1970 Rol Hnggi started his care

as a fnancial and investment analys

Swiss Bank Corporation, Switzerlan

beore moving on to the Union Bank

Switzerland and then to the Basella

Cantonal Bank, Switzerland. In 1976 he joined Z

Insurance Company and in 1986 became a mem

o the Corporate Executive Board and Head o f

and investments in securities, worldwide. He w

appointed Deputy CEO o Zurich Insurance Com

in 1988, serving as a Board member rom 1993 1997, beore becoming a private consultant.

From 1994 to April 2009, Rol Hnggi also se

Chairman o Rd, Blass & Cie AG, Bankers, Swit

Presently, he is a member o the Board o Tru

o the Foundation Lutbild Schweiz, Switzerland

a member o the Foundation Board, Werner Ab

Fonds, Switzerland until the end o the year 201


8/42


also sits on the Advisory Board or the Mastercourse

o Advanced Studies in Applied History at the

University o Zurich, Switzerland.

Jean-RenFourtou

Jean-Ren Fourtou began his career atBossard & Michel in 1963. He became CEO

o Bossard Consultants in 1972 and later

Chairman and CEO o the Bossard Group

rom 1977 to 1986.

From 1986 to 1999, he served as Chairman and

CEO o Rhne-Poulenc Group, and when Hoechst and

Rhne-Poulenc merged to create Aventis in 1999, he

became Vice Chairman o the Management Board and

Managing Director o the company until 2002. Since

2005, he has been Chairman o the Supervisory Board

o Vivendi, where he was Chairman and CEO rom

2002 to 2005.

Jean-Ren Fourtou is Chairman o the Bordeaux

University Foundation, France. He also serves as a

Board member o Sanof-Aventis, France and o Maroc

Tlcom, Morocco.

DanielBorel

Daniel Borel is the co-ounder o Logitech.

He served as Chairman and CEO o

Logitech S.A. rom 1982 to 1988 and o

Logitech International S.A. rom 1992

to 1998. Since 1998, he has served as

Chairman o Logitech International S.A. As o January

2008, Daniel Borel handed over the ofce o Chairmanremaining a member o the Board o Directors o

Logitech International S.A.

In addition, he is President o the EPFL Plus

Foundation and serves as Chairman o swissUp, a

Foundation or Excellence in Education in Switzerland,

and is a member o the Board o Deftech Foundation,

Switzerland.

Jean-PierreMeyers

From 1972 to 1980, Jean-Pierre Meyers

was attached to the directorate o fnancial

aairs at Socit Gnrale. During thesame time he was Assistant Proessor at

the Ecole Suprieure de Commerce in

Rouen, France. From 1980 to 1984, he was a Director

o the bank Odier Bungener Courvoisier. Jean-Pierre

Meyers has been a Board member o LOral S.A.,

France, since 1987 and Vice Chairman since 1994. He

has also served as Vice Chairman o the Bettencourt

Schueller Foundation since 1988.

In addition, Jean-Pierre Meyers is CEO and a

member o the Supervisory Board o Tthys S.A.S.

in France.

AndrKudelski

Andr Kudelski started his career in 1984

at Kudelski SA, Switzerland, as a research

and development engineer. Ater working

in Silicon Valley, he returned to Kudelski S

in 1986 and was appointed product

manager or Pay-TV solutions. From 1989 to 1990, he

was the director o the Pay-TV division (NagraVision)

beore taking over the position o Chairman and CEO

o the Kudelski Group in 1991. In addition, he becam

Chairman o Nagra Plus SA, a joint venture o

Kudelski SA and Canal Plus in 1992.

Andr Kudelski serves on the Board o Directors

and the Audit Committee o Dassault Systmes SA,

France, and Edipresse Group, Switzerland. Furthermo

he is a Board member o HSBC Private Banking

Holdings (Suisse) S.A. and Vice Chairman o the Boa

o Directors o the Swiss-American Chamber o

Commerce.

CarolinaMller-Mhl

Carolina Mller-Mhl started her career a

a PR consultant. In 1999 she served as

Vice Chairperson o the Board o Director

o Mller-Mhl Holding AG and becamePresident o the Mller-Mhl Group in 200

Carolina Mller-Mhl is a Board member o NZZ

Mediengruppe, Switzerland, and o SMG,

Schweizerische Management Gesellschat. She is als

Chairperson o Hyos Invest Holding AG, Switzerland,

and a Board member o Orascom Development

Holding AG, Switzerland.

In addition, she is a member o the Foundation

Board o Pestalozzianum, Switzerland, a member o

the Advisory Board o the Swiss Economic Forum,

a member o the Board o the Pestalozzi Foundation

and a ounding member and Co-President o theForum Bildung. Furthermore, Carolina Mller-Mhl is

also a member o the Foundation Board o Avenir

Suisse, a think tank or economic and social issues.

She was nominated as a Young Global Leader 200

by the World Economic Forum, and does a lot o wo

in the socio-political feld, with a particular commitme

to education policy and gender issues.


9/42


StevenG.Hoch

Steven G. Hoch started his career in 1978

at the Chemical Bank in New York and

Zurich, where he held a series o positions

in commercial banking, principally advising

multi-national companies. Steven G. Hochwas Senior Vice President and a member o the

Management Committee at Bessemer Trust Company,

N.A., New York, rom 1990 to 1994, and a member o

the Executive Committee and Head o Client Service

at Pell Rudman Trust Company, Boston, rom 1994

to 2002. In 2002, he ounded Highmount Capital, LLC,

a US-based investment management frm where he

is a Senior Partner.

Steven G. Hoch is Chairman o the American

Swiss Foundation, a trustee o the Woods Hole

Oceanographic Institution, USA, and a member o the

National Board o the Smithsonian Institution, USA.

NanaLalKidwai

Nana Lal Kidwai started her career

in 1982 and until 1994 was at ANZ

Grindlays Bank Plc.

From 1994 to 2002, she was Vice

Chairperson and Head o Investment

Banking at Morgan Stanley India beore moving to

HSBC. Currently she is Country Head o the HSBC

Group o Companies in India. In 2010, she was

appointed to the Board o HSBC Asia-Pacifc. She is

Senior Vice President o the Federation o Indian

Chambers o Commerce & Industry (FICCI).She serves the Government o India on the

Government-Industry Task Force and the Indo-

German Consultative Group. She is Chairperson o

the India Advisory Council o the City o London and

the India Advisory Board o the Harvard Business

School, where she is also a Global Advisor. Other

engagements include, being on the Board o the

Aspen Institute India, NCAER (National Council o

Applied Economics Research) and NIBM (National

Institute Bank Management). Her interests in the

Environment include being on the Board o Shakti

Sustainable Energy Foundation, the World EconomicForums Global Agenda Council on Climate Change

and TERIs Advisory Council.

Nana Lal Kidwai was given the Padma Shri

Award by the Indian government in 2007, has been

recognised in India and abroad with awards and

been repeatedly ranked in global lists o Top Women

in business.

BeatHess

Beat Hess started his career in 1977

BBC Brown Boveri Ltd in Baden as

Counsel where he was promoted to

General Counsel in 1986. From 1988

2003, he was Senior Group Ofcer,General Counsel and Secretary or ABB Ltd in Z

From 2003 until his retirement in January 2011,

Hess is Group Legal Director and a member o t

Group Executive Committee o Royal Dutch Sh

The Hague, The Netherlands, responsible on wo

level or legal and intellectual property services

well as or the Shell Compliance Ofce.

Beat Hess is a member o the Board o Holci

Switzerland and he has been nominated or ele

the Board o Sonova Holding AG. He is also a m

o the The Hague Academy o International Law

a member o the Supervisory Board o the The

Institute or the Internationalisation o Law.

TitiadeLange

Titia de Lange earned her doctoral a

post-doctoral degrees in biochemis

Amsterdam, London and San Franc

In 1997, she was appointed Proesso

at the Rockeeller University, New Y

where since 1999 she holds as well the Leon H

Proessorship. In 2006 she became Associate D

o the Anderson Cancer Center at that same Un

Titia de Lange is also an elected member o the

American National Academy o Sciences and hworked extensively with the National Institutes

Health. In addition to these research activities,

currently serves on many scientifc advisory bo

and award committees o universities and othe

research centres around the world, as well as o

review panels and editorial boards. Furthermore

has been awarded numerous honours and awa

since 1980.

For Nestl, Titia de Lange serves as a memb

the Nestl Nutritional Council (NNC) a group o

international experts who advise Nestl on nutr


10/42


Jean-PierreRoth

Jean-Pierre Roth spent his whole career at

the Swiss National Bank, which he joined

in 1979. Ater various senior positions, he

was appointed a member o the Swiss

Governing Board in 1996 beore becomingits Chairman in 2001 until 2009. From 2001 he was a

member o, and since 2006 the Chairman o the Board

o Directors o the Bank o International Settlements

until his retirement in 2009. Jean-Pierre Roth also

served as Swiss Governor o the International

Monetary Fund rom 2001 until 2009 and as a Swiss

representative on the Financial Stability Board rom

2007 until 2009.

As o 2010, Jean-Pierre Roth has been a member

o the Board o Swatch Group AG and a member

o the Foundation Board and Programme Committee

o Avenir Suisse, Switzerland. Since 1 July 2010, he

has served as Chairman o the Board o Directors o

Geneva Cantonal Bank as well as a Board member

o the global (re)insurance company Swiss Re.

AnnM.Veneman

An attorney by training, Ann M. Veneman

was Secretary o the United States

Department o Agriculture (USDA) rom

2001 to 2005. She then served a fve-year

term as the Executive Director o the

United Nations Childrens Fund. Earlier in her career

she was in various positions in the USDA and also

served our years as the Secretary o the CaliorniaDepartment o Food and Agriculture. She is currently

a member o the Boards o Alexion Pharmaceuticals,

the Close Up Foundation, Malaria No More, and 4-H.

She is also Co-Chair o Mothers Day is Every Day and

on a number o advisory boards including BRAC, The

Chicago Council Global Agriculture Development

Initiative, and the Bipartisan Policy Council Nutrition

and Physical Activity Initiative. She is a member o

the Council on Foreign Relations, and the Trilateral

Commission.

In 2009, she was named to the Forbes 100 Most

Powerul Women list, and she has been the recipiento numerous awards and honours throughout her

career.

Ann M. Veneman also serves as member o the

Nestl Creating Shared Value Advisory Board.

3.3 Electionsandtermsofofce

The Annual General Meeting has the competence to

elect and remove the members o the Board. In

principle, the initial term o ofce o a Board member

is three years. Outgoing Directors are re-eligible. Eac

year the Board is renewed by rotation in a way that,ater a period o three years, all members will have

been subject to re-election.

The Board o Directors elects, or a one-year term,

the Chairman, the Chie Executive Ofcer (CEO), two

Vice Chairmen and the members o the Committees.

The term o ofce o a Board member expires no

later than the Annual General Meeting ollowing his o

her 72nd birthday.

For the principles o the selection procedure: see

point 3.4.2 below (Nomination Committee).

For the time o frst election and remaining term o

ofce see point 3.1 above.


11/42


3.4.2 Tasks and area o responsibility or each Committee

o the Board o Directors (1)

The powers and responsibilities o each Committee

are established in the applicable Committee Charter,

which is approved by the Board. Each Committee isentitled to engage outside counsel.

The Chairmans and Corporate Governance

Committee consists o the Chairman, the two Vice

Chairmen, the CEO (Administrateur dlgu) and other

members as elected by the Board. It liaises between

the Chairman and the ull Board o Directors in order

to act as a consultant body to the Chairman and

to expedite whenever necessary the handling o the

Companys business. The Committee periodically

reviews the Corporate Governance o the Company

and prepares recommendations or the Board. It alsoadvices on certain fnance-related tasks including

the Companys fnancing and fnancial management.

While the Committee has limited authority as per

the Board Regulations, it may in exceptional and

urgent matters deal with business matters which

might arise between Board meetings. In all cas

keeps the Board ully appraised. It reviews the

annual work plan.

The Compensation Committee is chaired by anindependent and non-executive member o the

the other members are one Vice Chairman and

minimum o two other non-executive members

Board o Directors. All members are independe

Compensation Committee determines the princ

or remuneration o the members o the Board

submits them to the Board or approval. It overs

and discusses the remuneration principles or t

Company and the Group. In addition, it propose

remuneration o the Chairman, the CEO and ap

the individual remunerations o the members o

Executive Board. It reports on its decisions to thBoard and keeps the Board updated on the ove

remuneration policy o the Group.

The Nomination Committee includes a Chairpe

who is an independent and non-executive mem

3.4 Internalorganisationalstructure

3.4.1 Allocation o tasks within the Board o Directors

Chairmans and Corporate Compensation Nomination Audit

Governance Committee Committee Committee Comm

Peter Brabeck-Letmathe (Chair) Chairman

Paul Bulcke

CEO

Andreas Koopmann (Chair)

1st Vice Chairman

Rol Hnggi (Chai

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

Ann M. Veneman

(1) For complete inormation please reer to the Board o Directors Regulations and Committee Charters on www.nestle.com.


12/42


the Board; the other members are the Chairman o the

Board o Directors and a minimum o two independent

and non-executive members o the Board. The

Nomination Committee establishes the principles or

the selection o candidates to the Board, selects

candidates or election or re-election to the Board andprepares a proposal or the Boards decision. The

candidates to the Board must possess the necessary

profles, qualifcations and experience to discharge

their duties. Newly appointed Board members receive

an appropriate introduction into the business and

aairs o the Company and the Group. I required, the

Nomination Committee arranges or urther training.

It reviews, at least annually, the independence o the

members o the Board and it prepares the annual

sel-evaluation o the Board and its Committees. It

oversees the long-term succession planning o the

Board.

The Audit Committee consists o a Vice Chairman,

who chairs the Committee, and a minimum o two

other members o the Board, excluding the CEO

and any ormer member o the Executive Board. At

least one member has to have recent and relevant

fnancial expertise, the others must be amiliar with

the issues o accounting and audit. In discharging

its responsibilities, it has unrestricted access to the

Companys management, books and records. The

Audit Committee supports the Board o Directors in

its supervision o fnancial controls through a direct

link to KPMG (external auditors) and the Nestl GroupAudit (corporate internal auditors). The Audit

Committees main duties include the ollowing:

to discuss Nestls internal accounting procedures

to make recommendations to the Board o Directors

regarding the nomination o external auditors to be

appointed by the shareholders

to discuss the audit procedures, including the

proposed scope and the results o the audit

to keep itsel regularly inormed on important

fndings o the audits and o their progress

to oversee the quality o the internal and external

auditing to present the conclusions on the approval o the

Financial Statements to the Board o Directors

to review certain reports regarding internal controls

and the Groups annual risk assessment.

The Audit Committee regularly reports to the Board

on its fndings and proposes appropriate actions.

The responsibility or approving the annual Financial

Statements remains with the Board o Directors.


13/42


3.4.3 Work methods o the Board o Directors

and its Committees

The Board meets as oten as necessary, at least

quarterly, and on notice by the Chairman or by the

person designated by him. In addition, the Board must

be convened as soon as a Board member requests the

Chairman to call a meeting. All Committees provide

a detailed report to the ull Board at each meeting in

a dedicated Chairmanss session.

The Board reserves at least one day per year to

discuss the strategic long-term plan o the Company.

In addition, every year the Board visits one operating

company or three to fve days, in 2011 Nestl in Brazil.

The average attendance at the Board meetings was

100%. Board meetings, with the exception o certain

Chairmans andin camera sessions, are attended by

all members o the Executive Board. In addition,

selected members o the Executive Board and senior

management participate in certain Committee

meetings.

At each Board meeting the Chairmen o the various

Committees report on their Committees activities.

3.5 Denitionofareasofresponsibility

The governing bodies have responsibilities as ollows:

3.5.1 Board o Directors (1)

The Board o Directors is the ultimate governing

body o the Company. It is responsible or the ultimate

supervision o the Group. The Board attends to all

matters which are not reserved or the Annual General

Meeting or another governance body o the Company

by law, the Articles o Association or specifc

regulations issued by the Board o Directors.

The Board has the ollowing main duties:a) the ultimate direction o the Company, in particular

the conduct, management and supervision o

the business o the Company, and the provision

o necessary directions;

b) the determination o the Companys organisation;

c) the determination o accounting and fnancia

control principles, as well as the principles o

fnancial planning;

d) the appointment and removal o the Chairma

the Vice Chairmen, o the Committee memb

members o the Executive Board;

e) the ultimate supervision o the Chairman and

members o the Executive Board, in particula

respect to their compliance with the law, the

Articles o Association, the Board Regulation

instructions given rom time to time by the B

) the preparation o the Annual Report, the An

General Meeting and execution o its resolut

g) the notifcation o the court in the event o

overindebtedness;

h) the discussion and approval o:

the Groups long-term strategy and annua

investment budget;

major fnancial operations;

any signifcant policy issue dealing with th

Companys or the Groups general structu

with fnancial, commercial and industrial p

Corporate Governance Principles o theCompany;

the review o and decision on any report

submitted to the Board;

the Groups annual risk assessment.

3.5.2 Executive Board

The Board o Directors delegates to the CEO, w

the authorisation to subdelegate, the power to

the Companys and the Groups business, subje

to law, the Articles o Association and the Regu

o the Board o Directors.

The CEO chairs the Executive Board and deleto its members individually the powers necessa

or carrying out their responsibilities, within the

fxed in the Executive Boards Regulations.

Meetings held in 2011 Frequency Average duration (hours)

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

Chairmans and Corporate Governance Committee 8 times 4:20

Compensation Committee 3 times 1:20

Nomination Committee 3 times 1:05

Audit Committee 3 times 2:10

(1) For complete inormation please reer to the Board o Directors Regulations on www.nestle.com.


14/42


3.6 Informationandcontrolinstruments

vis--vistheExecutiveBoard

The Board o Directors, on a regular basis, is inormed

on material matters involving the Companys and

the Groups business. The members o the Executive

Board attend the Board o Directors meetings andreport on signifcant projects and events. In addition,

regular written reports are provided, including

consolidated fnancial inormation, capital investment

and strategy progress reports.

The Chairman and the CEO ensure the proper

inormation ow between the Executive Board and

the Board o Directors.

The Board o Directors receives regular and ad hoc

reports rom the Boards Committees, the Chairman,

the CEO, as well as rom the Executive Board. The

minutes o Committee meetings are made available

to the ull Board. The Board pays a visit to a major

market every year, where it meets members o senior

management.

Furthermore, the Audit Committee reviews the

fnancial perormance and assesses the eectiveness

o the internal and external audit processes as well

as the internal risk management organisation and

processes.

Members o the Executive Board and other senior

management attend the Audit Committee meetings,

except or certainin camera sessions.

Additional inormation and control instruments

include:

The external auditors, KPMG (auditors o Nestl S.A.and o the Consolidated Financial Statements o

the Nestl Group), who conduct their audit in

compliance with Swiss law and in accordance with

Swiss Auditing Standards and with International

Standards on Auditing.

The Nestl Group Audit unction, the corporate

internal auditors, which has a direct link to the Audit

Committee. It comprises a unit o international

auditors who travel worldwide, completing audit

assignments.

Group Risk Services, the corporate risk management

unit, providing assistance to all corporate entitieswith regard to risk management, loss prevention,

claims handling and insurance. A top-level risk

assessment is perormed once a year or all

businesses. For more inormation, please reer

to Note 23 o the 2011 Consolidated Financial

Statements o the Nestl Group.

Group Compliance and other risk and control-

related unctions provide additional guidance and

oversight. Risk and compliance activities are

regularly coordinated through the Group Complian

Committee to ensure a holistic, entity-wide

approach. For more inormation, please reer topage 8 o the Annual Report 2011.


15/42


4. ExecutiveBoard

4.1 MembersoftheExecutiveBoard

Name Year o birth Nationality Education/Current unction

Paul Bulcke 1954 Belgian Economics and Business Administration

CEOWerner Bauer 1950 German Chemical Engineering

EVP: Chie Technology Ofcer: Innovation,

Technology and R&D

Jos Lopez 1952 Spanish Mechanical Engineering

EVP: Operations, GLOBE

John J. Harris 1951 American Business Administration

EVP: Nestl Waters

James Singh 1946 Canadian Business Administration

EVP: CFO, Finance and Control, Legal, IP, Tax, Tre

Global Nestl Business Services

Laurent Freixe 1962 French Business Administration

EVP: Zone Europe

Chris Johnson 1961 American Economics and Business Administration

EVP: Zone Americas

Patrice Bula 1956 Swiss Economics and Business Administration

EVP: Strategic Business Units, Marketing,

Sales and Nespresso

Doreswamy Nandkishore 1958 Indian Electrical Engineering and Postgraduate in Manag

(Nandu) EVP: Zone Asia, Oceania and Arica

Wan Ling Martello 1958 American Business Administration and Accountancy

EVP: *

Marc Caira 1954 Canadian Marketing

Deputy EVP: Nestl Proessional

Jean-Marc Duvoisin 1959 Swiss Economics and Political Science

Deputy EVP: Human ResourcesKurt Schmidt 1957 American Business Administration and Chemistry

Deputy EVP: Nestl Nutrition

David P. Frick 1965 Swiss Law

SVP: Corporate Governance, Compliance and

Corporate Services

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

For complete inormation: please reer to individual CVs on www.nestle.com)

* CFO as o 1 April 2012


16/42


4.2 Professionalbackgroundandotheractivities

andfunctions

PaulBulcke

Please reer to point 3.2 above.

WernerBauerWerner Bauer began his career in 1975

as an Assistant Proessor in Chemical

Engineering at the University o Erlangen-

Nrnberg. In 1980, he was appointed

Proessor in Chemical Engineering at the

Technical University, Hamburg, and in 1985 he obtained

the Directorship o the Fraunhoer Institute or Food

Technology and Packaging and a position as Proessor

in Food Biotechnology, Technical University, Munich.

In 1990, Werner Bauer became Head o the Nestl

Research Center, Lausanne, moving on to become

Head o Nestl Research and Development in 1996.

Ater serving as Technical Manager and then Market

Head or Nestl Southern and Eastern Arica Region,

he moved to the position o Executive Vice President

and Head o Technical, Production, Environment,

Research and Development in 2002. In 2007, he was

appointed Chie Technology Ofcer, Head o Innovation,

Technology, Research and Development.

As a representative o Nestl, Werner Bauer also

undertakes the ollowing duties: Chairman o the

Supervisory Board o Nestl Deutschland AG; Board

member o LOral S.A. in France; Chairman or both

Lie Ventures S.A. and Nutrition-Wellness Venture AG,

Switzerland; Chairman o Sofnol S.A. in Switzerland.Furthermore, Werner Bauer is Chairman o the Nestl

Institute o Health Sciences, Switzerland, Board

member o Nestl Health Science S.A. and Board

member o Galderma Pharma, Switzerland.

He is also Chairman o the Board o Trustees or

the Bertelsmann Foundation and a member o the

Bertelsmann Verwaltungsgesellschat (BVG) in

Germany. Werner Bauer is member o the Supervisory

Board o GEA Group AG, Germany and is a Board

member o scienceindustries, Switzerland.

JosLopezJos Lopez joined Nestl in 1979 as

Engineering Trainee. From 1983 to 1995, he

completed various technical assignments

in Spain, USA, Japan and France. In 1995,

he was appointed Technical Manager of

the Oceania Region, becoming in 1997 the Operations

Director responsible for Technical, Supply Chain and

Exports. In 1999, Jos Lopez became Market Head

responsible for the Malaysian/Singaporean Region;

in 2003, he was appointed Market Head of Nestl

Japan. As Executive Vice President of Operations

since 2007, Jos Lopez is responsible or Procureme

Manufacturing, Supply Chain, Quality Management,Health & Safety, Environment and Engineering. As o

2008, he has also been in charge of GLOBE (Global

Business Excellence; IS/IT).

As a representative o Nestl, Jos Lopez serves

as Chairman o Nestec SA as well as o Nestrade SA

and is a member o the Supervisory Board o Cereal

Partners Worldwide, Switzerland.

Presently, Jos Lopez is Chairman o the

Management Board o GS1 (ormerly EAN Internation

in Belgium and a member o the Advisory Board o t

University o Cambridges Programme or Sustainabili

Leadership (CPSL).

JohnJ.Harris

John J. Harris began his career in 1974

as a Marketing Management Trainee

at Carnation Company in the United State

(acquired by Nestl in 1985). From 1974

to 1987, John J. Harris held various positio

in both Friskies PetCare and Carnation Products

Division. In 1987, he was promoted to Vice President

and General Manager o the Carnation Products

Division.

In 1991, he was transerred to the Friskies PetCare

Division as Vice President and General Managerand was instrumental in Friskies PetCares acquisition

o Alpo Pet Foods, announced in January 1995. In

January 1997, John J. Harris was named Senior Vice

President o Nestl S.A. in Vevey responsible or

the Nestl Worldwide PetCare Strategic Business Un

In March 1999, he returned to Nestl USA as Preside

o Friskies PetCare Company. In early 2001, he was

nominated Chie Worldwide Integration Ofcer

ollowing the acquisition o Ralston Purina Company

He was nominated Chie Executive Ofcer o Nest

Purina PetCare Europe in 2002 and received added

responsibility or Asia, Oceania and Arica in 2005.Eective December 2007, John J. Harris was

appointed Executive Vice President o Nestl S.A. an

Chairman and Chie Executive Ofcer o Nestl Wate


17/42


JamesSingh

James Singh joined Nestl Canada, Inc.

in 1977 as a Financial Analyst. In 1980,

he became Manager Financial Analysis and

Planning, moving on to Director o Finance

FoodServices and then Vice PresidentFinance and Treasurer. In 1993, James Singh was

appointed Senior Vice President Finance beore taking

his position as Executive Vice President and Chie

Financial Ofcer o Nestl Canada, Inc. in 1995. In

2000, he was transerred to Nestls International

Headquarters in Vevey, Switzerland as Senior Vice

President in charge o Mergers & Acquisitions, Joint

Ventures, Divestments, Corporate Real Estate

and Corporate Venturing Investments as well as or

special strategic corporate projects. As o January

2008, James Singh has been appointed Executive

Vice President and Chie Financial Ofcer with

responsibility or Finance and Control, Legal, Treasury,

Intellectual Property and Tax departments as well as

the Global Nestl Business Services.

As a representative o Nestl, James Singh is

Chairman o Nestl Capital Advisers S.A. and o Nestl

International Travel Retail S.A.; he is a Board member

o both Lie Ventures S.A. and Nutrition-Wellness

Venture AG.

Furthermore, James Singh was elected as a Director

o the RTL Group in Luxembourg on 20 April 2011.

LaurentFreixe

Laurent Freixe joined Nestl Francein 1986 as a sales representative and got

increasing responsibilities in the feld o

sales and marketing. In 1999, he became

a member o the Management Committee

and was nominated Head o the Nutrition Division.

In 2003, Laurent Freixe became Market Head o Nestl

Hungary. In January 2007, he was appointed Market

Head o the Iberian Region taking responsibility or

Spain and Portugal. As o November 2008, Laurent

Freixe has been serving as Executive Vice President

in charge o Zone Europe.

As a representative o Nestl, he is Chairman oNestl Entreprises S.A.S. in France, Nestl Suisse S.A.,

Socit des Produits Nestl S.A. and Beverage

Partners Worldwide S.A. in Switzerland as well as

Board member o Lactalis Nestl Produits Frais S.A.S.

in France and member o the Supervisory Board o

Cereal Partners Worldwide, Switzerland.

In addition, Laurent Freixe is a member o th

Foreign Investment Advisory Council o Russia,

a Board member o Association des Industries

Marque (AIM) in Belgium, member o the Board

and Executive Committee o the CIAA, membe

the Liaison Committee with the CIAA and memo the Executive Board o ECR Europe in Belgiu

ChrisJohnson

Chris Johnson started his career wit

Nestl in 1983 as a marketing traine

Carnation Inc. During his frst eight

he took on increasing responsibilitie

mainly in the commercial area, at Nes

and then, rom 1991, in Japan. Senior Area Man

or the Asian region o Nestl Waters in Paris ro

1995, he was then transerred to Taiwan in 1998

Market Head. From 2000, Chris Johnson led the

worldwide development and implementation o

GLOBE (Global Business Excellence; IS/IT), the

Strategic Supply Chain as well as eNestl. He w

appointed Deputy Executive Vice President in A

2001, and later moved back to Japan in 2007 as

Market Head. As o January 2011, Chris Johnso

has been serving as Executive Vice President in

charge o Zone Americas.

As a representative o Nestl, Chris Johnson

Chairman o the Board o Nestl Brasil Ltda. as

as o Nescalin S.A. de C.V., Mexico and o Nest

Mexico S.A. de C.V. He is also Co-Chairman o

Supervisory Board o Dairy Partners Americas amember o the Supervisory Board o Cereal Par

Worldwide, Switzerland.

In addition, Chris Johnson is a Board membe

the Swiss-Latin American Chamber o Commer

Treasurer o the Swiss-American Chamber o

Commerce.

PatriceBula

Patrice Bula joined Nestl in 1980 a

entrusted with various responsibiliti

Marketing and Sales in Kenya, Japa

Taiwan beore being promoted to Markor Taiwan in 1992, Market Head or

Republic in 1995, then Head or the South and

Arica Region in 1997. In 2000 he was appointed H

Chocolate, Conectionery and Biscuits Strategic B

Unit based at Nestls International Headquarters in

In October 2003, Patrice Bula was transerred as


18/42


Head o Nestl Germany and in August 2007 he took up

the role as Market Head or the Greater China Region.

As o May 2010, Patrice Bula was appointed to the

Executive Board o Nestl S.A. as Executive Vice

President with responsibility or the Strategic Business

Units, Marketing and Sales, and Nespresso.As a representative o Nestl, Patrice Bula serves as

Chairman o Nespresso S.A., as a Board member o

both Lie Ventures S.A. and Nutrition-Wellness

Venture AG as well as o Beverage Partners

Worldwide S.A., Switzerland. Furthermore, Patrice

Bula is Chairman o the Board o Shanghai Totole

Food Ltd. as well as o Shanghai Totole First Food Ltd,

China and is a Board member o both Yinlu Food

Group Companies and Hsu Fu Chi Group Companies,

China.

Doreswamy(Nandu)Nandkishore

Nandu Nandkishore joined Nestl as a

mid-career hire in 1989 in India where,

over the next seven years, he took on

increasing responsibilities, mainly in

marketing. His international career started

in 1996 when he was transerred to Indonesia to run

the Conectionery Business Unit.

In 2000, ater a short period at Nestls International

Headquarters in Vevey, Switzerland, he returned to

Indonesia where he was promoted to Market Head

o Indonesia in March 2003. In April 2005, Nandu

Nandkishore became Market Head o Nestl Philippines,

which he ran until October 2009, when he returnedto Nestls International Headquarters in Vevey,

Switzerland to take up the role o Global Business

Head, Inant Nutrition at Nestl Nutrition.

In 2010, Nandu Nandkishore was nominated to the

Executive Board o Nestl S.A. as Deputy Executive

Vice President in charge o Nestl Nutrition including

Inant Nutrition, Perormance Nutrition and Weight

Management. As o October 2011, the Board o

Directors appointed Nandu Nandkishore Executive

Vice President responsible or Asia, Oceania, Arica

and Middle East.

As a representative o Nestl, he is Chairman othe Supervisory Board o both P.T. Nestl Indonesia

and P.T. Nestl Indoood Citarasa Indonesia and

a Board member o Nestl (China) Ltd. and Hsu Fu Chi

International Ltd., China. In addition, Nandu Nandkishore

is a Board member o Osem Investments Ltd., Israel

and a member o the Supervisory Board o Cereal

Partners Worldwide S.A.

WanLingMartello

Wan Ling Martello joined Nestl S.A. as

Executive Vice President in November 20

and is the designated Chie Financial

Ofcer eective 1 April 2012.

Wan Ling Martello came to Nestl S.Arom Walmart Stores Inc., where she was EVP, Globa

eCommerce in 2010 and 2011. From 2005 to 2009 sh

was SVP, CFO & Strategy or Walmart International.

Prior to Walmart, Wan Ling Martello built her career

the consumer packaged goods industry. She worked

at Krat in increasingly broader fnance roles rom 19

to 1995. She was the Corporate Controller at Borden

Foods during its turn-around years owned by KKR

in 1995 until 1998. She was the CFO and then the

President o the U.S. business o NCH, a ormer

subsidiary o AC Nielsen rom 1998 to 2005.

Wan Ling Martello serves on the Board o Committ

o 100, a U.S. national organisation o Chinese Americ

leaders, as well as the Board o Royal Neighbors

o America. She is also a member o the Board o

Trustees o the Museum o Chinese in America.

MarcCaira

Marc Caira started at Nestl Canada in 197

In 1986, he was appointed Regional Sales

Vice President and then, in 1990, Vice

President FoodServices, eventually servin

as President o FoodServices & Nesca

Beverages or Nestl Canada rom 1997 to 2000.

In October 2000, Marc Caira joined ParmalatCanada and became President and CEO o Parmalat

North America in 2004.

In May 2006, Marc Caira returned to Nestl and

was appointed Deputy Executive Vice President in

charge o FoodServices Strategic Business Division

which became Nestl Proessional, a globally

managed business unit, in 2009.

Jean-MarcDuvoisin

Jean-Marc Duvoisin joined Nestl in 1986

ater a short period at the Centre he start

his international career in the area o Sale& Marketing, frst in Colombia, and then

in Central America until 1997 as a Busine

Executive Manager in the Dairy, Inant Nutrition and

Cereal sector. He came back to the Centre to Zone

AMS as Operations Manager or two years ater whic

he returned to Latin America where he assumed

the role o Country Manager in 1999 in Ecuador. He


19/42


became Market Head o the Bolivarian Region

(Colombia, Ecuador and Venezuela) in 2003 and

Market Head o Mexico in 2004. From 2007,

Jean-Marc Duvoisin held the position o Senior Vice

President, Head o Corporate Human Resources.

Eective January 2010, he was appointed to theExecutive Board o Nestl S.A. as Deputy Executive

Vice President, Human Resources and Centre

Administration.

As a representative o Nestl, Jean-Marc Duvoisin

serves as Chairman o Nestl Pension Funds and

as a Board member o Nestl Capital Advisers S.A.

KurtSchmidt

Kurt Schmidt began his career in Marketing

with the Krat Food U.S. Rerigerated

Products Group in 1985, beore starting

his international assignments as Head

o Food & Beverages or Australia and

New Zealand. In 1993, he was appointed to the position

o Marketing Director or Krat Jacobs Suchard in

Hungary. In 2002, he joined Novartis and managed the

Animal Health Business. Kurt Schmidt fnally took over

the position o President and Chie Executive Ofcer

o Gerber, a division o Novartis, beore joining Nestl

with the acquisition o Gerber Products Company.

In 2007, he became Regional Business Head or

Inant Nutrition and responsible or the coordination

o Nestl Nutrition North America. As o September

2011, Kurt Schmidt was appointed Deputy Executive

Vice President in charge o Nestl Nutrition.As a representative o Nestl, he is a Board member

o both Lie Ventures S.A. and Nutrition-Wellness AG

as well as o the Nestl Nutrition Council.

Furthermore, Kurt Schmidt is Chairman o the

International Association o Inant Food Manuacturers

(IFM).

DavidP.Frick

David P. Frick began his career in 1991 at

the Meilen District Court in Zurich and

as an assistant to the Banking Law Chair at

Zurich University Law School.From 1994, he was an attorney in the

International Corporate and Litigation practice groups

o Cravath, Swaine & Moore, the New York law frm.

In 1999, he became Group General Counsel and

Managing Director o Credit Suisse Group, Zurich,

where he was appointed a Member o the Executive

Board and served as the companys Head o Le

and Compliance.

David P. Frick joined Nestl S.A. in 2006 and

as Senior Vice President, Corporate Governanc

Compliance and Corporate Services.

He is a member o the Board o Economiesuichairs its Legal Commission. He also represents

at SwissHoldings and serves on the SIX Regula

Board, the Committee on Extraterritoriality or t

International Chamber o Commerce in Paris an

Legal Committee or the Swiss-American Cham

o Commerce.

4.3 Managementcontracts

There are no management contracts with third

at Nestl.


20/42


5. Compensations,shareholdingsandloans

Please reer to the Compensation Report, Appendix 1

o this document.

6. Shareholdersparticipation

6.1 Votingrightsandrepresentationrestrictions6.1.1/ All voting rights restrictions and rules /

6.1.2 Reasons or granting exceptions in the year

under review

Only persons entered in the share register as

shareholders with voting rights may exercise the

voting rights or the other rights related thereto

(art. 5 par. 2 o the Articles o Association).

No person may exercise, directly or indirectly,

voting rights, with respect to own shares or shares

represented by proxy, in excess o 5% o the share

capital as recorded in the commercial register. Legal

entities 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 achieving

an understanding or orming a syndicate or otherwise

acting in concert to circumvent such a limit shall be

counted as one shareholder (art. 11 par. 2 o the Articles

o Association; see art. 11 par. 3 o the Articles o

Association, or exceptions to this voting restriction).

To permit the exercise o voting rights in respect o

shares deposited with banks, in line with art. 11 par. 4

o the Articles o Association, the Board o Directors

may and has granted exceptions to certain banks

to vote shares deposited by their clients which in

aggregate are in excess o 5% o the share capital.In order to acilitate trading o the shares on the

Stock Exchange, the Board o Directors has issued

regulations and authorised certain nominees to exceed

the 5% limit to be registered as nominees with voting

rights.

6.1.3 Procedure and conditions or abolishing

statutory voting rights restrictions

A resolution to amend the provisions o the Articles

o Association relating to:

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

change or removal o such restrictions, or(ii) the limitation on registration or the limitation on voting

rights and the change or removal o such limitations

requires a majority o two thirds o the shares

represented and the absolute majority o the nominal

value represented at the General Meeting (art. 13 o

the Articles o Association). See also art. 11 par. 4

o the Articles o Association.

6.1.4 Statutory rules on participation in the General

Meeting o shareholders i they dier rom applicable

legal provisions

There are no restrictions to the legal regime provided

by Swiss Law. Shareholders with voting rights

may have their shares represented by the proxy otheir choice.

6.2 Statutoryquorums

Please reer to art. 13 o the Articles o Association.

6.3 ConvocationoftheGeneralMeeting

ofshareholders

Nestl S.A. statutory rules (art. 7 to 9 o the Articles

o Association) do not dier rom applicable legal

provisions. An Extraordinary General Meeting request

by one or more shareholders whose combined

holdings represent at least 10% o the share capital

as recorded in the commercial register must be

held as promptly as practicable ollowing such reque

(art. 8 par. 2 o the Articles o Association).

6.4 Inclusionofitemontheagenda

One or more shareholders with voting rights whose

combined holdings represent at least 0.15% o the

share capital as recorded in the commercial register

may request that an item be included in the agenda

o the General Meeting by making the request in

writing to the Board o Directors at the latest 45 days

beore the meeting and speciying the agenda

items and the proposals made (art. 9 par. 2 and 3o the Articles o Association).

6.5 Inscriptionsintotheshareregister

The relevant date to determine the shareholders righ

to participate in the General Meeting on the basis o

the registrations appearing in the share register is set

by the Board o Directors in the invitation to the

General Meeting.


21/42


7. Changeofcontrolanddefencemeasures

7.1 Dutytomakeanoffer

Nestl S.A. does not have a provision on opting out

or opting up in the Articles o Association.

Thus, the provisions regarding the legally

prescribed threshold o 33% o the voting rightsor making a public takeover oer set out in art. 32

o the Swiss Stock Exchange Act are applicable.

7.2 Clausesonchangeofcontrol

There are no such agreements.

8. Auditors

8.1 Durationofthemandateandtermofofce

oftheleadauditor

KPMG Klynveld Peat Marwick Goerdeler SA were frst

appointed on 22 May 1993, and KPMG SA (replacing

KPMG Klynveld Peat Marwick Goerdeler SA) were frst

appointed on 23 April 2009 as auditors o Nestl S.A.

On 14 April 2011 KPMG SA (hereater KPMG)

were appointed as auditors o Nestl S.A. and o the

Consolidated Financial Statements o the Nestl Group

or a term o ofce o one year.

The audit report is signed jointly by two KPMG

partners on behal o KPMG. The frst year that

Mr Mark Baillache, in his capacity as lead auditor,

signed the Financial Statements o Nestl S.A. and the

Consolidated Financial Statements o the Nestl Group

was or the year ending 31 December 2006.

8.2 AuditingfeesThe total o the auditing ees paid to the auditors

or 2011 amounts to CHF 41 million, o which KPMG,

in their capacity as Group auditors, received

CHF 39 million.

8.3 Additionalfees

Fees paid to the auditors or 2011 related to additional

services amount to CHF 8 million, o which KPMG

received CHF 1.5 million or tax services and

CHF 1.5 million or other various non-audit services

(mainly IS/IT advisory support).

8.4 Supervisoryandcontrolinstruments

pertainingtotheaudit

KPMG presents to the Audit Committee a detailed

report on the conduct o the 2011 Financial Statements

audit, the fndings on signifcant fnancial accounting

and reporting issues together with the fndings on

the internal control system as well as an overvie

o issues ound during the interim audit.

In 2011, KPMG participated in all three Audit

Committee meetings at the end o which they m

with the Audit Committee without the Groups

management being present.Nestl Group Audit (corporate internal audito

three times with the Audit Committee. In additi

head o internal audit regularly met with the Ch

o the Audit Committee or interim updates.

The Audit Committee reviews annually the

appropriateness o retaining KPMG as the audit

the Nestl Group and Nestl S.A., prior to prop

to the Board and to the Annual General Meeting

o Nestl S.A. the election o KPMG as auditors

Audit Committee assesses the eectiveness o

work o the auditors in accordance with Swiss l

based on their understanding o the Groups bu

control, accounting and reporting issues, toget

with the way in which matters signifcant at Gro

level or in the statutory accounts are identifed

resolved.

The Audit Committee is also inormed on the

work o KPMG through regular briefngs o its Ch

The lead auditor is rotated every seven years in

accordance with Swiss law. Audit ees are ultim

approved by the Audit Committee.

The Group and KPMG have agreed on clear

guidelines as to audit services which it is appro

or KPMG to provide. These services include du

diligence on mergers, acquisitions and disposatax and business risk assurance and IS/IT advis

support. These guidelines ensure KPMGs

independence in their capacity as auditors to th

Group. KPMG monitors its independence throu

the year and confrms its independence to the A

Committee annually.


22/42


9. Informationpolicy

InvestorRelationsguidingprinciples

Nestl is committed to managing an open and

consistent communication policy with shareholders,

potential investors and other interested parties.

The objective is to ensure that the perception o thoseparties about the historical record, current perormance

and uture prospects o Nestl is in line with

managements understanding o the actual situation

at Nestl. The guiding principles o this policy are that

Nestl gives equal treatment to shareholders in equal

situations, that any price-sensitive inormation is

published in a timely ashion and that the inormation

is provided in a ormat that is as ull, simple, transparent

and consistent as possible.

Methodology

Nestl produces each year a detailed Annual Report,

which reviews the business. It also provides detailed

audited Financial Statements or the year under

review, prepared according to the International

Financial Reporting Standards (IFRS). These are

complemented by the Hal-Yearly Report.

Nestl publishes its ull-year and hal-year results,

and its frst-quarter and nine-months sales fgures;

it also publishes press releases at the time o any

potentially price-sensitive event, such as signifcant

acquisitions and divestments, joint venture agreements

and alliances. Major announcements, such as results

o corporate activity, are accompanied by a presentation

which is broadcast live on the Internet and whichanyone can choose to access, whether or not that

person is a shareholder.

Furthermore, Nestl has an active investor relations

programme, including both group meetings and

one-to-one meetings. This includes the Annual General

Meeting, as well as presentations at the time o its

ull-year and hal-year results. The Group also has

a programme o roadshows, which take place in most

fnancial centres around the world, and hosts themed

events or institutional investors and investment

analysts at which members o line management give

an overview o their particular areas o responsibility.These meetings ocus either on recently announced

fnancial results, recent corporate activity or the

longer-term strategy o the Group; they are not an

occasion or the disclosure o new inormation which

might encourage an investment decision.

Specifcally on governance topics, the Company

engages into an active dialogue with investors through

regular Chairmans roundtables, surveys and bilatera

exchanges which are reported to the Chairmans and

Corporate Governance Committee or the Board.

The Company utilises the World Wide Web

(www.nestle.com) to ensure a rapid and equitable

distribution o inormation. Nestl does not just relyon people visiting the site to be updated on the lates

developments within the Group: anyone can sign

up on the site to be alerted automatically by Nestl

whenever there is a change to the Investor Relations

Web site; also press releases are distributed to

major wire and news services. There are links to

non-fnancial inormation that may be o interest

to investors, including areas such as the environmen

sustainability, the Nestl Corporate Business Principl

and the Nestl Human Resources Policy. A Corporate

calendar o relevant dates is available on the Corpora

Web site (www.nestle.com).

The Nestl Investor Relations Department can be

contacted, either through the Web site, or by telephon

ax, e-mail or letter.

Contact

Investor Relations

Nestl S.A., Avenue Nestl 55

CH-1800 Vevey (Switzerland)

Tel. +41 (0)21 924 35 09

Fax +41 (0)21 924 28 13

E-mail: [email protected]


23/42


GeneralOrganisationofNestlS.A.

31 December 2011

Chairmano the Board

Chie Executive Ofcer Nestl Health Science

Zone AOA:

Asia, Oceania and Arica

Zone AMS:

Americas

Executive Board

P.BulckeW. BauerJ. Lopez

J. J. HarrisJ. Singh

L. FreixeC. JohnsonP. Bula

D. NandkishoreW. L. MartelloM. CairaJ.-M. DuvoisinK. SchmidtD. P. Frick

CorporateCommunications

Human ResourcesCorporate Governance

Compliance &Corporate Services

Operations Finance & ControlStrategic Business Units,

Marketing and Sales

Nestl WatersNestl Nutrition

Zone EUR:

Europe

InnovationTechnology and R&D

Nestl Proessional

P.Brabeck-Letmathe

P.Bulcke L.Cantarell

D.Nandkishore C.Johnson

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

J.Lopez J.Singh* P.Bula

J.J.HarrisK.Schmidt

L.Freixe

W.Bauer

M.Caira

*W. L. Martello as o 0


24/42



25/42

Corporate Governance Report 2011 Appendix 1

Appendix 1: Compensation Report 2011


26/42

26 Corporate Governance Report 2011 Appendi

Compensation Report 2011

Introduction

The uture success o Nestl is dependent on its ability to

attract, motivate and retain good people. Among the various

programmes to support this ambition is a competitive

remuneration policy. Nestl believes in a perormance

culture as well as good corporate governance and corporatesocial responsibility.

Thereore, remuneration at Nestl is based on the ollowing

principles:

pay or perormance 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 o fxed and variable remuneration

depending on hierarchical level to ensure a direct

participation in results achieved.

As last year, the Compensation Report shall be submitted

to the advisory vote o the shareholders at the next Annual

General Meeting.

Changestothecompensationsystem

The Compensation Committee has decided on the ollowing

material changes to our compensation system or 2012:

as anticipated in last years report, the Compensation

Committee has decided to introduce a second

perormance measure to our Perormance Share Unit

Plan (PSUP). The currently used relative perormancemeasure o Total Shareholder Return versus peers, which

is an external one, will be supplemented by an absolute,

internal perormance measure in the orm o Earnings per

Share. The vesting level o the PSUP will be determined

with equal weight by each o these two measures;

the Board has decided to change the compensation

structure o the CEO as rom 2012. The target Short Term

Bonus as well as the Long Term Incentives will be

reduced rom 200% to 150% o the Annual Base Salary,

which will be increased proportionally. This change will

result in a lower ratio between fxed and variable

remuneration.


27/42


Governance

The Board o Directors has the overall responsibility or defning the compensation principles used in the Group. It ap

the compensation o the members o the Board, its Chairman, the CEO and the Executive Board as a whole.

The governance or setting the compensation o the members o the Board o Directors and the Executive Board

defned as ollows:

Compensation o Recommended by Approved by

Chairman o the Board, CEO andExecutive Board as a whole

Compensation Committee Board o Directors(a)

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

Members o the Executive Board CEO together with Chairman Compensation Committe

(a) Chairman as well as CEO not voting on own compensation.

(b) Members not voting on own compensation to the extent that Committee ees are concerned.

CompensationCommittee(CC)

The CC is governed by the Compensation Committee Charter. The Committee consists o the Chairperson who is an

independent and non-executive member o the Board, one o the Vice Chairmen o the Board and two other non-exe

members o the Board.

The members o the CC and its Chairperson are appointed by the Board o Directors or a period o one year.

On 31 December 2011, the composition o the CC was as ollows:

Chairman Members

Mr Daniel Borel Mr Andreas Koopmann

Mr Jean-Ren Fourtou

Mr Jean-Pierre Meyers


28/42


Compensation2011forthemembersoftheBoardofDirectors

Boardmembershipfeesandallowances

With the exception o the Chairman and the CEO, each member o the Board o Directors receives a Board membership

ee o CHF 280 000 and an Expense Allowance o CHF 15 000. These fgures have remained unchanged since 2006.

Members o a Board Committee receive the ollowing additional ees:

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 ee.

Committeemembershipon31December2011

Chairmans and CorporateGovernance Committee

CompensationCommittee

NominationCommittee

AuditCommittee

Peter Brabeck-Letmathe (Chair)

Paul Bulcke

Andreas Koopmann (Chair)

Rol 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

Ann M. Veneman

The above ees and allowances cover the period between the Annual General Meeting 2011 and the Annual General

Meeting 2012. Board membership and the Committee ees are paid 50% in cash and 50% in Nestl S.A. shares, which ar

subject to a three-year blocking period. As anticipated in last years report, the blocking period was extended rom two

years to three years.

The number o Nestl S.A. shares is determined by taking the closing price o the share on the SIX Swiss Exchange

on the ex-dividend date o the respective fnancial year, discounted by 16.038% to account or the blocking period o three

years. In 2011 the value was CHF 43.83.


29/42


Summaryofcompensation

Cash in CHF(a)

Number

o sharesDiscounted value

o shares in CHF b)T

remunera

Peter Brabeck-Letmathe, Chairman(c) 1 600 000 122 606 5 373 821 6 973

Paul Bulcke, Chie Executive Ofcer(c)

Andreas Koopmann, 1st Vice Chairman 325 000 5 939 260 306 585

Rol Hnggi, 2nd Vice Chairman 330 000 6 035 264 514 594

Jean-Ren Fourtou 275 000 4 981 218 317 493

Daniel Borel 205 000 3 640 159 541 364

Jean-Pierre Meyers 175 000 3 066 134 383 309

Andr Kudelski 205 000 3 640 159 541 364

Carolina Mller-Mhl 175 000 3 066 134 383 309

Steven G. Hoch 175 000 3 066 134 383 309

Nana Lal Kidwai 205 000 3 640 159 541 364

Beat Hess 205 000 3 640 159 541 364

Titia de Lange 155 000 2 682 117 552 272

Jean-Pierre Roth 155 000 2 682 117 552 272

Ann M. Veneman 155 000 2 682 117 552 272

Totalfor2011 4340000 171365 7510927 118509

Total or 2010 4 185 000 127 407 8 867 028 (d) 13 052

(a) The cash amount includes the expense allowance o CHF 15 000. The Chairman receives no expense allowance.

(b) Nestl S.A. shares received as part o the Board membership and the Committee ees are valued at the closing price o the share on the SIX Swiss Exc

the ex-dividend date, discounted by 16.038% to account or the blocking period o three years.

(c) The Chairman and the Chie Executive Ofcer receive neither Board membership or Committee ees nor expense allowance.

(d) Including the air value o stock options granted to the Chairman in 2010.

During 2011, one new Board member (Ms Ann M. Veneman) joined the Board.

Peter Brabeck-Letmathe, in his capacity as active Chairman, received a cash compensation as well as Nestl S.A.

shares, which are blocked or three years. This in particular reects certain responsibilities or the direction and cont

the Group including the Nestl Health Science Company and the direct leadership o Nestls interests in LOral, Gaand Laboratoires innov. He also represents Nestl at the European Round Table o Industrialists and at the Foundati

Board o the World Economic Forum (WEF). All corresponding compensation is included in the disclosed amount. H

compensation was:

2011 2

Number Value in CHF Number Value in C

Cash compensation 1 600 000 1 600

Blocked shares (discounted value) 122 606 5 373 821 80 475 3 526

Stock options (air value at grant) (a) 477 600 3 199

Totalcompensation 6973821 8326

(a) As anticipated in last years report, compensation or the Chairman o the Board is paid in the orm o cash and Nestl S.A. shares, which are blocked o

years. The use o stock options was discontinued.


30/42


Sharesandstockoptionsownershipofthenon-executivemembersoftheBoardofDirectors

andcloselyrelatedpartieson31December2011

Number oshares held(a)

Number ooptions held(b)

Peter Brabeck-Letmathe, Chairman 2 237 853 2 733 600

Andreas Koopmann, 1st Vice Chairman 72 973

Rol Hnggi, 2nd Vice Chairman 72 440

Jean-Ren Fourtou 27 754

Daniel Borel 225 426

Jean-Pierre Meyers 1 425 574

Andr Kudelski 50 036

Carolina Mller-Mhl 168 008

Steven G. Hoch 213 844

Nana Lal Kidwai 16 216

Beat Hess 15 816

Titia de Lange 5 414

Jean-Pierre Roth 5 414

Ann M. Veneman 2 682

Totalasat31December2011 4539450 2733600

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

(a) Including blocked shares.

(b) The ratio is one option or one Nestl S.A. share.

Loans

There are no loans to non-executive members o the Board o Directors.


31/42


Principlesofcompensationformembers

oftheExecutiveBoard

Principles

The compensation programmes or members o the

Executive Board are based on three major objectives:

Pay or perormance

As a direct reection o this objective, the Total Direct

Compensation package or the members o the Executive

Board includes a fxed Annual Base Salary and a variable

part, which is a combination o a Short-Term (Annual) Bonus

and Long-Term Incentives. For the members o the Executive

Board, the variable and perormance-related part was

between 50% and 75% o the Total Direct Compensation.

The criteria and objectives which are used are reecting

perormance as well as the quality and sustainability o

such perormance and risk considerations. All variable

compensation includes maximum award limits.

Alignment with long-term company strategy and

shareholders interests

Executive compensation is aligned with company strategy

and shareholders interests. Part or all o any Short-Term

Bonus is paid in the orm o Nestl S.A. shares instead o

cash. Long-Term Incentives are provided in the orm o

Perormance Share Units (PSUs), Stock Options on Nestl S.A.

sha

corp governance report 2011 en

Documents