Philips 2004 Annual Report Download - page 24

the Board of Management of the Company, succeeding Mr
Hommen as Chief Financial Officer.
In respect of the Group Management Committee, the following
changes occurred in 2004.
Mr Van der Poel relinquished his membership of the Group
Management Committee and left the Company on April 1, 2004.
As of the same date, Mr Oosterveld retired as a member of the
Group Management Committee, and as of January 1, 2005, Mr
McGregor relinquished his position as member of the Group
Management Committee.
As of November 1, 2004, Mr van Houten succeeded Mr McGregor
as CEO of the Semiconductors division, and as of the same date
Mr Provoost was appointed CEO of the Consumer Electronics
division.
Report of the Remuneration Committee
The Remuneration Committee, currently consisting of four
members, who are listed on page 20 of this Annual Report, is
responsible for preparing decisions of the Supervisory Board on
the remuneration of individual members of the Board of
Management and the Group Management Committee. It met four
times in the course of 2004.
The Remuneration Committee proposes to the Supervisory Board
the remuneration policy for members of the Board of Management
and other members of the Group Management Committee, and
reports annually to the Supervisory Board on the implementation
of this remuneration policy. The Supervisory Board, through the
Remuneration Committee, implements this policy and determines
on the basis of this policy the remuneration of the individual
members of the Board of Management and other members of the
Group Management Committee. The Remuneration Committee
has been assigned its tasks as laid down in the Charter of the
Remuneration Committee that forms part of the Rules of
Procedure of the Supervisory Board. Currently, no member of the
Remuneration Committee is a member of the management board
of another listed company.
General remuneration policy
The objective of the remuneration policy for members of the
Board of Management, approved by the 2004 General Meeting of
Shareholders and published on the Company’s website, is in line
with that for Philips executives throughout the Philips Group: to
focus them on improving the performance of the Company and
enhancing the value of the Philips Group, to motivate and retain
them, and to be able to attract other highly qualified executives to
enter into Philips’ service, when required.
In order to link executive remuneration to the Company’s
performance, the remuneration package includes a significant
variable part in the form of an annual cash bonus incentive and a
long-term incentive in the form of restricted share rights and stock
options.
Base salary
Base salaries are based on a function-related salary system. When
first appointed, an individual Board of Management member’s base
salary will usually be below the maximum function-related salary.
Maximum base salary
Board of Management 2002 2003 2004
Chairman 1,012,000 1,020,000 1,020,000
CFO/Vice-Chairman 835,000 840,000 840,000
CFO – – –
Member 651,000 660,000 660,000
Normally (and subject to the decision by the Supervisory Board)
the base salary will reach the maximum function-related salary
level over a maximum 3-year period from appointment. In line
with market developments shown by benchmark research and
additional market studies, the maximum function-related salary
levels in 2004 have not been increased. In 2004, the (maximum)
function-related salary of the President/CEO was EUR 1,020,000
and that of the Vice-Chairman/CFO EUR 840,000; the (maximum)
function-related salary of the other Board of Management
members was EUR 660,000. The annual review date for the base
salary is April 1. Adjustment of individual salaries is influenced by
the (annual) adjustment, if any, of the function-related salary levels
and the progress to the (maximum) function-related salary level if
this level has not yet been reached. The individual salary levels are
shown in the table on page 161 of this Annual Report.
Annual Incentive (bonus)
Each year, a variable cash incentive (Annual Incentive) can be
earned, based on factors such as the achievement of specific
targets. These targets are set at a challenging level, taking into
account general trends in the relevant markets, and are partly
(80%) linked to the financial results of the Philips Group and partly
(20%) to the set team targets in the areas of responsibility
monitored by the individual members of the Board of
Management. The Annual Incentive criteria are 1) the financial
indicators of the Company: Net Income and Cash Flow, and 2)
team targets. The related targets for the members of the Board of
Management are determined annually at the beginning of the year
by the Remuneration Committee on behalf of the Supervisory
Board and hence are linked to the Company’s financial
23Philips Annual Report 2004