Philips 2007 Annual Report Download - page 115

Philips Annual Report 2007 121
Long-Term Incentive Plan
For many years Philips has operated a Long-Term
Incentive Plan (LTIP), which has served to align the
interests of the participating employees with the
shareholders’ interests and to attract, motivate and
retain participating employees. Until 2002, the long-term
incentive awards consisted exclusively of stock options,
but since 2003 an LTIP approved by the General Meeting
of Shareholders has been in place consisting of a mix
of restricted share rights and stock options.
By granting additional (premium) shares after the grantees
have held the restricted shares for three years after delivery,
provided they are still in service, grantees will be more
stimulated to focus on the longer term as shareholders
of the Company.
The actual number of long-term incentives that will
be granted to members of the Board of Management,
the other members of the Group Management
Committee, executives and other key employees
depends on the team and/or individual performance
and on the share performance of Philips and are aimed
at median level of the relevant markets. As the value
of the grants was below market median, the grant
levels were increased in 2007.
The share performance of Philips is measured on
the basis of the Philips Total Shareholder Return
(TSR) compared to the TSR of a peer group of leading
multinational electronics/electrical equipment companies
over a three-year period. Since the sale of a majority
stake in the Semiconductors division, the list of TSR
peer group companies as approved in 2003 contained
companies with which Philips did not compare itself
any longer. The 2007 General Meeting of Shareholders
approved a new list of peer group companies and a new
simplied TSR-based LTI multiplier based on the ranking
table below:
Philips position compared to peer companies1) LTI Multiplier
Top 4 1.2
Middle 4 1.0
Bottom 4 0.8
1) Electrolux, Emerson Electric, General Electric, Hitachi, Honeywell International,
Johnson & Johnson, Matsushita, Philips, Schneider, Siemens, Toshiba, 3M
For 2007, the Supervisory Board has applied (under
the ‘old’ system) a multiplier of 1.1, based on the Philips
share performance over the period from the last
working day in December 2003 to December 31, 2006.
In 2007, 7,270,713 stock options and 2,423,541
restricted share rights were granted under the LTIP
(excluding the premium shares to be delivered after
a three-year holding period); in 2006, 7,164,384 stock
options and 2,466,189 restricted share rights
were granted.
The 2006 General Meeting of Shareholders approved
the amendment of the maximum allocation from 2.5%
to 3.0% of the annual LTIP pool-size to members of
the Board of Management.
Grants to members of the Board of Management
under the LTIP:
Long-Term Incentive Plan 20071)2)
stock options
restricted share
rights
G.J. Kleisterlee 73,926 24,642
P-J. Sivignon 42,903 14,301
G.H.A. Dutiné 39,600 13,200
T.W.H.P. van Deursen 39,600 13,200
R.S. Provoost 39,600 13,200
A. Ragnetti 39,600 13,200
S.H. Rusckowski 42,903 14,301
1) Reference date for board membership is December 31, 2007
2) Long-Term Incentive Multiplier of 1.1 applied
Long-Term Incentive Plan 20061)2)
stock options
restricted share
rights
G.J. Kleisterlee 48,006 16,002
P-J. Sivignon 33,003 11,001
G.H.A. Dutiné 30,006 10,002
T.W.H.P. van Deursen 30,006 10,002
R.S. Provoost 30,006 10,002
A. Ragnetti 27,000 9,000
1) Reference date for board membership is December 31, 2007
2) Long-Term Incentive Multiplier of 1.0 applied
98 Risk management 112 Our leadership 116 Report of the Supervisory Board 126 Financial Statements