Philips 2008 Annual Report Download - page 118

Base salary
In 2008 base salaries have been increased in line with
the policy, with the exception of the President/CEO
for whom the salary is fixed for the duration of his
contract of employment.
Annual Incentive
Each year, a variable cash incentive (Annual Incentive)
can be earned, based on the achievement of specific
and challenging targets. The Annual Incentive criteria
are for 80% the financial indicators of the Company
(net income, comparable sales growth and free cash
flow) and for 20% team targets in the areas of
responsibility monitored by the (individual) members
of the Board of Management.
The Supervisory Board determines whether
performance conditions are met, and has the ability
to adjust the pay-out upward or downward if the
predetermined performance criteria would produce
an unfair result due to extraordinary circumstances.
The related targets for the members of the Board of
Management are determined annually at the beginning
of the year.
The on-target Annual Incentive percentage is set
at 60% of the base salary for members of the Board
of Management and 80% of the base salary for the
President/CEO, and the maximum Annual Incentive
achievable is 120% of the annual base salary for
members of the Board of Management and for the
President/CEO it is 160% of the annual base salary.
The Annual Incentive pay-out in any year relates to
the achievements of the preceding financial year in
relation to agreed targets. As a result, Annual
Incentives paid in 2009 relate to the salary levels and
the performance in the year 2008.
Based upon the 2008 results as published in this
Annual Report, the realized Annual Incentive amounts
mentioned in the table below will be paid to members
of the Board of Management in April 2009.
Pay-out in 20091)
in euros
realized annual
incentive
as a % of base
salary (2008)
G.J. Kleisterlee 220,000 20.0%
P-J. Sivignon 105,000 15.0%
G.H.A. Dutiné 93,750 15.0%
R.S. Provoost 95,250 15.0%
A. Ragnetti 95,250 15.0%
S.H Rusckowski 221,470 34.9%
Reference date for board membership is December 31, 2008
1)
Long-Term Incentive Plan (LTIP)
The LTIP consists of a mix of stock options and
restricted share rights and serves to align the interests
of the participating employees with the shareholders’
interest and to attract, motivate and retain
participating employees.
The actual number of stock options and restricted
share rights that will be granted to members of the
Board of Management is performance-related and
depends on Philips’ Total Shareholder Return (TSR)
and the team targets of the Board of Management.
The 2007 General Meeting of Shareholders approved
a new list of peer group companies and a new
simplified TSR-based LTI multiplier based on the
ranking table below:
Philips’ position compared to peer companies
LTI multiplier
Top 4 1.2
Middle 4 1.0
Bottom 4 0.8
The peer group contains the following companies:
Electrolux, Emerson Electric, General Electric, Hitachi,
Honeywell International, Johnson & Johnson, Matsushita
(Panasonic), Philips, Schneider, Siemens, Toshiba, 3M.
For 2008, the Supervisory Board has applied a multiplier
of 1.0, based on the Philips share performance over
the period from December 2004 to December 2007.
The stock option plan has a three-year vesting term
(vesting dependent on employment upon the vesting
date), and a 10-year total option term.
Restricted share rights grants apply a vesting term
of respectively 1, 2 and 3 years after grant, and vest
based on employment upon vesting. Through the
granting of 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.
To further align the interests of the members of the
Board of Management and shareholders, restricted
shares granted to the Board of Management members
shall be retained for a period of at least five years or
until at least the end of their employment, if this period
is shorter. Similarly, for other Philips Senior Executives
compulsory share ownership was introduced in 2004.
Philips Annual Report 2008118
42
Our group performance
18
We care about...
8
Message from
the President
6
Performance highlights
14
Who we are