Philips 2008 Annual Report Download - page 119

In 2008, 9,979,902 stock options and 2,321,634
restricted share rights were granted under the LTIP
(excluding the 20% premium shares to be delivered
after a three-year holding period).
For more details of the LTIP, see note 33.
Pensions
Eligible members of the Board of Management
participate in the Executives Pension Plan in the
Netherlands consisting of a combination of a defined-
benefit (career average) and defined-contribution plan.
The target retirement age under the plan is 62.5.
The plan does not require employee contributions.
Additional arrangements
In addition to the main conditions of employment, a
number of additional arrangements apply to members
of the Board of Management. These additional
arrangements, such as expense and relocation allowances,
medical insurance, accident insurance and company
car arrangements are broadly in line with those for
Philips executives in the Netherlands. In the event of
disablement, members of the Board of Management
are entitled to benefits in line with those for other
Philips executives in the Netherlands.
In line with regulatory requirements, the Company’s
policy forbids personal loans to members of the Board
of Management and Supervisory Board or to the other
members of the Group Management Committee, and
consequently no loans were granted to such members
in 2008, nor were such loans outstanding as of
December 31, 2008.
Unless the law provides otherwise, the members
of the Board of Management and of the Supervisory
Board shall be reimbursed by the Company for various
costs and expenses, like reasonable costs of defending
claims, as formalized in the articles of association.
Under certain circumstances, described in the articles
of association, such as an act or failure to act by a
member of the Board of Management or a member
of the Supervisory Board that can be characterized
as intentional (“opzettelijk”), intentionally reckless
(“bewust roekeloos”) or seriously culpable (“ernstig
verwijtbaar”), there will be no entitlement to this
reimbursement. The Company has also taken out
liability insurance (D&O - Directors & Officers) for
the persons concerned.
2009
In view of the current economic circumstances, salaries
of the members of the Board of Management will not
be increased in 2009 and Philips will be restrictive in
the salary review for all employees.
After extensive consultation with important
stakeholders, Philips will propose to the General
Meeting of Shareholders in 2009 the introduction of
a new TSR multiplier range for restricted share rights.
If adopted, the new multiplier will be applied starting
with the grant in April 2009. The new multiplier range
has more down side and more upside than previously:
minimum is “zero” (from 0.8), and maximum is 2
(from 1.2). As the multiplier is applied to determine
grant numbers, this means that grants can be zero at
minimum, or double the target number at maximum.
In this way, the link between pay and performance
is further enhanced.
The current multiplier range for stock options will be
maintained (ranging from 0.8 – 1.2).
The so-called ultimum remedium clause and claw back
clause of best practice provisions II.2.10 and II.2.11
of the new Dutch Corporate Governance Code,
as presented by the Corporate Governance Code
Monitoring Committee in its report of December
2008, is applicable to Annual Incentive payments
and LTIP grants over the year 2009 onwards to all
members of the Board of Management.
Proposed TSR
TSR Ranking 123456
Multiplier
(current) 1.2 1.2 1.2 1.2 1 1
Multiplier
(proposed) 2 1.8 1.6 1.4 1.2 1
Proposed TSR
TSR Ranking 789101112
Multiplier
(current) 1 1 0.8 0.8 0.8 0.8
Multiplier
(proposed) 1 0.8 0.6 0.4 0.2 0
Philips Annual Report 2008 119
122
Performance statements
114
Supervisory Board report
110
Our leadership
94
Risk management
70
Our sector performance