Philips 2009 Annual Report Download - page 137

9.3 Report of the
Remuneration
Committee
9.3.1 Introduction
The Remuneration Committee, currently consisting of
four members, 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. In performing its duties and
responsibilities the Remuneration Committee is assisted
by an in-house remuneration expert acting on the basis of
a protocol which ensures that he acts on the instructions
of the Remuneration Committee and maintains an
independent position in which conflicts of interest are
avoided. The Remuneration Committee’s tasks are 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.
9.3.2 General remuneration policy
The objective of the remuneration policy for members of
the Board of Management is in line with that for
executives throughout the Philips Group: to focus on
improving the performance of the company and enhance
the value of the Philips Group, to motivate and retain
them, and to be able to attract highly qualified executives,
when required.
One of the goals behind the policy is to achieve a strong
link between executive remuneration and the company’s
performance. Consequently, the remuneration package
includes a (significant) variable part in the form of an
annual cash incentive and a long-term incentive consisting
of restricted share rights and stock options. The
performance targets are predominantly linked to Philips’
long-term strategy.
The performance targets for the members of the Board of
Management are determined annually at the beginning of
the year. The Supervisory Board determines whether
performance conditions are met and can adjust the pay-
out of the annual cash incentive and the long-term
incentive grant upward or downward if the
predetermined performance criteria would produce an
“unfair” result in extraordinary circumstances. The
authority for such adjustments exists on the basis of the
ultimum remedium- and claw back clauses (in accordance
with best practice provisions II.2.10 and II.2.11 of the
Dutch Corporate Governance Code).
The Board of Management remuneration policy is
benchmarked regularly against companies in the general
industry in Europe and aims at the median market
position.The Remuneration Committee also annually
conducts scenario analyses. These include the calculation
of remuneration under different scenarios, whereby
different Philips performance assumptions and corporate
actions are looked at. In 2009, the full Supervisory Board
conducted an extensive review of the remuneration
policy. The Supervisory Board concluded that the current
policy proves to function well, in the current extreme
circumstances as well as in terms of the relationship
between the strategic objectives and the chosen
performance criteria. The policy does not encourage
inappropriate risk-taking.
9.3.3 Contracts of employment
Members of the Board of Management have a 4-year
contract of employment with the Company.
Contract terms for current members1)
end of term
G.J. Kleisterlee April 1, 2011
P-J. Sivignon April 1, 2013
G.H.A. Dutiné April 1, 2011
R.S. Provoost April 1, 2010
A. Ragnetti April 1, 2010
S.H. Rusckowski April 1, 2011
1) Reference date for board membership is December 31, 2009
The main elements of the contracts are made public no
later than the date of the notice convening the General
Meeting of Shareholders at which the appointment of the
member of the Board of Management will be proposed.
The severance payment is set at a maximum of one year’s
salary, or in case this is ‘manifestly unreasonable’ for a
member of the Board of Management in his first
appointment period, the amount is maximized at twice the
annual salary.
Information on the individual remuneration of the
members of the Board of Management is shown in the
tables below as well as in the tables in note 31.
9 Supervisory Board report 9.3 - 9.3.4
Philips Annual Report 2009 137