Philips 2009 Annual Report Download - page 139

9.3.5 Base salary
In view of the economic circumstances, salaries of the
members of the Board of Management have not been
increased on the yearly review date in April 2009. Philips
has applied a restrictive policy for all employees.
9.3.6 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). In 2009 the
focus was on comparable sales growth and free cash flow.
The 20% team targets comprise the major elements of the
management agenda, including sustainability elements.
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 2010
relate to the salary levels and the performance in the year
2009. The amounts in the table below will be paid to the
members of the Board of Management in April 2010.
Pay-out in 20101)
in euros
realized annual
incentive
as a % of base salary
(2009)
G.J. Kleisterlee 962,720 87.5%
P-J. Sivignon 459,480 65.6%
G.H.A. Dutiné 410,250 65.6%
R.S. Provoost 416,814 65.6%
A. Ragnetti 416,814 65.6%
S.H Rusckowski 416,814 65.6%
1) Reference date for board membership is December 31, 2009
9.3.7 Long-Term Incentive Plan
The LTIP consists of a mix of stock options and restricted
share rights. It aims to align the interests of the
participating employees with the shareholders’ interests
and to attract, motivate and retain participating
employees.
The stock option plan vests three years after grant,
dependent on employment upon the vesting date. The
exercise price is the share price upon grant, and the total
option term is 10 years.
A restricted share right is a right to receive a share,
subject to being employed with Philips upon the vesting
date. Vesting occurs in 3 equal tranches respectively 1, 2
and 3 years after grant. An additional 20% of the restricted
share rights grant is deferred, subject to the condition that
released shares are held for three years after vesting, and
employment with Philips is continued during this period.
The actual number of stock options and restricted share
rights to be granted to the board members is performance
related and depends on the ranking of Philips in the Total
Shareholder Return (TSR) peer group and the realization
of the team targets of the Board of Management. The peer
group comprises the following companies: Electrolux,
Emerson Electric, General Electric, Hitachi, Honeywell
International, Johnson & Johnson, Matsushita, Philips,
Schneider, Siemens, Toshiba and 3M.
The TSR ranking is the basis for the two different
multipliers that apply to the grant of stock options and
restricted share rights. The multipliers are determined in
line with the table below.
TSR multiplier
Philips’ position ranking 1 2 3 4 5 6
restricted share rights 2.0 1.8 1.6 1.4 1.2 1.0
stock options 1.2 1.2 1.2 1.2 1.0 1.0
TSR multiplier
Philips’ position ranking 7 8 9 10 11 12
restricted share rights 1.0 0.8 0.6 0.4 0.2 0.0
stock options 1.0 1.0 0.8 0.8 0.8 0.8
Based on the Philips’ share performance over the period
December 2005 - December 2008, Philips ranked 8th in its
peer group.
To further align the interests of the members of the Board
of Management and shareholders, restricted shares
granted to the members of the Board of Management 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.
9 Supervisory Board report 9.3.5 - 9.3.7
Philips Annual Report 2009 139