Philips 2015 Annual Report Download - page 82

Supervisory Board report 10.1
82 Annual Report 2015
focus on the management teams of the two operating
committees responsible for the day-to-day
management of the businesses addressing the
HealthTech and Lighting opportunities.
With respect to corporate governance matters, the
Committee discussed relevant developments and
legislative changes during two meetings. The
Committee reviewed the corporate governance of
Royal Philips and considered options for governance
models for Philips Lighting should it become a
company listed at a stock exchange. Given this
possibility, the Committee also reviewed potential
candidates for a supervisory board of Philips Lighting.
10.2 Report of the Remuneration
Committee
Introduction
The Remuneration Committee is chaired by Heino von
Prondzynski. Its other members are Jeroen van der
Veer, Ewald Kist and Christine Poon. The Committee is
responsible for preparing decisions of the Supervisory
Board on the remuneration of individual members of
the Board of Management and the Executive
Committee. In performing its duties and responsibilities
the Remuneration Committee is assisted by an external
consultant and in-house remuneration expert acting on
the basis of a protocol which ensures that he acts on
the instructions of the Remuneration Committee.
Currently, no member of the Remuneration Committee
is a member of the management board of another listed
company. In line with applicable statutory and other
regulations, this report focuses on the terms of
engagement and remuneration of the members of the
Board of Management. The Committee met six times in
2015.
10.2.1 Remuneration policy
The objective of the remuneration policy for members
of the Board of Management, as adopted by the
general meeting of shareholders, is in line with that for
executives throughout the Philips Group. That is, to
attract, motivate and retain qualied senior executives
of the highest caliber with an international mindset and
the background essential for the successful leadership
and eective management of a large global company.
The Board of Management remuneration policy is
benchmarked regularly against companies in the
general industry and aims at the median market
position.
One of the goals behind the policy is to focus on
improving the performance of the company and to
enhance the value of the Philips Group. Consequently,
the remuneration package includes a variable part in
the form of an annual cash incentive and a long-term
incentive consisting of performance shares. The policy
does not encourage inappropriate risk-taking.
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 have
been met and can adjust the payout of the annual cash
incentive and the long-term incentive grant upward or
downward if the predetermined performance criteria
were to produce an inappropriate result in
extraordinary circumstances. The authority for such
adjustments exists on the basis of contractual ultimum-
remedium and claw-back clauses. In addition, pursuant
to Dutch legislation eective January 1, 2014, incentives
may, under certain circumstances, be amended or
clawed back pursuant to statutory powers. For more
information please refer to chapter 11, Corporate
governance, of this Annual Report. Further information
on the performance targets is given in the chapters on
the Annual Incentive (see sub-section 10.2.6, Annual
Incentive, of this Annual Report) and the Long-Term
Incentive Plan (see sub-section 10.2.7, Long-Term
Incentive Plan, of this Annual Report) respectively.
Key features of our Executive Committee
Compensation Program
The list below highlights Philips’ approach to
remuneration, in particular taking into account
Corporate Governance practices in the Netherlands.
What we do
• We pay for performance
• We conduct scenario analyses
• We have robust stock ownership guidelines
• We have claw-back policies incorporated into our
incentive plans
• We have a simple and transparent remuneration
structure in place
What we do not do
•We do not pay dividend equivalents on stock options,
or restricted share units and performance share units
that do not vest
• We do not oer executive contracts with longer than
12 months’ separation payments
• We do not have a remuneration policy in place that
encourages our Board of Management to take any
inappropriate risks or to act in their own interests
• We do not reward failing members of the Board of
Management upon termination of contract
•We do not grant loans or give guarantees to the Board
of Management
10.2.2 Contracts for the provision of services
Below, the main elements of the contracts for the
provision of services of the members of the Board of
Management are included.
Term of appointment
The members of the Board of Management are
engaged for a period of 4 years, it being understood
that this period expires no later than at the end of the
following AGM held in the fourth year after the year of
appointment.