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 made up for 80% of the financial indicators of the Company and for 20% of the team targets comprising, among others, sustainability targets as part of our EcoVision program.

The on-target Annual Incentive percentage is set at 80% of the base salary for the CEO and at 60% of the base salary for other members of the Board of Management. The maximum Annual Incentive achievable is 160% of the annual base salary for the CEO and 120% of the annual base salary for members of the Board of Management.

To support the performance culture, the Annual Incentive plan is based on (financial) targets at ‘own level’ and ‘group’ level results (line-of-sight). The 2014 payouts, shown in the table below, reflect the below target performance of EBITA, CSG and ROIC at the Group level. In addition, the average Team Target payout was also less than the target level.

Philips Group
Annual Incentive realization in EUR
2014 (payout in 2015)
realized annual incentive
as a % of base salary (2014)
F.A. van Houten
R.H. Wirahadiraksa
P.A.J. Nota

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Earnings before interest, tax and amortization (EBITA) represents income from continuing operations excluding results attributable to non-controlling interest holders, results relating to investments in associates, income taxes, financial income and expenses, amortization and impairment on intangible assets (excluding software and capitalized development expenses). Philips believes that EBITA information makes the underlying performance of its businesses more transparent by factoring out the amortization of these intangible assets, which arises when acquisitions are consolidated. In our Annual Report on form 20-F this definition is referred to as Adjusted IFO.

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