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: to attract, motivate and retain qualified senior executives of the highest caliber with an international mindset and the background essential for the successful leadership and effective 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 effective January 1, 2014, incentives may, under certain circumstances, be amended or clawed back pursuant to statutory powers. For more information please refer to Corporate governance. Further information on the performance targets is given in the chapters on the Annual Incentive (see Annual Incentive) and the Long-Term Incentive Plan (see Long-Term Incentive Plan) 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 and unvested restricted share or performance share units
  • We do not offer 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 employment
  • We do not grant loans or give guarantees to the Board of Management