Long-Term Incentive Plan

In 2013 a new LTI Plan has been introduced. The new plan consists of performance shares only.

Grant size

The annual grant size is set by reference to a multiple of base salary. For the CEO the annual grant size is set at 120% of base salary and for the other members of the Board of Management at 100% of base salary. This is at a mid-market level against leading European listed companies. The actual number of performance shares to be awarded is determined by reference to the average of the closing price of the Philips share on the day of publication of the quarterly results and the four subsequent dealing days.

Vesting schedule

Dependent upon the achievement of the performance conditions cliff-vesting applies three years after the date of grant. During the vesting period, the value of dividends will be added to the performance shares in the form of shares. These dividend equivalent shares will only be delivered to the extent that the award actually vests.

Performance conditions

Vesting of the performance shares is based on two equally weighted performance conditions:

  • 50% Adjusted Earnings per Share growth (“EPS”) and
  • 50% Relative Total Shareholder Return (“TSR”)

EPS

EPS growth is calculated applying the simple point-to-point method at year end. Earnings are the income from continued operations attributable to shareholders as reported in the Annual Report.

The following performance incentive-zone applies for EPS:

Performance incentive-zone for EPS
 
Below
threshold
Threshold
Target
Maximum
Pay-out
in %
0
40
100
200

The EPS targets are annually set by the Supervisory Board. Given the fact that these targets are considered to be company sensitive disclosure will take place retrospectively at the end of the performance period. EPS targets and the achieved performance are published in the annual report after the relevant performance period.

TSR

The TSR peer group for the new plan consists of the following 21 companies:

 
ABB
Hitachi
Panasonic
Covidien
Honeywell Int.
Procter & Gamble
Danaher
Johnson Controls
Schneider Electric
Eaton
Johnson & Johnson
Siemens
Electrolux
Legrand
Toshiba
Emerson Electric
LG Electronics
Smiths Group
General Electric
Medtronic
3M

A ranking approach to TSR applies with Philips itself excluded from the peer group to permit interpolation.

The performance incentive-zone is outlined in the table below:

Performance incentive-zone for TSR
Position
≥14
-21
≥13
≥12
≥11
≥10
≥9
≥8
≥7
≥6
-1
Pay-out
in %
0
60
60
100
120
140
160
180
200

Under the new LTI Plan members of the Board of Management were granted 124,171 performance shares in 2013.

The following tables provide an overview of granted but not yet vested (locked up) stock option grants, an overview of performance shares granted but not yet vested and an overview of restricted share rights granted but not yet released. The reference date for board membership is December 31, 2013. The Accelerate! Grant is reported separately under Remuneration costs.

Performance shares 1)
in euros
 
grant date
originally granted
number of performance
shares
value at
grant date
end of
vesting
period
number of
performance
shares
vested in 2013
value
at vesting
date in 2013
 
 
 
 
 
 
 
F.A. van Houten
2013
62,559
1,320,000
2016
n.a.
n.a.
R.H. Wirahadiraksa
2013
31,991
675,000
2016
n.a.
n.a.
P.A.J. Nota
2013
29,621
625,000
2016
n.a.
n.a.
1)
Accelerate! Grant reported separately. Dividend performance shares resulting from the new LTI Plan not included
Stock options2)
in euros
 
grant date
number of
stock options
value at
grant date
end of
lock up period
value at
end of
lock up period 3)
 
 
 
 
 
 
F.A. van Houten
2010
20,4001)
103,428
2013
86,429
 
2011
75,000
366,000
2014
n.a.
 
2012
75,000
212,550
2015
n.a.
R.H. Wirahadiraksa
2010
16,5001)
81,675
2013
36,290
 
2011
51,000
248,880
2014
n.a.
 
2012
51,000
144,534
2015
n.a.
P.A.J. Nota
2010
40,8001)
206,856
2013
172,857
 
2011
51,000
248,880
2014
n.a.
 
2012
51,000
144,534
2015
n.a.
1)
Awarded before date of appointment as a member of the Board of Management
2)
Accelerate! Grant reported separately
3)
Value at end of lock up period based on Black & Scholes value
Restricted share rights
in euros
 
grant date
originally granted number of restricted share rights
value at
grant date
number of restricted share rights
released in 2013
value at
release date
in 2013
 
 
 
 
 
 
F.A. van Houten
2010
5,1001)
116,688
1,700
41,497
 
2011
20,001
418,021
6,667
145,607
 
2012
20,001
296,415
6,667
136,807
R.H. Wirahadiraksa
2010
4,1251)
102,713
1,375
30,113
 
2011
13,602
284,282
4,534
99,023
 
2012
13,602
201,582
4,534
93,038
P.A.J. Nota
2010
10,2001)
233,376
3,400
82,994
 
2011
13,602
284,282
4,534
99,023
 
2012
13,602
201,582
4,534
93,038
1)
Awarded before date of appointment as a member of the Board of Management

For more details of the LTI Plan, see note (31) Share-based compensation.

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This is an interactive electronic version of the Philips Annual Report 2013 and also contains certain information in summarized form. The contents of this version are qualified in their entirety by reference to the printed version of the full Philips Annual Report 2013. This printed version is available as a PDF file on this website. Information about: forward-looking statements, third-party market share data, fair value information, IFRS basis of presentation, use of non-GAAP information, statutory financial statements and management report, reclassifications and analysis of 2013 compared to 2012.