May 18, 2023
It’s a Contract Year for Signify CEO, Eric Rondolat
Impending contract renewal puts Rondolat's leadership in spotlight
What do NFL running backs Austin Ekeler and Saquon Barkley have in common with Signify CEO, Eric Rondolat? All three individuals are entering the final year of their respective employment contracts, which will likely cause their individual performance to be scrutinized even more than usual.
All three high-performing men are well compensated for their work, but unlike an aging and battered running back, Rondolat's game has the potential to consistently improve year after year, even as the CEO enters his twelfth year leading the company formerly known as Philips Lighting and now known as Signify.
In 2020, two months after the company acquired Cooper Lighting for $1.4 billion, Netherlands-based Signify renewed Rondolat's contract for a four-year term that will expire at the company's next Annual General Meeting, expected to occur in May 2024.
Navigating a multi-billion-dollar lighting company during the LED revolution is difficult work. Rondolat joined Philips Lighting in 2012, when all "Big 3" lamp companies were building a robust LED portfolio on the fly while also navigating corporate spinoffs. OSRAM Sylvania became Ledvance in the U.S. and Canada. GE Lighting was splintered into GE Current and smart home company Savant Systems. And five years ago this week, Rondolat guided Philips Lighting's spinoff from Royal Philips to become the world's largest pure-play lighting company, Signify.
Along the way, Signify has transformed its portfolio of traditional source-lamps and luminaires into a collection of LED products that form the backbone of a complex global lighting and controls company, operating in consumer, commercial, and OEM channels across the globe.
Some Important details of Eric Rondolat's current contract:
Rondolat's last contract renewal officially began on May 20, 2020. As is common for European business leaders, Rondolat works as an independent contractor rather than as a company employee.
The engagement has a specific duration—it will last until the Annual General Meeting of Shareholders, expected to take place in May 2024. However, as the end date approaches, both parties will engage in discussions about the potential extension of the contract. No later than six months before the end date, or this coming November, both parties will discuss the possibility of an extension.
If the company decides to terminate the contract early, without an urgent cause, Rondolat is entitled to a one-time compensation equal to the Annual Base Compensation. This provision ensures fairness in case the company decides to wrap things up before the agreed-upon end date, but not due to an urgent situation.
In 2022, Eric Rondolat received a base salary of EUR 947,330 and a total compensation of just over EUR 2.0 million. In each of the two previous years, his total compensation was just over EUR 3.2 million. Given the challenges of 2022, the variable payout was less compared to prior years.
This level of compensation is in line – and possibly on the lighter side – when compared to other CEOs who lead publicly traded multi-billion-dollar global corporations. CEOs of comparably sized companies Motorola and Xerox earned over $20 million and over $8 million respectively in 2022.
In addition to the expected financial metrics that impact Rondolat's variable compensation, one notable aspect of Rondolat's income is that the goals of Signify's Brighter Lives, Better World 2025 program are integrated into the CEO's long-term compensation. Metrics related to carbon footprint reduction, circular revenues, "brighter lives revenues," and women in leadership positions are each calculated into the CEO's compensation.
At this week's Annual General Meeting, the shareholders approved a 4% base salary increase for Eric Rondolat and set a total compensation target, inclusive of all short and long-term incentives, of approximately $3 million USD.
It’s a complex business that demands the right leader
There is no lighting company in the world with a more complex go-to-market strategy than Signify. The company's sales are diversified globally, as Signify's products, systems, and services are sold in 180 countries. One-third of sales occur in the United States. Signify employs 32,000 people in 70 countries and has manufacturing plants in all major regions of the world.
With diverse B2C and B2B channels based on lamps, luminaires, controls, horticulture, smart cities, or OEM components, the company's vast lighting category diversity also creates a complex market strategy. Signify has been delivering favorable profits, although its global revenues have not kept pace with some US-focused competitors.
The year ahead:
In football, impatient fans often say it's time to bring in new blood to the locker room, but the other side of that coin is whether the replacements will actually perform better than the incumbents. Rondolat is experienced, poised, and deeply knowledgeable about the markets. 2022 was a challenging year for Signify. And 2023 started with some speed bumps, too.
While there are no public clues pointing to Rondolat or Board of Directors disenchantment, it’s possible that 57-year-old Rondolat, who joined Philips after a long tenure with Schneider Electric, seeks out another corporate leadership opportunity in lieu of re-upping a multi-year commitment with Signify. Or it’s possible that the Board of Directors initiates a search for a new leader.
The Board of Directors and Rondolat should have an idea by the end of this calendar year about the likelihood of a contract renewal. As next year’s Annual General Meeting approaches industry onlookers will learn the proposed direction that the Board recommends.