APC 2012 Annual Report Download - page 141

2012 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 139
CORPORATE GOVERNANCE
3
INTERNAL CONTROL AND RISK MANAGEMENT
As Jean-Pascal Tricoire agreed to resign from his employment
contract with the Schneider Electric Group (where he had 22 years’
seniority) when his term as Chairman of the Board was renewed in
May2009, the Supervisory Board defi ned his new status with his
agreement. This status was approved at the Annual Shareholders’
Meeting of April23, 2009. In view of the renewal of his appointment
as Chairman of the Management Board, the Supervisory Board
decided to renew the status of Mr.Tricoire, but with two adjustments:
fi rst, to submit the benefi t of supplementary contingency cover to
performance conditions, and second, to provide that the benchmark
for the calculation of involuntary severance pay is the arithmetic
mean of the effective annual compensation for the last three years.
This modifi ed status of Jean-Pascal Tricoire was approved at the
Annual Shareholders’ Meeting of May3, 2012. Under this status,
Mr.Jean-Pascal Tricoire:
•benefi ts from the Top-hat Pension Benefi t for Schneider Electric
senior executives, the Schneider Electric SA employee benefi t
plan and the supplementary health, disability and death coverage
available to the Group’s senior executives;
•is bound by a non-compete agreement;
•is entitled to compensation in the event of termination, capped at
twice the arithmetic mean of the effective annual compensation
(fi xed and variable) for the last three years, taking into account
compensation provided for in the non-compete agreement
provided for by the commitment described above and provided
that he resigns, is dismissed or is not re-appointed following a
material change in Schneider Electric’s shareholder structure or
a re-orientation of the strategy pursued and promoted by him
until that time;
•retains, subject to performance criteria, all unvested stock
options, stock grants and performance stock grants should he
leave the Company.
At its meeting of May3, 2012 the Supervisory Board made a change
to this status. It decided to provide that involuntary severance
pay will not be due if the dismissal or resignation requested of
Mr.Tricoire is motivated by serious or gross misconduct according
to the criteria adopted by jurisprudence.
At its meetings of April23 and December17, 2009, the Supervisory
Board agreed that Emmanuel Babeau would continue to benefi t
from the top-hat pension benefi t for senior executives provided
under his employment contract with Schneider Electric Industries
SAS. The Shareholders’ Meeting of April22, 2010 approved this
benefi t.
On February21, 2012 the Supervisory Board gave the Management
Board authorization to change the Top-hat Pension Benefi t for the
Schneider Group’s directors to comply with the AFEP/MEDEF
recommendations that provide for progressive acquisition of rights
according to length of service. It has also given authorization for
Management Board members to benefi t from the modifi ed plan .
The Supervisory Board of May3, 2012 authorized the outsourcing
of the old article 39 plans from AXA France Vie with effect from
April30, 2012. In addition, it authorized advancing the outsourcing
of the new article39 plan, which had been initially set for July1,
2012, to that date of April30, 2012 (see pages 273, 290 and 291).
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10. Internal control and risk
management**
10.1 Definition and objectives of internal control and risk management
Definition and objectives
The Group’s internal control procedures are designed to ensure:
•compliance with laws and regulations;
•application of instructions and guidelines issued by Senior
Management;
•the proper functioning of the Company’s internal processes,
notably as concerns asset preservation;
•the reliability of fi nancial reporting;
and more generally, internal control helps the Group manage its
businesses, run effi cient operations and use its resources effi ciently.
Internal control aims to prevent and manage risks related to the
Group’s business. These include accounting and fi nancial risks,
the risk of fraud, as well as operating, fi nancial and compliance
risks. However, no system of internal control is capable of providing
absolute assurance that these risks will be managed completely.
Scope of this report
The system is designed to cover the Group, defi ned as the
Schneider ElectricSA parent company and the subsidiaries over
which it exercises exclusive control.
Jointly controlled subsidiaries are subject to all of the controls
described below, with the exception of self-assessments of
the implementation of Key Internal Controls (see “Operating
Units”below).