Philips 2004 Annual Report Download - page 13

Corporate governance
For many years now Philips has pursued a consistent policy to
enhance and improve its corporate governance – including its
disclosure practices – in line with best practices. In its two-tier
corporate structure, executive management is entrusted to the
Board of Management under the supervision of the independent
Supervisory Board. Both boards are accountable to the General
Meeting of Shareholders for the performance of their functions.
All outstanding shares carry voting rights. Continuously striving to
improve relations with its shareholders, Koninklijke Philips
Electronics N.V. (the ‘Company’) seeks for an accurate and
complete disclosure policy and follows an active investor relations
approach.
Comprehensive internal procedures, compliance with which is
supervised by the Supervisory Board and its Audit Committee, are
in place for the preparation and publication of financial results and
ad-hoc financial information. The annual financial statements,
observing Dutch law and applying US and Dutch GAAP, are
presented for discussion and adoption to the General Meeting of
Shareholders. A separate Annual Report on Form 20-F, certified
by both the Chief Executive Officer and the Chief Financial Officer,
is filed with the US Securities and Exchange Commission. The
Company, which is required to comply with the US
Sarbanes-Oxley Act and related regulations, has disclosed and
maintains a policy of strict separation between the auditing and
non-audit functions of its external auditor. The external auditor,
which is assessed by the Supervisory Board and its Audit
Committee, is appointed by the General Meeting of Shareholders
as required by Dutch law. A proposal shall be made to the 2005
Annual General Meeting of Shareholders to re-appoint KPMG
Accountants N.V. for an additional three years.
Against the background of the continuing endeavors to improve
the Company’s corporate governance, and in connection with the
implementation of the Dutch Corporate Governance Code of
December 9, 2003 and new Dutch legislation, a proposal will be
made to the 2005 Annual General Meeting of Shareholders to
amend the current articles of association of the Company.
The Company addresses its overall corporate governance
structure and the way it implements the Dutch Corporate
Governance Code in the section Corporate Governance on
pages 195 to 208.
Philips General Business Principles
The Philips General Business Principles (GBP) govern the
Company’s business decisions and actions throughout the world,
applying equally to corporate actions as well as the behavior of
individual employees when on company business. They
incorporate the fundamental principles on which all Philips activity
is or should be based.
2004 saw the worldwide roll-out of the new version of the GBP.
These have been translated into the local language – and are an
integral part of the labor contract – in virtually all countries.
Responsibility for compliance with the Principles rests first and
foremost with the management of each business. In every country
organization and in the major production sites a Compliance
Officer has been appointed. Confirmation of compliance with the
GBP is an integral part of the annual Statement on Business
Controls that has to be issued by the management of each
organizational unit.
In 2004 we took a number of fundamental steps to encourage full
compliance, e.g. the introduction of whistleblower policies and
standardized complaint reporting and escalation procedures.
Guaranteed-anonymity hotlines are now in place in the Philips
organizations in North America, Latin America and virtually all of
Asia Pacific.
To drive the practical deployment of the GBP, a set of Directives
have been published, including the Purchasing Code of Ethics and
the Financial Code of Ethics. To ensure compliance with the
highest standards of transparency and accountability by all
employees performing important financial functions, the Financial
Code of Ethics contains, among other things, standards to
promote honest and ethical conduct, and full, accurate and timely
disclosure procedures to avoid conflicts of interest.
In 2004 a new dilemma-training casebook was developed to
heighten awareness and understanding of the general issue of
business ethics and, more specifically, to promote compliance with
the GBP. This casebook is also widely used on introductory
courses for new employees. Within our Medical Systems division,
e-learning tools are deployed to ensure that the new GBP are
embedded throughout the organization, and other parts of Philips
are expected to adopt this methodology in the coming year.
12 Philips Annual Report 2004
Governance