Philips 2004 Annual Report Download - page 197

and the General Meeting of Shareholders. The Board of
Management follows its own Rules of Procedure, which set forth
procedures for meetings, resolutions, minutes and (vice)
chairmanship. Such Rules of Procedure are published on the
Company’s website.
(Term of) Appointment, individual data and
conflicts of interests
Members of the Board of Management and the President/CEO are
elected by the General Meeting of Shareholders upon a binding
recommendation from the Supervisory Board and – currently –
the Meeting of Priority Shareholders. According to the Company’s
current articles of association, this binding recommendation may
be overruled by a resolution of the General Meeting of
Shareholders adopted by a majority of at least 2/3 of the votes cast
and representing more than half of the issued share capital.
Pursuant to the Amended Articles of Association, the priority
shares will be cancelled. As from then, a binding recommendation
shall be drawn up by the Supervisory Board after consultation with
the President/CEO. This binding recommendation may be
overruled by a resolution of the General Meeting of Shareholders
adopted by a simple majority of the votes cast and representing at
least 1/3 of the issued share capital. If a simple majority of the
votes cast is in favor of the resolution to overrule the binding
recommendation, but such majority does not represent at least
1/3 of the issued share capital, a new meeting may be convened at
which the resolution may be passed by a simple majority of the
votes cast, regardless of the portion of the issued share capital
represented by such majority. In anticipation of the Amended
Articles of Association, the Board of Management and the
Supervisory Board will reconsider the recommendation if the
General Meeting of Shareholders, by simple majority representing
at least 1/3 of the Company’s share capital, does not adopt the
proposed election.
Members of the Board of Management and the President/CEO are
appointed for a maximum term of four years, it being understood
that this maximum term expires at the end of the following general
meeting of shareholders to be held in the fourth year after the
year of their appointment. Reappointment is possible for
consecutive maximum terms of four years or, if applicable, on a
later pension or other contractual termination date in that year,
unless the General Meeting of Shareholders resolves otherwise.
Members may be suspended by the Supervisory Board and the
General Meeting of Shareholders and dismissed by the latter.
Individual data on the members of the Board of Management are
published in the Annual Report, and updated on the Company’s
website. The acceptance by a member of the Board of
Management of a membership of the supervisory board of another
company requires the approval of the Supervisory Board. The
Supervisory Board is required to be notified of other important
positions (to be) held by a member of the Board of Management.
No member of the Board of Management holds more than two
supervisory board memberships of listed companies, or is a
chairman of such supervisory board, other than of a Group
company.
The Company shall further propose to the General Meeting of
Shareholders to formalize its rules to avoid conflicts of interests
between the Company and members of the Board of Management.
The Amended Articles of Association state that in the event of a
legal act or a lawsuit between the Company and a member of the
Board of Management, certain of such member’s relatives, or
certain (legal) entities in which a member of the Board of
Management has an interest, and insofar as the legal act is of
material significance to the Company and/or to the respective
member of the Board of Management, the respective member of
the Board of Management shall not take part in the
decision-making in respect of the lawsuit or the legal act.
Resolutions concerning such legal acts or lawsuits require the
approval of the Supervisory Board.
Legal acts as referred to above shall be mentioned in the Annual
Report for the financial year in question. The Rules of Procedure
of the Board of Management establish further rules on the
reporting of (potential) conflicts of interests. No (potential)
conflicts of interests have been reported during the financial year
2004.
Relationship between Board of Management and
Supervisory Board
The Board of Management is supervised by the Supervisory Board
and provides the latter with any and all (written) information the
Supervisory Board needs to fulfill its own responsibilities. Major
decisions of the Board of Management require the approval of the
Supervisory Board; these include decisions concerning (a) the
operational and financial objectives of the Company, (b) the
strategy designed to achieve the objectives, and, if necessary, (c)
the parameters to be applied in relation to the strategy.
Risk management approach
The Board of Management is responsible for ensuring that the
Company complies with all relevant legislation and regulations. It is
responsible for proper financing of the Company and the
management of the risks that the Company is facing. It reports on
and accounts for internal risk management and control systems to
196 Philips Annual Report 2004
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