Philips 2004 Annual Report Download - page 22

General
The supervision of the policies and actions of the executive
management (the Board of Management) of Koninklijke Philips
Electronics N.V. (the ‘Company’) the Company is entrusted to the
Supervisory Board, which, in the two-tier corporate structure
prescribed by Netherlands law, is a separate body and fully
independent from the Board of Management. This independence is
also reflected in the requirement that members of the Supervisory
Board be neither a member of the Board of Management, nor an
employee of the Company. The Supervisory Board considers all its
members to be independent under the applicable US standards
and pursuant to the Dutch Corporate Governance Code of
December 9, 2003 (the ‘Dutch Corporate Governance Code’).
The Supervisory Board, acting in the interests of the Company and
the Philips Group, supervises and advises the Board of
Management in performing its management tasks and setting the
direction of the Philips Group’s business. It is empowered to
recommend to the General Meeting of Shareholders persons to be
appointed as members of the Supervisory Board or the Board of
Management. Major management decisions, including the Philips
Group strategy, require the approval of the Supervisory Board.
The Supervisory Board further supervises the structure and
management of systems of internal business controls and the
financial reporting process. It determines the remuneration of the
individual members of the Board of Management within the
remuneration policy adopted by the General Meeting of
Shareholders. While retaining overall responsibility, the
Supervisory Board assigns certain of its tasks to three permanent
committees: the Corporate Governance and Nomination &
Selection Committee, the Remuneration Committee and the
Audit Committee. The separate reports of these committees are
part of this report and published below.
As in prior years, the Supervisory Board discussed developments
in the area of corporate governance in 2004. In addition to the
preparations for the implementation of the Sarbanes-Oxley Act
and its requirements regarding assessment, review and monitoring
of internal controls over financial reporting, the Dutch Corporate
Governance Code and its consequences were discussed in several
meetings. As in 2003, Philips addresses its overall corporate
governance structure in this Annual Report (refer to pages 195 to
208). In connection therewith and with new Dutch legislation, a
proposal will be made to the Annual General Meeting of
Shareholders to be held on March 31, 2005 to amend the current
articles of association of the Company. Upon adoption of this
proposal by the General Meeting of Shareholders, the priority
shares will be cancelled and the thresholds for overruling the
Supervisory Board’s binding recommendation for appointments of
members of the Board of Management and the Supervisory Board
will be changed. The proposal to amend the articles of association
also contains detailed provisions on dealing with conflicts of
interests of members of the Board of Management and stipulates
that resolutions that are so far-reaching that they would
significantly change the identity or nature of the Company or the
enterprise shall be subject to the approval of the General Meeting
of Shareholders.
Meetings of the Supervisory Board
The Supervisory Board met six times in the course of 2004,
including a meeting on strategy; all of its members who were in
office during the full year participated in four or more of these
meetings. The members of the Board of Management were
present at the meetings of the Supervisory Board except in
matters regarding the composition and functioning of the
Supervisory Board and its members. The Supervisory Board also
met without the members of the Board of Management being
present when they discussed the composition of the Board of
Management and the Group Management Committee, as well as
the remuneration and performance of members of the Board of
Management and the Group Management Committee. During the
course of the year the Supervisory Board was informed and
consulted by the Board of Management on the course of business,
important decisions and the Philips Group strategy. In addition to
the scheduled meetings, the Chairman and other members of the
Supervisory Board had regular contact with the President/CEO
and other members of the Board of Management throughout the
year.
Composition and remuneration of the Supervisory
Board
The Supervisory Board aims for an appropriate combination of
knowledge and experience among its members in relation to the
global and multi-product character of the Company’s businesses.
Consequently the Supervisory Board aims for an appropriate level
of experience in marketing, manufacturing, financial, economic,
technology, social and legal aspects of international business and
government and public administration. The Supervisory Board
further aims to have available appropriate experience within
Philips by having one former Philips executive as a member.
Members are appointed for fixed terms of four years and may be
re-appointed for two additional four-year terms.
The Supervisory Board currently consists of nine members, who
are listed on page 20 of this Annual Report. At the General
Meeting of Shareholders held on March 25, 2004 Mr van Miert was
re-appointed and Mr Kist was elected to the Supervisory Board.
At the 2005 General Meeting of Shareholders the present term of
Messrs van Wachem and Schweitzer will end. Mr van Wachem,
21Philips Annual Report 2004
Supervisory Board Report