Philips 2005 Annual Report Download - page 221

Philips Annual Report 2005 221
recommendation III.4.2 of the Dutch Corporate Governance Code.
Under certain circumstances and in view of the position and
responsibilities of the Chairman of the Supervisory Board it could
be in the best interests of the Company that a member of the Board
ofManagement,whoresignedsuchpositionmorethanveyearsago,
be Chairman of the Supervisory Board.
The Rules of Procedure of the Supervisory Board are published on
the Company’s website. They include the charters of its committees, to
which the plenary Supervisory Board, while retaining overall responsibility,
has assigned certain tasks: the Corporate Governance and Nomination
& Selection Committee, the Audit Committee and the Remuneration
Committee. A maximum of one member of each committee need not
beindependentasdenedbytheDutchCorporateGovernanceCode.
Each committee reports, and submits its minutes for information, to
the Supervisory Board.
The Supervisory Board is assisted by the General Secretary of the
Company. The General Secretary sees to it that correct procedures are
followed and that the Supervisory Board acts in accordance with its
statutory obligations and its obligations under the articles of association.
Furthermore the General Secretary assists the Chairman of the
Supervisory Board in the actual organization of the affairs of the
Supervisory Board (information, agenda, evaluation, introductory
program) and is the contact person for interested parties who want
to make concerns known to the Supervisory Board. The General
Secretary shall, either on the recommendation of the Supervisory
Board or otherwise, be appointed by the Board of Management and
may be dismissed by the Board of Management, after the approval of
the Supervisory Board has been obtained.
(Termof)Appointment,individualdataandconictsofinterests
The Supervisory Board consists of at least three members (currently
ten), including a Chairman, Vice-Chairman and Secretary. The so-called
Dutch ‘structure regime’ does not apply to the Company itself.
Members are currently elected by the General Meeting of Shareholders
forxedtermsoffouryears,uponabindingrecommendationfromthe
Supervisory Board. According to the Company’s articles of association,
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 one-third 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 one-third 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.
Members may be suspended by the Supervisory Board and the General
Meeting of Shareholders and dismissed by the latter. In the event of
inadequate performance, structural incompatibility of interests, and in
other instances in which resignation is deemed necessary in the opinion
of the Supervisory Board, the Supervisory Board shall submit to the
General Meeting of Shareholders a proposal to dismiss the respective
member of the Supervisory Board. There is no age limit applicable, and
members may be re-elected twice. The date of expiration of the terms
of Supervisory Board members is put on the Company’s website.
Individual data on the members of the Supervisory Board are published
in the Annual Report, and updated on the Company’s website.
After their appointment, all members of the Supervisory Board shall
followanintroductoryprogram,whichcoversgeneralnancialandlegal
affairs,nancialreportingbytheCompany,anyspecicaspectsthatare
unique to the Company and its business activities, and the responsibilities
of a Supervisory Board member. Any need for further training or
education of members will be reviewed annually, also on the basis of
an annual evaluation survey.
In accordance with policies adopted by the Supervisory Board, no
memberoftheSupervisoryBoardshallholdmorethanvesupervisory
board memberships of Dutch listed companies, the chairmanship of
a supervisory board counting as two regular memberships.
In compliance with the Dutch Corporate Governance Code, the
Companyhasformalizedstrictrulestoavoidconictsofinterests
between the Company and members of the Supervisory Board; all
informationaboutaconictofinterestssituationistobeprovided
totheChairmanoftheSupervisoryBoard.Noconictsofinterests
were reported in 2005.
Meetings of the Supervisory Board
The Supervisory Board meets at least six times per year, including
a meeting on strategy. The Supervisory Board, on the advice of its
Audit Committee, also discusses, in any event at least once a year,
the risks of the business, and the result of the assessment by the Board
of Management of the structure and operation of the internal risk
managementandcontrolsystems,aswellasanysignicantchanges
thereto. In 2005 each member of the Supervisory Board participated
inveormoreofthemeetingsoftheSupervisoryBoard.Themembers
of the Board of Management attend meetings of the Supervisory Board
exceptinmatterssuchasthedesiredprole,compositionand
competence of the Supervisory Board, the Board of Management and
the Group Management Committee, as well as the remuneration and
performance of individual members of the Board of Management and
the Group Management Committee and the conclusions that must be
drawn on the basis thereof. In addition to these items, the Supervisory
Board, being responsible for the quality of its own performance,
discusses, at least once a year on its own, without the members of the
Board of Management being present, both its own functioning and that
of the individual members, and the conclusions that must be drawn on
the basis thereof. The President/CEO and other members of the Board
of Management have regular contacts with the Chairman and other
members of the Supervisory Board. The Board of Management is
required to keep the Supervisory Board informed of all facts and
developments concerning Philips that the Supervisory Board may
need in order to function as required and to properly carry out its
duties, to consult it on important matters and to submit certain
important decisions to it for its prior approval. The Supervisory Board
and its individual members each have their own responsibility to request
from the Board of Management and the external auditor all information
that the Supervisory Board needs in order to be able to carry out its
duties properly as a supervisory body. If the Supervisory Board considers
itnecessary,itmayobtaininformationfromofcersandexternal
advisers of the Company. The Company provides the necessary
means for this purpose. The Supervisory Board may also require
thatcertainofcersandexternaladvisersattenditsmeetings.
The Chairman of the Supervisory Board
The Supervisory Board’s Chairman will see to it that: (a) the members
of the Supervisory Board follow their introductory program, (b) the
members of the Supervisory Board receive in good time all information
which is necessary for the proper performance of their duties,
(c)thereissufcienttimeforconsultationanddecision-makingby
the Supervisory Board, (d) the committees of the Supervisory Board
function properly, (e) the performance of the Board of Management
members and Supervisory Board members is assessed at least once
a year, and (f) the Supervisory Board elects a Vice-Chairman.
Remuneration of the Supervisory Board and share ownership
The remuneration of the individual members of the Supervisory
Board, as well as the additional remuneration for its Chairman and
the members of its committees is determined by the General Meeting
of Shareholders. The remuneration of a Supervisory Board member
is not dependent on the results of the Company. Further details are
published in the chapter Report of the Supervisory Board that begins
on page 60 of this Annual Report. The Company shall not grant its
Supervisory Board members any personal loans, guarantees or similar
arrangements. No such (remissions of) loans and guarantees were
granted to such members in 2005, nor were any outstanding as per
December 31, 2005.
Shares or rights to shares shall not be granted to a Supervisory Board
member. In accordance with the Rules of Procedure of the Supervisory
Board, any shares in the Company held by a Supervisory Board member
are long-term investments. The Supervisory Board has adopted a policy
onownership(andnotication)oftransactionsinnon-Philipssecurities
by members of the Supervisory Board. This policy is included in the