Philips 2005 Annual Report Download - page 222

Philips Annual Report 2005222
Rules of Procedure of the Supervisory Board. In order to avoid the
impression that the Company should or could take corrective action
in respect of a certain transaction in securities in another company by
a member of the Supervisory Board and the unnecessary administrative
burden,theSupervisoryBoardconsidersanannualnoticationofchanges
in a member’s holdings of securities related to Dutch listed companies
tothePhilipsComplianceOfcertobeinlinewithbestpracticesand
sufcienttoreachanadequateleveloftransparency;however,itisnot
fully in compliance with the Dutch Corporate Governance Code,
recommendationIII.7.3,whichrequiresnoticationonaquarterlybasis.
The Corporate Governance and Nomination & Selection Committee
The Corporate Governance and Nomination & Selection Committee
consists of at least the Chairman and Vice-Chairman of the Supervisory
Board. The Committee reviews the corporate governance principles
applicable to the Company at least once a year, and advises the
Supervisory Board on any changes to these principles as it deems
appropriate. It also (a) draws up selection criteria and appointment
procedures for members of the Supervisory Board, the Board of
Management and the Group Management Committee; (b) periodically
assesses the size and composition of the Supervisory Board, the Board
of Management and the Group Management Committee, and makes
theproposalsforacompositionproleoftheSupervisoryBoard,if
appropriate; (c) periodically assesses the functioning of individual
members of the Supervisory Board, the Board of Management and
the Group Management Committee, and reports on this to the
Supervisory Board. The Committee also consults with the President/
CEOandtheBoardofManagementoncandidatestollvacancies
on the Supervisory Board, the Board of Management and the Group
Management Committee, and advises the Supervisory Board on the
candidates for appointment. It further supervises the policy of the
Board of Management on the selection criteria and appointment
procedures for Philips Executives.
The Remuneration Committee
The Remuneration Committee meets at least twice a year and is
responsible for preparing decisions of the Supervisory Board on the
remuneration of individual members of the Board of Management and
the Group Management Committee. It drafts the proposal for the
remuneration policy to be adopted by the Supervisory Board for
the remuneration of the members of the Board of Management and
the Group Management Committee.
The Remuneration Committee prepares an annual remuneration report.
The remuneration report contains an account of the manner in which
theremunerationpolicyhasbeenimplementedinthepastnancialyear,
as well as an overview of the implementation of the remuneration
policy planned by the Supervisory Board for the next years. The
Supervisory Board aims to have appropriate experience available within
the Remuneration Committee. Although currently these functions are
not combined, the Supervisory Board is of the opinion that, considering
the functions and tasks of the Chairman of the Remuneration Committee
and the position and responsibilities of the Chairman of the Supervisory
Board, it could be desirable that these functions may be combined in
view of the role of the Chairman of the Remuneration Committee
towards the President /CEO and other members of the Board of
Management in the procedures for determining the remuneration
policy and the remuneration of the individual members of the Board
of Management. No more than one member of the Remuneration
Committee shall be an executive board member of another Dutch
listed company.
In performing its duties and responsibilities the Remuneration Committee
is assisted by a remuneration expert acting on the basis of a protocol
ensuring that the expert acts on the instructions of the Remuneration
Committeeandonanindependentbasisinwhichconictsofinterests
are avoided.
The Audit Committee
The Audit Committee meets at least four times a year, before the
publication of the annual and quarterly results. At least one of the
members of the Audit Committee, which currently consists of four
membersoftheSupervisoryBoard,isanancialexpertassetoutin
theDutchCorporateGovernanceCodeandeachmemberisnancially
literate.Inaccordancewiththiscode,anancialexperthasrelevant
knowledgeandexperienceofnancialadministrationandaccounting
at the company in question. The Supervisory Board considers the fact
of being compliant with the Dutch Corporate Governance Code, in
combination with the knowledge and experience available in the Audit
Committee as well as the possibility to take advice from internal and
externalexpertsandadvisors,tobesufcientforthefulllmentofthe
tasks and responsibilities of the Audit Committee. The Supervisory
Board has determined that none of the members of the Audit
CommitteeisdesignatedasanAuditCommitteenancialexpertas
denedundertheregulationsoftheUSSecuritiesandExchange
Commission. The Audit Committee may not be chaired by the
Chairman of the Supervisory Board or by a (former) member of
the Board of Management.
The tasks and functions of the Audit Committee, as described in its
charter, which is published on the Company’s website as part of the
Rules of Procedure of the Supervisory Board, include the duties
recommended in the Dutch Corporate Governance Code. More
specically,theAuditCommitteeassiststheSupervisoryBoardin
fulllingitsoversightresponsibilitiesfortheintegrityoftheCompany’s
nancialstatements,thenancialreportingprocess,thesystemof
internal business controls and risk management, the internal and
externalauditprocess,theinternalandexternalauditor’squalications,
its independence and its performance, as well as the Company’s process
for monitoring compliance with laws and regulations and the General
Business Principles (GBP). It reviews the Company’s annual and interim
nancialstatements,includingnon-nancialinformation,priorto
publication and advises the Supervisory Board on the adequacy and
appropriateness of internal control policies and internal audit programs
andtheirndings.
In reviewing the Company’s annual and interim statements, including
non-nancialinformation,andadvisingtheSupervisoryBoardon
internal control policies and internal audit programs, the Audit
Committee reviews matters relating to accounting policies and
compliance with accounting standards, compliance with statutory and
legalrequirementsandregulations,particularlyinthenancialdomain.
Importantndingsandidentiedrisksareexaminedthoroughlybythe
Audit Committee in order to allow appropriate measures to be taken.
With regard to the internal audit, the Audit Committee, in cooperation
with the external auditor, reviews the internal audit charter, audit plan,
audit scope and its coverage in relation to the scope of the external
audit,stafng,independenceandorganizationalstructureoftheinternal
audit function.
With regard to the external audit, the Audit Committee reviews
the proposed audit scope, approach and fees, the independence of the
external auditor, its performance and its (re-)appointment, audit and
permitted non-audit services provided by the external auditor in
conformity with the Philips Policy on Auditor Independence, as well as
any changes to this policy. The Audit Committee also considers the
report of the external auditor and its report with respect to the annual
nancialstatements.Accordingtotheprocedures,theAuditCommittee
acts as the principal contact for the external auditor if the auditor
discoversirregularitiesinthecontentofthenancialreports.Italso
advises on the Supervisory Board’s statement to shareholders in
the annual accounts. The Audit Committee periodically discusses the
Company’s policy on business controls, the GBP including the deployment
thereof, overviews on tax, IT, litigation, environmental exposures,
nancialexposuresintheareaoftreasury,realestate,pensions,and
the Company’s major areas of risk. The Company’s external auditor
attends all Committee meetings and the Audit Committee meets
separately at least on a quarterly basis with each of the President/CEO,
the CFO, the internal auditor and the external auditor.
Group Management Committee
The Group Management Committee consists of the members of the
Board of Management, Chairmen of operating divisions and certain key
ofcers.MembersotherthanmembersoftheBoardofManagementare
appointed by the Supervisory Board. The task of the Group Management
Committee, the highest consultative body within Philips, is to ensure
that business issues and practices are shared across Philips and to
implement common policies.
Corporate governance