Philips 2005 Annual Report Download - page 60

Philips Annual Report 200560
General
The supervision of the policies and actions of the executive
management (the Board of Management) of Koninklijke
Philips Electronics N.V. (the ‘Company’) is entrusted to
the Supervisory Board, which, in the two-tier corporate
structure under Dutch law, is a separate body and
fully independent of the Board of Management. This
independenceisalsoreected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nancial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
are published below.
As in prior years, the Supervisory Board discussed
developments in the area of corporate governance in
2005. In addition to the ongoing preparations for the
implementation of section 404 of the Sarbanes-Oxley Act
and its requirements regarding assessment, review and
monitoringofinternalcontrolsovernancialreporting,
the monitoring of the Dutch Corporate Governance Code
was discussed. As in 2004, Philips addresses its overall
corporate governance structure in this Annual Report
(refer to the chapter Corporate governance that begins
on page 218).
Meetings of the Supervisory Board
The Supervisory Board met seven times in the course of
2005, including a two-day meeting on strategy; all of its
memberswhowereinofceduringthefullyearparticipated
inve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. Extensive evaluation of the functioning of the
Supervisory Board and its members has taken place,
resulting in several suggestions which will be given further
consideration. Furthermore members of the Supervisory
Board regularly received training relevant for their function.
A similar evaluation of the Board of Management and its
members has also taken place. The Supervisory Board also
met without the members of the Board of Management
being present when they discussed the composition and
functioning 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/ChiefExecutiveOfcer(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, technological, manufacturing,
nancial,economic,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
xedtermsoffouryearsandmaybere-appointedfortwo
additional four-year terms.
The Supervisory Board currently consists of ten members,
who are listed in the chapter Our leadership that begins
on page 52 of this Annual Report. At the 2005 General
Report of the Supervisory Board