Philips 2006 Annual Report Download - page 107

Philips Annual Report 2006 107
Contracts of employment
Members of the Board of Management have a contract
of employment with the Company. The form of contract
used for members of the Board of Management is in line
with the standard form used for other Philips executives.
As from August 1, 2003, for newly appointed members of
the Board of Management and the other members of the
Group Management Committee, the term of the contract
is set at four years. In case the Company terminates the
contract of employment, the maximum severance payment
is in principle limited to one year of base salary in line
with the Dutch Corporate Governance Code but subject
to mandatory Dutch law, to the extent applicable.
If the maximum of one year’s salary would be manifestly
unreasonable for a member of the Board of Management
who is dismissed during his fi rst term of offi ce, the member
of the Board of Management shall be eligible for a severance
payment not exceeding twice the annual salary. The
contract terms for current members of the Board
of Management are presented in the table below.
Contract terms for current members
1)
end of term
G.J. Kleisterlee October 1, 2008
P-J. Sivignon June 15, 2009
G.H.A. Dutiné April 1, 2007
T.W.H.P. van Deursen April 1, 2008
R.S. Provoost April 1, 2010
A. Ragnetti April 1, 2010
1) Reference date for board membership is December 31, 2006
Outlook 2007
The maximum base salaries for the members of the
Board of Management will be increased in line with
market developments.
Since the sale of a majority stake in the Semiconductors
division, the existing list of TSR peer group companies
contains companies with which Philips does not compare
itself any longer. It has been decided to compose a new
peer group and to design a simplifi ed TSR-based multiplier.
Both elements will be submitted to the 2007 General
Meeting of Shareholders for approval.
The sale of a majority stake in the Semiconductors division
has shown that in certain extraordinary circumstances
(such as major joint ventures, acquisitions and divestments)
a further refi nement of the remuneration policy, allowing
ad-hoc payments or incentives, is desirable. A proposal
will be submitted to the 2007 General Meeting of
Shareholders.
Report of the Audit Committee
The Audit Committee, currently consisting of four
members of the Supervisory Board, who are listed
in the chapter Our leadership of this Annual Report,
assists the Supervisory Board in fulfi lling its supervisory
responsibilities for the integrity of the Company’s fi nancial
statements, the fi nancial reporting process, the system
of internal business controls and risk management, the
internal and external audit process, the internal and
external auditor’s qualifi cations, independence and
performance, as well as the Company’s process for
monitoring compliance with laws and regulations and
the General Business Principles (GBP).
The Audit Committee met six times in 2006 and reported
its fi ndings periodically to the plenary Supervisory Board.
The President, the Chief Financial Offi cer, the Internal
Auditor, the Group Controller and the External Auditor
attended all meetings. Furthermore, the Audit Committee
met each quarter separately with each of the President,
the Chief Financial Offi cer, the Internal Auditor and the
External Auditor. In accordance with its charter, which is
part of the Rules of Procedure of the Supervisory Board,
the Audit Committee in 2006 reviewed the Company’s
annual and interim fi nancial statements, including non-
fi nancial information, prior to publication thereof. It
also assessed in its quarterly meetings the adequacy and
appropriateness of internal control policies and internal
audit programs and their fi ndings.
In its 2006 meetings, the Audit Committee reviewed
periodically matters relating to accounting policies
and compliance with accounting standards. Compliance
with statutory and legal requirements and regulations,
particularly in the fi nancial domain, was also reviewed.
Important fi ndings and identifi ed risks were examined
thoroughly in order to allow appropriate measures to
be taken. With regard to the internal audit, the Audit
Committee reviewed the internal audit charter, audit plan,
54 The Philips sectors 86 Risk management 100 Report of the Supervisory Board 110 Financial Statements