Philips 2006 Annual Report Download - page 226

Philips Annual Report 2006226
General
Koninklijke Philips Electronics N.V., a company organized under Dutch
law (the ‘Company’), is the parent company of the Philips Group
(‘Philips’ or the ‘Group’). The Company, which started as a limited
partnership with the name Philips & Co in 1891, was converted into
the company with limited liability N.V. Philips’ Gloeilampenfabrieken
on September 11, 1912. On May 6, 1994 the name was changed to
Philips Electronics N.V., and on April 1, 1998 the name was changed
to Koninklijke Philips Electronics N.V. Its shares have been listed on
the Amsterdam Stock Exchange Euronext Amsterdam since 1913.
The shares have been traded in the United States since 1962 and
have been listed on the New York Stock Exchange since 1987.
Over the last decades the Company has pursued a consistent policy
to enhance and improve its corporate governance in line with US,
Dutch and international (codes of) best practices. The Company has
incorporated a fair disclosure practice in its investor relations policy,
has strengthened the accountability of its executive management and
its independent supervisory directors, and has increased the rights
and powers of shareholders and the communication with investors.
The Company is required to comply with, inter alia, Dutch Corporate
Governance rules, the US Sarbanes-Oxley Act, New York Stock
Exchange rules and related regulations, insofar as applicable to the
Company. A summary of signifi cant differences between the Company’s
corporate governance structure and the New York Stock Exchange
corporate governance standards is published on the Company’s
website (www.philips.com/investor).
In this report, the Company addresses its overall corporate governance
structure and states to what extent it applies the provisions of the
Dutch Corporate Governance Code of December 9, 2003 (the ‘Dutch
Corporate Governance Code’). The Supervisory Board and the Board
of Management, which are responsible for the corporate governance
structure of the Company, are of the opinion that the vast majority
of the principles and best practice provisions of the Dutch Corporate
Governance Code that are addressed to the Board of Management
and the Supervisory Board, interpreted and implemented in line with
the best practices followed by the Company, are being applied. Some
recommendations are not (fully) applied, and the reasons for these
deviations are set out hereinafter. Deviations from aspects of the
corporate governance structure of the Company that are described in
this report, when deemed necessary in the interests of the Company,
will be disclosed in the Annual Report. Substantial changes in the
Company’s corporate governance structure - including substantial
amendments to the Rules of Procedure of the Supervisory Board
and the Board of Management respectively - and in the Company’s
compliance with the Dutch Corporate Governance Code shall be
submitted to the General Meeting of Shareholders for discussion
under a separate agenda item.
Also in connection with the implementation of the Dutch Corporate
Governance Code and new Dutch legislation, the 2005 General Meeting
of Shareholders resolved to amend the articles of association of the
Company. Pursuant to the amendment of the articles of association,
the Company’s priority shares have been withdrawn and the thresholds
for overruling the binding recommendation for appointments of
members of the Board of Management and the Supervisory Board
have been changed. Furthermore the articles of association now also
contain detailed provisions on dealing with confl icts of interests of
members of the Board of Management and stipulate that resolutions
that are so far-reaching that they would signifi cantly change the identity
or nature of the Company or the enterprise shall be subject to the
approval of the General Meeting of Shareholders.
Board of Management
General
The executive management of Philips is entrusted to its Board of
Management under the chairmanship of the President/Chief Executive
Offi cer and consists of at least three members (currently six). The
members of the Board of Management have collective powers and
responsibilities. They share responsibility for the management of
the Company, the deployment of its strategy and policies, and the
achievement of its objectives and results. The Board of Management
has, for practical purposes, adopted a division of responsibilities
indicating the functional and business areas monitored and reviewed
by the individual members. According to the Company’s corporate
objectives and Dutch law, the Board of Management is guided by
the interests of the Company and its affi liated enterprises within
the Group, taking into consideration the interests of the Company’s
stakeholders, and is accountable for the performance of its assignment
to the Supervisory Board and the General Meeting of Shareholders.
The Board of Management follows its own Rules of Procedure, which
set forth procedures for meetings, resolutions, minutes and (vice)
chairmanship. These Rules of Procedure are published on the
Company’s website.
(Term of) Appointment, individual data and confl icts
of interests
Members of the Board of Management and the President/CEO
are elected by the General Meeting of Shareholders upon a binding
recommendation drawn up by the Supervisory Board after consultation
with the President/CEO. 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 of the Board of Management and the President/CEO are
appointed for a maximum term of four years, it being understood
that this maximum term expires at the end of the General Meeting
of Shareholders to be held in the fourth year after the year of their
appointment. Reappointment is possible for consecutive maximum
terms of four years or, if applicable, until a later retirement date or
other contractual termination date in the fourth year, unless the
General Meeting of Shareholders resolves otherwise. Members may
be suspended by the Supervisory Board and the General Meeting
of Shareholders and dismissed by the latter.
Individual data on the members of the Board of Management are
published in the chapter Our leadership of this Annual Report,
and updated on the Company’s website. The acceptance by a member
of the Board of Management of membership of the supervisory board
Corporate governance of the Philips Group
112 Group fi nancial statements 172 IFRS information 218 Company fi nancial statements