Philips 2006 Annual Report Download - page 229

Philips Annual Report 2006 229
strategy are discussed with and approved by the Supervisory Board. In
its report, the Supervisory Board describes its activities in the fi nancial
year, the number of committee meetings and the main items discussed.
Rules of Procedure of the Supervisory Board
The Supervisory Board’s Rules of Procedure set forth its own
governance rules (including meetings, items to be discussed,
resolutions, appointment and re-election, committees, confl icts
of interests, trading in securities, profi le of the Supervisory Board).
Its composition follows the profi le, which aims for an appropriate
combination of knowledge and experience among its members
encompassing marketing, technological, manufacturing, fi nancial,
economic, social and legal aspects of international business and
government and public administration in relation to the global and
multi-product character of the Group’s businesses. The Supervisory
Board further aims to have available appropriate experience within
Philips by having one former Philips executive as a member. In line
with US and Dutch best practices, the Chairman of the Supervisory
Board should be independent under the applicable US standards and
pursuant to the Dutch Corporate Governance Code; because this
provision does not exclude a former Philips executive from being
Chairman of the Supervisory Board, but only if he or she meets
these standards, it is not fully in line with 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 fi 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 defi 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
confl 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
fi 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 fi nancial and
legal affairs, fi nancial reporting by the Company, any specifi 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 fi 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 confl icts of interests
between the Company and members of the Supervisory Board; all
information about a confl ict of interests situation is to be provided
to the Chairman of the Supervisory Board. No decisions to enter
into material transactions in which there are confl icts of interest
with members of the Supervisory Board have occurred during
the fi nancial year 2006.
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 signifi cant changes
thereto. The members of the Board of Management attend meetings
of the Supervisory Board except in matters such as the desired profi 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 offi cers and external advisers of the Company.
The Company provides the necessary means for this purpose. The
Supervisory Board may also require that certain offi 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 suffi 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.
226 Corporate governance224 Reconciliation of
non-US GAAP information
234 The Philips Group
in the last ten years
236 Investor information