Philips 2006 Annual Report Download - page 230

Philips Annual Report 2006230
Remuneration of the Supervisory Board and share ownership
The remuneration of the individual members of the Supervisory Board,
as well as the additional remuneration for its Chairman and the
members
of its committees is determined by the General Meeting
of Shareholders. The remuneration of a Supervisory Board member
is not dependent on the results of the Company. Further details are
published in the chapter Report of the Supervisory Board of this
Annual Report. The Company shall not grant its Supervisory Board
members any personal loans, guarantees or similar arrangements.
No such (remissions of) loans and guarantees were granted to such
members in 2006, nor were any outstanding as per December 31, 2006.
Shares or rights to shares shall not be granted to a Supervisory
Board member. In accordance with the Rules of Procedure of the
Supervisory Board, any shares in the Company held by a Supervisory
Board member are long-term investments. The Supervisory Board has
adopted a policy on ownership (and notifi cation) of transactions in
non-Philips securities by members of the Supervisory Board. This
policy is included in the 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 notifi cation of changes in a member’s holdings of securities
related to Dutch listed companies to the Philips Compliance Offi cer
to be in line with best practices and suffi 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 notifi 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 profi 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 fi 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
fi 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
confl 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 fi nancial expert as set out
in the Dutch Corporate Governance Code and each member is
fi nancially literate. In accordance with this code, a fi nancial expert
has relevant knowledge and experience of fi 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 suffi cient for
the fulfi 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 fi nancial
expert as defi 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
specifi cally, the Audit Committee assists the Supervisory Board in
fulfi lling its oversight 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,
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 fi nancial statements, including non-fi 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 fi ndings.
In reviewing the Company’s annual and interim statements, including
non-fi 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 fi nancial domain. Important fi ndings
and identifi 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,
staffi 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 fi
nancial statements. According to the procedures, the Audit
112 Group fi nancial statements 172 IFRS information 218 Company fi nancial statements