Philips 2007 Annual Report Download - page 245

Philips Annual Report 2007 251
Individual data on the members of the Board of Management are
published in the chapter Our Leadership that begins on page 112
of this Annual Report. The acceptance by a member of the Board
of Management of membership of the supervisory board of another
company requires the approval of the Supervisory Board. The
Supervisory Board is required to be notied of other important
positions (to be) held by a member of the Board of Management.
No member of the Board of Management holds more than two
supervisory board memberships of listed companies, or is a chairman
of such supervisory board, other than of a Group company or
participating interest of the Company.
The Company has formalized its rules to avoid conicts of interests
between the Company and members of the Board of Management.
The articles of association state that in the event of a legal act or
a lawsuit between the Company and a member of the Board of
Management, certain of such member’s relatives, or certain (legal)
entities in which a member of the Board of Management has an
interest, and insofar as the legal act is of material signicance to
the Company and/or to the respective member of the Board of
Management, the respective member of the Board of Management
shall not take part in the decision-making in respect of the lawsuit
or the legal act. Resolutions concerning such legal acts or lawsuits
require the approval of the Supervisory Board.
Legal acts as referred to above shall be mentioned in the Annual
Report for the nancial year in question. The Rules of Procedure
of the Board of Management establish further rules on the reporting
of (potential) conicts of interests. No legal acts as referred to above
have occurred during the nancial year 2007.
Relationship between Board of Management
and Supervisory Board
The Board of Management is supervised by the Supervisory Board and
provides the latter with all information the Supervisory Board needs
to fulll its own responsibilities. Major decisions of the Board of
Management require the approval of the Supervisory Board; these
include decisions concerning (a) the operational and nancial objectives
of the Company, (b) the strategy designed to achieve the objectives, and,
if necessary, (c) the parameters to be applied in relation to the strategy.
Risk management approach
Within Philips, risk management forms an integral part of business
management. The Board of Management is responsible for managing
the signicant risks that the Company is facing and has implemented
a risk management and internal control system that is designed to
provide reasonable assurance that strategic objectives are met by
creating focus, by integrating management control over the Company’s
operations, by ensuring compliance with applicable laws and regulations
and by safeguarding the reliability of the nancial reporting and its
disclosures. The Board of Management reports on and accounts for
internal risk management and control systems to the Supervisory
Board and its Audit Committee. The Company has designed its
internal control system in accordance with the recommendations
of the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
The Company’s risk management approach is embedded in the periodic
business planning and review cycle and forms an integral part of
business management. On the basis of risk assessments, management
determines the risks and appropriate risk responses related to the
achievement of business objectives and critical business processes.
Risk factors and the risk management approach as well as the
sensitivity of the Company’s results to external factors and variables
are described in more detail in the chapter Risk management of this
Annual Report. Signicant changes and improvements in the Company’s
risk management and internal control system have been discussed
with the Supervisory Board’s Audit Committee and the external
auditor and are disclosed in that chapter as well.
With respect to nancial reporting a structured self-assessment and
monitoring process is used company-wide to assess, document, review
and monitor compliance with internal control over nancial reporting.
Internal representations received from management, regular management
reviews, reviews of the design and effectiveness of internal controls
and reviews in corporate and divisional audit committees are integral
parts of the Company’s risk management approach. On the basis
thereof, the Board of Management conrms that internal controls
over nancial reporting provide a reasonable level of assurance that
the nancial reporting does not contain any material inaccuracies, and
conrms that these controls have properly functioned in 2007 and
that there are no indications that they will not continue to do so. The
nancial statements fairly represent the nancial condition and result
of operations of the Company and provide the required disclosures.
It should be noted that the above does not imply that these systems
and procedures provide certainty as to the realization of operational
and nancial business objectives, nor can they prevent all misstatements,
inaccuracies, errors, fraud and noncompliances with rules and regulations.
In view of all of the above the Board of Management believes that it
is in compliance with the requirements of recommendation II.1.4.
of the Dutch Corporate Governance Code, taking into account the
recommendation of the Corporate Governance Code Monitoring
Committee in its 2005-report on the application thereof. This
statement cannot be construed as a statement in accordance with
the requirements of section 404 of the US Sarbanes-Oxley Act.
Such statement is set forth in the section Management’s report
on internal control over nancial reporting of this Annual Report.
Philips has a nancial code of ethics which applies to certain senior
ofcers, including the CEO and CFO, and to employees performing
an accounting or nancial function (the nancial code of ethics has
been published on the Company’s website). The Company, through
the Supervisory Board’s Audit Committee, also has appropriate
procedures in place for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and the condential,
anonymous submission by employees of concerns regarding
questionable accounting or auditing matters. Internal ‘whistleblowers’
have the opportunity, without jeopardizing their position, to report
on irregularities of a general, operational or nancial nature and to
report complaints about members of the Board of Management
to the Chairman of the Supervisory Board.
In view of the requirements under the US Securities Exchange Act,
procedures are in place to enable the CEO and the CFO to provide
certications with respect to the Annual Report on Form 20-F.
Group nancial statements Company nancial statements 250 Corporate governance246 Reconciliation of
non-US GAAP information 258 The Philips Group in the last ten years 260
Investor information