Philips 2008 Annual Report Download - page 257

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
the Company
believes that it could be in the best interests of the
Company that a member of the Board of Management, who resigned
such position more than five 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 defined 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 conflicts
of interests
The Supervisory Board consists of at least three members (currently
nine), 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 fixed
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 of the Supervisory Board are
appointed by the Shareholders Meeting
Members may be suspended and dismissed by the General Meeting
of Shareholders. 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 financial and
legal affairs, financial reporting by the Company, any specific 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 five 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 conflicts of interests between the
Company and members of the Supervisory Board; all information
about a conflict 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 conflicts of interest with members of
the Supervisory Board have occurred during the financial year 2008.
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 significant changes
thereto. The members of the Board of Management attend meetings
of the Supervisory Board except in matters such as the desired profile,
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 officers and external advisers of the Company.
The Company provides the necessary means for this purpose. The
Supervisory Board may also require that certain officers 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 sufficient 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.
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 2008, nor were any outstanding as per December 31, 2008.
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 notification) 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
notification of changes in a member’s holdings of securities related
to Dutch listed companies to the Philips Compliance Officer to be
in line with best practices and sufficient 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
notification on a quarterly basis.
Philips Annual Report 2008 257
254
Corporate governance
250
Reconciliation of
non-US GAAP information
262
Ten-year overview
266
Investor information