Philips 2012 Annual Report Download - page 108

11 Corporate governance 11 - 11.1
108 Annual Report 2012
11 Corporate governance
Corporate governance of the Philips group
Introduction
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 Eindhoven, the Netherlands,
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 1912. 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 Dutch, US
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 significant 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
revised Dutch Corporate Governance Code of December 10, 2008
(the ‘Dutch Corporate Governance Code’). This report also includes
the information which the Company is required to disclose pursuant
to the governmental decree on Article 10 Takeover Directive and the
governmental decree on Corporate Governance. 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 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. Deviations
from aspects of the corporate governance structure of the Company,
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 and in the Company’s compliance with
the Dutch Corporate Governance Code are submitted to the General
Meeting of Shareholders for discussion under a separate agenda item.
11.1 Board of Management
Introduction
The Board of Management (the ‘Board of Management’) is entrusted
with the management of the Company. Certain key officers have been
appointed to manage the Company together with the Board of
Management. The members of the Board of Management and these key
officers together constitute the Executive Committee (the ‘Executive
Committee’). Under the chairmanship of the President/Chief Executive
Officer (‘CEO’) the members of the Executive Committee share
responsibility for the deployment of its strategy and policies, and the
achievement of its objectives and results. The Executive Committee
has, for practical purposes, adopted a division of responsibilities
indicating the functional and business areas monitored and reviewed by
the individual members. For the purpose of this document, where the
Executive Committee is mentioned this also includes the Board of
Management unless the context requires otherwise.
The members of the Board of Management remain accountable for the
actions and decisions of the Executive Committee and have ultimate
responsibility for the Company’s management and the external
reporting and are answerable to shareholders of the Company at the
Annual General Meeting of Shareholders.
All resolutions of the Executive Committee are adopted by majority
vote comprising the majority of the members of the Board of
Management present or represented, such majority comprising the
vote of the CEO. The Board of Management retains the authority to,
at all times and in all circumstances, adopt resolutions without the
participation of the other members of the Executive Committee. In
discharging its duties, the Executive Committee shall be guided by the
interests of the Company and its affiliated enterprise, taking into
consideration the interests of the Company’s stakeholders.
The Executive Committee is supervised by the Supervisory Board and
provides the latter with all information the Supervisory Board needs to
fulfill its own responsibilities. Major decisions of the Board of
Management and Executive Committee require the approval of the
Supervisory Board; these include decisions concerning (a) the
operational and financial objectives of the Company, (b) the strategy
designed to achieve the objectives, (c) if necessary, the parameters to
be applied in relation to the strategy and (d) corporate social
responsibility issues that are relevant to the Company.
The Executive Committee follows the Rules of Procedure of the Board
of Management and Executive Committee, 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 and conflicts of interests
Members of the Board of Management and the CEO are elected by the
General Meeting of Shareholders upon a binding recommendation
drawn up by the Supervisory Board after consultation with the 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. Pursuant to newly adopted Dutch
legislation, effective January 1, 2013, the requirement that a binding
nomination for the appointment of a member of the management board
or supervisory board consists of at least two persons for each vacancy
has been abolished. The remaining members of the Executive
Committee are appointed by the CEO, subject to approval by the
Supervisory Board.
Members of the Board of Management and the CEO are appointed for a
term of four years, it being understood that this 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 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 and Executive Committee are
published in chapter 8, Management, of this Annual Report.
The acceptance by a member of the Board of Management of a position
as a member of a supervisory board or a position of non-executive
director in a one-tier board (a ‘Non-Executive Directorship’)
at another company requires the approval of the Supervisory Board.
The Supervisory Board is required to be notified 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 Non-
Executive Directorships at listed companies, or is a chairman of a
supervisory board or one-tier board, other than of a Group company
or participating interest of the Company. In addition, pursuant to newly
adopted Dutch legislation, effective January 1, 2013, no member of the
Board of Management holds more than two Non-Executive
Directorships at ‘large companies’ as defined under Dutch law and no
member of the Board of Management holds the position of chairman
of another one-tier board or the position of chairman of another
supervisory board. A company qualifies as a ‘large company’ if at least
two of the following criteria apply: (i) the value of the assets according