Philips 2014 Annual Report Download - page 80

Supervisory Board report 10
80 Annual Report 2014
10 Supervisory Board report
Introduction
We as members of the Supervisory Board are fully
committed to our role and responsibility in respect of
the proper functioning of the corporate governance of
Philips. The Supervisory Board supervises and advises
the Board of Management and Executive Committee in
performing their management tasks and setting the
direction of the business of the Philips Group. The
Supervisory Board acts, and we as individual members
of the Board act, in the interests of Koninklijke Philips
N.V., its business and all its stakeholders. This report
includes a more specific description of the Supervisory
Board’s activities during the financial year 2014 and
other relevant information on its functioning.
Activities of the Supervisory Board
The overview below indicates a number of matters that
we discussed during meetings throughout 2014:
• Performance of the Philips Group and its underlying
businesses and financial headroom;
• Philips’ strategic direction and the proposal to
separate the group into two companies: one focused
on HealthTech businesses and one focused on
Lighting Solutions businesses, which was announced
during the Capital Markets Day in September 2014. As
part of this discussion, the Supervisory Board
discussed the various strategic options available to
Philips and the benets and challenges presented by
each option, the strategic rationale for a separation
and the aspects of why a separation is favored over
other options;
• In connection with this, we discussed the
combination of the Healthcare Sector and the
Consumer Lifestyle Sector and the organizational
changes that would occur as a consequence of this;
• Philips’ annual management commitment and
annual operating plan for 2015;
• The strategic rationale and implications behind the
decision to make a tender oer to acquire Volcano
Corporation;
• Enterprise risk management (which included an
annual risk assessment and discussion of the
changing nature of the risks faced by Philips and the
possible impact of such risks). Such risks included the
impact of negative market conditions and the
transition to new business models;
• Changes in the composition of the Executive
Committee;
• Comprehensive review of underlying production
processes and standards, as well as regulatory
compliance, within the Healtcare sector, and
necessary remedial eorts at the Company’s
Healthcare factory in Cleveland;
•Signicant civil litigation claims and public
investigations against or into the company;
• The tender process for selecting a new external
auditor and the resulting proposal to appoint Ernst &
Young Accountants LLP;
• Quality and regulatory matters; and
• Intended divestment of the combined Lumileds and
Automotive Lighting components businesses.
The Supervisory Board conducted “deep dives” on a
range of topics such as: the Philips Integrated
Landscape (which concerns the IT infrastructure for the
company), and a review of the company’s quality and
regulatory systems.
The Board reviewed the company’s deployment of its
General Business Principles (GBP) and approved an
updated version of the GBP.
Additionally, we received updates on the Company’s
sustainability eorts and initiatives in the area of the
“circular economy”, the annual dividend, the share buy-
back program and the impact of currency headwinds
on results.
On multiple occasions, we were briefed on the various
aspects of the Accelerate! program. This included the
transformation of the Finance and IT functions and also
the progress made in transforming the culture within
Philips and simplifying its operating model.
The Supervisory Board also reviewed Philips’ annual
and interim financial statements, including non-
financial information, prior to publication thereof.
Supervisory Board meetings and attendance
In 2014, the Supervisory Board convened for seven
regular meetings and two extraordinary meetings.
Moreover, we collectively and individually interacted
with members of the Executive Committee and with
senior management outside the formal Supervisory
Board meetings. The Chairman of the Supervisory
Board and the CEO met regularly for bilateral
discussions about the progress of the Company on a
variety of matters. The Chairman also held bilateral
meetings with several members of the Executive
Committee to discuss a range of topics.
The Supervisory Board meetings were well attended in
2014. The attendance percentage at the meetings -
including the committee meetings - was again high (in
excess of 95%). The Supervisory Board committees also
convened regularly (see the separate reports of the
committees below) and all of the committees regularly
reported back on their activities to the full Supervisory
Board. In addition to the formal meetings of the Board
and its Committees, the Board members also held
private meetings. We as members of the Board devoted