Philips 2014 Annual Report Download - page 88

Supervisory Board report 10.2.11
88 Annual Report 2014
10.2.11 Year 2015
Services agreements Board of Management
For the members of the Board of Management, who will
be proposed to be re-appointed at the Annual General
Meeting on May 7, 2015, an agreement of provision of
services for a xed 4-year period will be concluded
instead of a contract of employment pursuant to Dutch
law, eective January 1, 2013. In future this will apply to
all newly appointed members of the Board of
Management.
These agreements will be made public no later than the
date on which the 2015 Annual General Meeting of
Shareholders will be convened.
The main elements of the (proposed) services
agreements will be materially the same as the main
elements of the current contracts described above.
Pensions
Due to legislative changes in the Netherlands, the
pension arrangement applicable to the members of the
Board of Management, the other members of the
Executive Committee and the Executives, all working in
the Netherlands, needed to be reviewed as of January
1, 2015.
As of this date pension plans which allow pension
accrual based on a pensionable salary exceeding an
amount of EUR 100,000 are, for scal purposes,
considered to be non-qualifying schemes. For this
reason the Executive Pension Plan in the Netherlands
will be terminated.
The following pension arrangement will apply to the
members of the Board of Management with eect from
January 1, 2015:
• members will participate in the Flex Pension Plan in
the Netherlands (retirement age: 67), which is a
dened-benet plan with an accrual percentage of
1.85 and a maximum pensionable salary of EUR
100,000;
•a gross Pension Allowance will be paid equal to 25%
of the base salary exceeding EUR 100,000;
• for a maximum period of 8 years (rst 5 years in full;
year 6: 75%; year 7: 50%, year 8: 25%) a gross
Transition Allowance will be paid to those members
who were eligible to it under the former pension
arrangement and will be based on the age and salary
of the Executive on December 31, 2014.
The total contribution of the Company towards this new
pension arrangement (including the temporary
Transition Allowance) will be comparable to the
contribution made under the former pension
arrangement.
10.3 Report of the Audit Committee
The Audit Committee is chaired by Jackson Tai, and its
other members are Neelam Dhawan, Kees van Lede,
Heino von Prondzynski and Orit Gadiesh. Jeroen van
der Veer also regularly participated in Audit Committee
meetings. The Committee assists the Supervisory Board
in fulfilling its supervisory responsibilities for (inter alia)
ensuring the integrity of the Company’s financial
statements and reviewing the Company’s internal
controls.
The Audit Committee met for four quarterly meetings
and one education and training session during 2014 and
reported its findings to the plenary Supervisory Board.
The CEO, the CFO, the Chief Legal Ocer, the Head of
Internal Audit, the Group Controller and the external
auditor (KPMG Accountants N.V.) attended all regular
meetings.
Furthermore, the Committee met each quarter
separately with each of the CEO, the CFO, the Chief
Legal Ocer, the Head of Internal Audit and the
external auditor as well as on an ad hoc basis with other
company employees, such as the Group Treasurer, the
Group Controller and Head of Financial Risk and
Pensions Management.
The overview below indicates some of the matters that
were discussed during meetings throughout 2014:
• The Company’s 2014 annual and interim financial
statements, including non-financial information,
prior to publication thereof. The Committee also
assessed in its quarterly meetings the adequacy and
appropriateness of internal control policies and
internal audit programs and their findings.
•Matters relating to accounting policies, financial risks
and compliance with accounting standards.
Compliance with statutory and legal requirements
and regulations, particularly in the financial domain,
was also reviewed. Important findings, Philips’ major
areas of risk (including the internal auditor’s reporting
thereon, and the Chief Legal Ocer’s review of
litigation and other claims) and follow-up action and
appropriate measures were examined thoroughly.
Specifically, the Committee reviewed the Company’s
pension liabilities and its program to de-risk future
pension liabilities and related economic, accounting
and legal implications. The Committee reviewed the
Company’s cash flow generation, liquidity and
headroom throughout the year to undertake its
financial commitments, including the Company’s
share repurchase program and payment of
dividends. The Committee also reviewed the
goodwill impairment test performed in the second
quarter, risk management, tax issues, IT strategy and
transformation (including information security) and
remediation of IT-related internal control findings,
the company’s finance transformation,