Philips 2015 Annual Report Download - page 78

Supervisory Board report 10
78 Annual Report 2015
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 2015 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 2015:
• Establishing Philips Lighting as a stand-alone
company, and reviewing the strategic options for its
separation. Please also refer to the activities of the
Separation Committee, as included below in this
Supervisory Board report;
• Developing the strategic direction for Philips to
capture higher growth in the health technology
market opportunities, and for Lighting to transition
from conventional lighting to LED applications;
• Performance of the Philips Group and its underlying
businesses and financial headroom;
• Philips’ annual management commitment and
annual operating plan for 2016;
• Capital allocation, including the dividend policy and
continuance of the share buyback program;
• Quality and regulatory systems and processes,
including the interactions with the United States
Food and Drug Administration and the remedial
eorts in Cleveland and other sites. Please also refer
to the description below in this Supervisory Board
report of the activities of the Quality & Regulatory
Committee that was established in 2015;
•Signicant mergers, acquisitions and divestments,
notably the extensive eorts to obtain regulatory
clearance for the sale of the Lumileds and
Automotive business to a consortium led by GO Scale
Capital which was terminated in January 2016;
• Customers and new business models, including the
increasing importance of large scale and managed
equipment projects in both the HealthTech and
Lighting business areas;
• Business transformation and the progress being
made in the Accelerate! Program;
• 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
challenges of an increasingly digital environment,
information security, including product security, new
business models in the context of changing public
policies and the execution risk associated with the
separation of the Company;
•The Company’s program to de-risk its future pension
liabilities, and the implications thereof;
• Changes in the composition of the Executive
Committee and the Board of Management, including
the appointment of a new Chief Financial Ocer;
•Signicant civil litigation claims and public
investigations against or into the Company; and
• A review of the Company’s sustainability programs
and goals.
The Supervisory Board conducted “deep dives” on a
range of topics including:
• The North American Market, which included the
recovery of the Diagnostic Imaging business, the
scaling of solutions businesses and the importance
of unlocking the potential of the Professional
Lighting business; and
• The strategy for the Lighting business and its
translation to an equity story for potential investors.
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 2015, the Supervisory Board convened for seven
regular meetings and one extraordinary meeting.
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 Supervisory Board 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
2015. The attendance percentage at the meetings -
including the committee meetings - was again high (in
excess of 90%). The Supervisory Board visited the
Company’s site in Somerset, the United States, and
toured its Lighting Application Center, to view
demonstrations of its innovations in the Lighting market
and meet with employees. The Supervisory Board also
visited the Company’s site in Best, the Netherlands,
where we reviewed, among other things, the quality
system of the Image Guided Therapy business group.
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