Supervisory Board report
- Activities of the Supervisory Board
- Supervisory Board meetings and ...
- Composition, diversity and ...
- Supervisory Board committees
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:
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 efforts 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 sufﬁcient time to engage (proactively if the circumstances so required) in our supervisory responsibilities.
Composition, diversity and self-evaluation by the Supervisory Board
The Supervisory Board is a separate corporate body that is independent of the Board of Management (and the Executive Committee). Its independence is also reﬂected in the requirement that a member of the Supervisory Board cannot be a member of the Board of Management, of the Executive Committee or an employee of Philips. The Supervisory Board furthermore considers all its members to be independent pursuant to the Dutch Corporate Governance Code. We will continue to pay close attention to applicable independence criteria.
The Supervisory Board currently consists of eight members.
We were deeply saddened in 2014 by the passing of James Schiro, shortly after he stepped down from the Supervisory Board. James became a member of Philips’ Supervisory Board in 2005 and he was appointed for three consecutive terms. In 2012, James became the Vice-Chairman of the Supervisory Board, the Chairman of the Remuneration Committee and a member of the Nomination & Selection Committee; he also served on the Audit Committee from 2005 until 2011. James was instrumental in the introduction of the new Remuneration Policy and Long-term Incentive Plan that was approved by shareholders in 2013. James was an excellent Supervisory Board member and a loyal friend, he was full of integrity, modest and humble: truly a fine man. Philips and we as members of the Supervisory Board will miss him dearly.
Ms Orit Gadiesh was appointed as a member of the Supervisory Board at the 2014 Annual General Meeting of Shareholders. The agenda for the upcoming 2015 Annual General Meeting of Shareholders includes a proposal to reappoint Mr Heino von Prondzynski and Mr Jackson Tai to the Supervisory Board for an additional term of four years. The Supervisory Board will also recommend to the General Meeting of Shareholders to re-appoint Mr Kees van Lede for an additional term of two years. The re-appointment would represent Kees fourth term on the Supervisory Board. The Board proposes to re-appoint Mr van Lede because his past experience and strong knowledge of corporate governance will be of particular benefit as the company goes through a period of transition.
In 2014, there were also a number of changes to the chairmanships and memberships within the Board. Christine Poon was appointed as Vice-Chairman of the Supervisory Board and Heino von Prondzynski was appointed as Chairman of the Remuneration Committee. Mr von Prondzynski also joined the Corporate Governance and Nomination & Selection Committee. Orit Gadiesh joined the Audit Committee.
The proﬁle of the Supervisory Board remains unchanged and aims for an appropriate combination of knowledge and experience among its members, encompassing marketing, manufacturing, technology, ﬁnancial, economic, social and legal aspects of international business, government and public administration in relation to the global and multi-product character of Philips’ businesses. The Supervisory Board pays great value to diversity in its composition. More particular it aims for having members with both European and non-European backgrounds (nationality, working experience or otherwise) and one or more members who have held an executive or similar position in business or society.
In addition, we support Philips’ policy to appoint a well-balanced mix of women and men to its Board of Management, Executive Committee and Supervisory Board, including the requirement under Dutch legislation for companies to pursue a policy of having at least 30% of the seats on the Board of Management and the Supervisory Board held by women and at least 30% of the seats held by men.
We believe we are making good progress in implementing this policy, the appointment of Orit Gadiesh brought the Supervisory Board’s gender diversity within the statutory criteria. We note that there may be various pragmatic reasons – such as other relevant selection criteria and the availability of suitable candidates within Philips – that could play a role in the achievement of our diversity targets.
In 2014, the members of the Supervisory Board again completed a questionnaire to verify compliance in 2014 with applicable corporate governance rules and its Rules of Procedure. The outcome of this survey was satisfactory.
In addition, we each submitted to the Chairman responses to a questionnaire designed to self-evaluate the functioning of the Supervisory Board. As in previous years, the questionnaire covered topics such as the composition and competence of the Supervisory Board (for example, the Board’s size and the education and training requirements of its members), access to information, the frequency and quality of the meetings, quality and timeliness of the meeting materials, the nature of the topics discussed during meetings and the functioning of the Supervisory Board’s committees.
The responses to the questionnaire were aggregated into a report, which was discussed by the Supervisory Board in a private meeting. Certain areas were identiﬁed that could be improved and it was decided that the Chairman would follow-up with individual members to address speciﬁc issues. The Chairman was evaluated by the Vice-Chairman. The responses provided by the Supervisory Board members indicated that the Board continues to be a well-functioning team and we believe a diversity of experience and skills is represented on the Board. The Board has spent time throughout 2014 considering its composition and it will continue to devote attention to this topic during 2015. The functioning of the Supervisory Board committees was considered to be commendable (or better) and speciﬁc feedback will be addressed by the Chairman of each committee with its members.
In 2015, the use of an external evaluator to measure the functioning of the Supervisory Board may be re-considered.
Supervisory Board committees
The Supervisory Board has assigned certain of its tasks to three permanent committees: the Corporate Governance and Nomination & Selection Committee, the Remuneration Committee and the Audit Committee. The function of the committees is to prepare the decision-making of the full Supervisory Board, and the committees currently have no independent or assigned powers. The full Board retains overall responsibility for the activities of its committees. The separate reports of the committees are part of this Supervisory Board report and are published below.
Supervisory Board remuneration
As the base fee for the remuneration of the Supervisory Board was not changed since 2008, and in view of the increased activities and responsibilities of the Supervisory Board, the agenda for the upcoming 2015 Annual General Meeting of Shareholders will include a proposal to determine the remuneration of the members of the Supervisory Board and its Committees.
Composition Board of Management
The agenda for the upcoming 2015 Annual General Meeting of Shareholders will include proposals to re-appoint the members of the Board of Management for an additional term of four years. The Supervisory Board is very pleased that Messrs. Van Houten, Wirahadiraksa and Nota remain available as members of the Board of Management. Their re-appointment is recommended in view of their performance and the importance of continuity in the ongoing transformation process of the Philips Group and the proposed separation of the Lighting business from Royal Philips.
Financial Statements 2014
The ﬁnancial statements of the company for 2014, as presented by the Board of Management, have been audited by KPMG Accountants N.V. as independent external auditor appointed by the General Meeting of Shareholders. Its reports have been included in Independent auditor's report. We have approved these ﬁnancial statements, and all individual members of the Supervisory Board (together with the members of the Board of Management) have signed these documents.
We recommend to shareholders that they adopt the 2014 ﬁnancial statements. We likewise recommend to shareholders that they adopt the proposal of the Board of Management to make a distribution of EUR 0.80 per common share (up to EUR 735 million), in cash or in shares at the option of the shareholder, against the net income for 2014 and retained earnings.
Finally, we would like to express our thanks to the members of the Executive Committee and all other employees for their continued contribution during the year.
February 24, 2015
The Supervisory Board
Jeroen van der Veer
Kees van Lede
Heino von Prondzynski
To gain a better understanding of the responsibilities of the Supervisory Board and the internal regulations and procedures governing for its functioning and that of its committees, please refer to Corporate governance and to the following documents published on the company’s website:
Changes Supervisory Board and committees 2014
- James Schiro stepped down from the Supervisory Board shortly before he passed away.
- Christine Poon was appointed as Vice-Chairman of the Supervisory Board.
- Heino von Pronzynski was appointed as Chairman of the Remuneration Committee and as a member of the Corporate Governance and Nomination & Selection Committee.
- Orit Gadiesh was appointed as a member of the Supervisory Board and was appointed as a member of the Audit Committee.
Changes and re-appointments Supervisory Board 2015
- It is proposed to re-appoint Kees van Lede, Heino von Prondzynski and Jackson Tai as members of the Supervisory Board.
(Appointment subject to approval by the General Meeting of Shareholders.)
Changes Management 2014
- Denise Haylor was appointed as Chief Human Resources Officer.
- Marnix van Ginneken was appointed as Chief Legal Officer.
- Deborah DiSanzo left the company.
Board of Management 2015
- It is proposed to re-appoint Frans van Houten, Ron Wirahadiraksa and Pieter Nota as members of the Board of Management.