- Supervisory Board
- Supervisory Board report
Supervisory Board report
TomTom's Supervisory Board is responsible for supervising and advising the Management Board in setting and achieving the company’s strategy and its objectives. The interests of the company and TomTom's stakeholders guide the performance of the duties of the Supervisory Board. The Supervisory Board is assisted in its decision-making process by the Audit Committee, the Remuneration Committee and the Selection and Appointment Committee.
TomTom has positioned itself back for growth with its revenue growth in 2015. The company showed continued growth in the Licensing and Telematics business. It’s Consumer business continued to broaden its revenue base with new products in the sports category. The Automotive business contracted as anticipated and the level of order intake in 2015 was substantially higher than in previous years, which provides a good indication that the automotive strategy is taking hold.
The efforts made by the employees of the company and its Management Board are greatly appreciated by the Supervisory Board. We look forward to a further successful execution of TomTom’s growth strategy.
The Supervisory Board of TomTom consists of six members.
At the 2015 General Meeting, Doug Dunn was reappointed for a term of another two years. This means that at the 2017 General Meeting Doug Dunn will have served for twelve years, the maximum term according to best practice provision III.3.5 of the Corporate Governance Code (the Code). Toine van Laack stepped down from the Supervisory Board on 1 September 2015 because he ended his employment at Janivo Holding B.V.
Mr Van Laack was appointed in 2013 by Janivo Holding B.V. and Dasym Investment Strategies B.V. together, exercising the right to nominate a candidate for an additional seat on the Supervisory Board. No nomination for replacing Mr Van Laack has been made since his departure.
At the 2016 General Meeting, the second term of Ben van der Veer will expire. At this meeting Ben van der Veer will be nominated for re-appointment for a term of another year which means that at that time he will have served for nine years.
At the 2016 General Meeting, the Supervisory Board shall nominate Jack de Kreij for appointment as a member of the Supervisory Board for a term of four years, effective as of 1 January 2017. Mr De Kreij shall replace Mr Van der Veer as Chairman of the Audit Committee as from the 2017 General Meeting. For more information, reference is made to the Selection and Appointment Committee report. Guy Demuynck will step down from the Supervisory Board after the 2016 General Meeting by which time he will have served for eleven years.
As a result hereof, the Supervisory Board shall reduce from six to five members as from the date of the 2016 General Meeting and be complemented with a new member as of 1 January 2017, subject to the appointment of Mr De Kreij at the 2016 General Meeting.
The Supervisory Board confirms that all members are independent as meant within the terms of best practice provision III.2.2 of the Code.
The composition of the Supervisory Board is in line with the Supervisory Board profile, as drawn up by the Supervisory Board and published on the company’s website, in terms of experience, expertise, nationality, gender and age. According to the Act on Management and Supervision ('Wet Bestuur en Toezicht'), a proper composition of the Supervisory Board means that at least 30% of the members should be female. The current composition of the Supervisory Board is in line with this gender diversity requirement; two out of six Supervisory Board members (33%) are female.
No member of the Supervisory Board holds more than five directorships at Dutch ‘large companies’. Biographies of the members of the Supervisory Board, as well as the information as prescribed by provision III.1.3 of the Code can be found in the Profiles of the Supervisory Board section of this report. This section also provides details on the committees of the Supervisory Board.
The Supervisory Board met fifteen times in 2015: seven physical meetings and eight conference calls. The non-physical meetings were held to discuss financial updates and recent developments within the company in months when there was no physical meeting. The Management Board members attended all those meetings either in full or in part. The meetings of the Supervisory Board achieved an overall average attendance rate of 87%. All physical meetings were attended by all Supervisory Board members, except for the March meeting where one member was unable to attend and the two meetings in October where another member was unable to attend.
All members have had sufficient time available for their duties relating to their membership of the Supervisory Board. No member of the Supervisory Board was regularly absent from the meetings. Their availability for ad-hoc calls, prompt response on emails and the fact that the members were well prepared for meetings and actively participated in the meeting discussions, demonstrate they were all able to devote sufficient attention to the company.
The agenda for the meetings was prepared through consultation between the Chairman, the Management Board and the Company Secretary. In addition to the regular meetings, the Chairman of the Supervisory Board was in regular contact with the CEO of the company. Further, the members of the Supervisory Board held informal consultations with members of the Management Board and senior management of the company to keep closely informed about the business.
Meetings of the Supervisory Board are preceded by committee meetings. The chairs of the committees work closely with senior management and conduct regular face-to-face meetings to set the agendas and prepare all relevant information for the committee meetings.
To facilitate open and productive discussions, the Management Board and senior management provided the Supervisory Board with comprehensive quarterly reports that outline the developments, achievements, challenges and opportunities in each business unit of the company before each physical meeting. These reports also included insight into noticeable market developments, trends and analyses. During the year, senior management was frequently invited to present a range of topics to the Supervisory Board.
It is important for the Supervisory Board to keep in touch with the talents within the company. For this purpose, among others, breakfast sessions were organised every quarter to facilitate a Meet & Greet session between representatives of the Supervisory Board and a selective number of talents. The members of the Supervisory Board strongly support the company’s efforts around talent management as well as succession planning for key positions within the organisation and it had been regularly updated on these items including the vacancy status of key positions.
The Supervisory Board devoted considerable time to reviewing strategic options and discussing the company’s long-term strategy. An active role was played in ensuring that the Management Board's ideas were challenged and tested in order to reach decisions that would underpin the company's strategy. The group strategy and the business unit strategies were presented and constructive discussions and reviews were held with the Management Board and senior management. In addition, the Supervisory Board was kept regularly informed of major commercial opportunities, deals and partnerships.
During discussions with the Management Board, specific attention was given to the various R&D projects, which were discussed and monitored regularly. A strong attention point of the Supervisory Board was the company’s delivery of and the migration to TomTom’s unique transactional mapmaking platform providing incremental map updates. Also, progress on investments in the field of modular navigation software was closely monitored. The Supervisory Board was frequently updated on the positioning of these mapping and navigation technologies and their traction in the market.
The Supervisory Board and Management Board visited the local management team of its operations in Burlington, Massachusetts, responsible for the Consumer business in North America. The purpose of this working visit for the Supervisory Board was to meet local management and better understand the North America distribution strategy, market trends and the challenges experienced by the team. The Supervisory Board visited various retail stores in the Boston area, to get the opportunity to see the TomTom products displayed in the retail stores.
The second informative visit was organised with the local management team of the Maps technology unit, residing in Lebanon, New Hampshire, responsible for maintaining the TomTom map and its platforms. The purpose of this visit for the Supervisory Board was to learn about the map creation process and the newest innovative technologies used in this process. Several demonstrations were given.
The development and introduction of the TomTom Bandit Action Camera and the new generation GPS sports and fitness watches were closely monitored during the year by the Supervisory Board. The efforts of management to diversify the Consumer business further had been shared, reviewed and discussed with the Supervisory Board.
Frequent updates were provided to the Supervisory Board on the bookings made which, together with orders secured earlier, will support the growth strategy of the Automotive business. The progress made with the development of the new transactional mapmaking system featured regularly on the Supervisory Board agenda. This technologically innovative system was fully deployed by the end of 2015 and enables TomTom to address the need for accurate and up-to-date maps, for navigation applications and driver assistance applications, including Autonomous Driving.
The Supervisory Board followed with interest the continued growth in the Licensing and Telematics business. The Supervisory Board was also involved in the acquisition of Finder in Poland through which the Telematics business further expanded its subscriber installed base.
The company's results, its operating result and its cash generation from operations were presented and closely supervised throughout the year. The currency headwinds caused by the weakening of the euro were assessed every quarter by the Supervisory Board as well as the level of investment (both CAPEX and OPEX) in the core technologies of the company. The Supervisory Board reviewed and approved the budget for 2016.
The Supervisory Board regularly gained insights into the constantly changing landscape in which TomTom operates. During 2015, several product and technology demonstrations were given to the Supervisory Board to update the members on the actual functioning of TomTom innovations.
Every quarter, the Supervisory Board was updated on the company’s Investor Relations activities, including share price developments, analysts’ research and communication with shareholders. The press releases regarding the full-year and half-year results, and the quarterly trading updates were all reviewed and approved by the Supervisory Board.
Through its Audit Committee, the Supervisory Board was kept informed of the company’s strategic, operational, financial, legal and compliance risks, as well as the actions taken and systems in place to manage these risks. Time was also dedicated to discussing the company's intended organisational changes and structure.
The composition, functioning and succession planning of the Management Board and the performance of its individual members were discussed. The Supervisory Board took adequate actions when it was informed about the departure of Marina Wyatt, CFO of the company. It completed a diligent search for a replacement. Taco Titulaer, who has worked for the company for ten years, was appointed on 1 August 2015 as CFO of the company and on 8 October 2015 as a member of the Management Board by the General Meeting.
The Supervisory Board assessed its own succession planning and engaged with an external agency to search for an appropriate replacement of the Chairman of the Audit Committee as of the financial year 2017. It resolved to nominate Jack de Kreij as a member of the Supervisory Board on the 2016 General Meeting effective as of 1 January 2017. Mr De Kreij will take over the function of Chairman of the Audit Committee as from the date of the 2017 General Meeting when Mr Van der Veer will step down from the Supervisory Board. For more information reference is made to the Selection and Appointment Committee report.
The Supervisory Board received updates on the company’s legal compliance and corporate social responsibility programmes, its intellectual property strategy and the developments with respect to corporate governance and regulations.
The Supervisory Board reviewed and discussed its own functioning, as well as that of its members, its committees and the Chairman. The evaluation of the Chairman was discussed by the entire Supervisory Board, without the Chairman present. In preparation of these discussions, the members of the Supervisory Board and Management Board provided feedback through a written assessment performed by an independent third-party.
The assessment included reviews of the composition and expertise of the Supervisory Board, its time management, its effectiveness, its dynamics and succession planning. The Supervisory Board's oversight on the company's strategy and the effectiveness of the strategy day, human resources management, risk management and internal controls were also reviewed.
The relationships between the individual members of the Supervisory Board, and between the Supervisory Board and the Management Board were rated very highly overall, as was the atmosphere in the boardroom in terms of encouraging equal contribution, candid discussion and critical thinking. The performance of the Supervisory Board in testing and developing TomTom’s strategy was positively rated overall. The focus on the company’s talent management as well as succession planning for key positions within the organisation remain key attention topics moving forward, considering the company’s ambition to be the employer of choice in the technology sector and to attract, develop and retain the best talents.
The Supervisory Board intends to bring in a third-party to assess its functioning every three years; the next such occasion being in 2018.
This Remuneration Report describes the activities of the Remuneration Committee (Committee), the Remuneration Policy and its application in 2015. The Remuneration Policy (including the Management Board Stock Option Plan) was first adopted by the General Meeting in 2005 and has since been amended several times, most recently in 2014. In line with Dutch legislation, the execution of the Remuneration Policy in 2015 will be put on the agenda for discussion as separate agenda item at the 2016 General Meeting.
The Committee consists of three members: Guy Demuynck (Chairman), Peter Wakkie and Jacqueline Tammenoms Bakker.
The Remuneration Committee met four times and held two conference calls in the course of 2015, with an overall attendance rate of 89%. Each meeting was also attended by Management Board member Alain De Taeye, as well as the Head of HR, the Head of Reward & Operations and the Company Secretary. Preparation meetings attended by the Chairman of the Committee, the Head of Reward & Operations and the Company Secretary were held prior to each Committee meeting.
The Committee monitored the effectiveness and relevance of TomTom's Management Board Remuneration Policy throughout the year. It also considered the extent to which the individual remuneration packages of the Management Board members were in line with the company's policy.
The Committee spent time during its meeting in April on its preparation for the 2015 General Meeting, where the execution of the Remuneration Policy in 2014 appeared on the agenda as a separate agenda item.
The Committee agreed on the key performance indicators (KPIs) and weighting levels set for the short-term variable remuneration of the Management Board and periodically reviewed the progress on the achievement of the KPIs that had been set for the ongoing short-term and long-term variable remuneration components of the Management Board. A scenario analysis was carried out within the terms of the best practice provision II.2.1 of the Code to evaluate the variable components of the remuneration packages of the Management Board members.
The Committee previously assessed the peer group in 2013. In the light of the evolving complexity in TomTom’s businesses the Committee decided to reassess the peer group in 2015 and engaged with a remuneration expert for this purpose. The peer group serves as an essential yardstick to determine the overall competitiveness of the company’s Management Board remuneration and gives an appropriate reflection of the competitive markets in which TomTom is operating. Less focus has been placed in this years’ reassessment on geography and size. Most relevant are considered companies in the same or similar industry globally, as were peer technology organisations with head offices in the Netherlands. Both groups were considered regardless of having substantially larger or smaller market values and revenues compared to TomTom.
As a result hereof, eleven competitors (reflective of each of the TomTom business units) and three high-tech Dutch companies were added to the existing peer group. The companies which have been delisted since 2013 were removed. The new peer group consists of the following 25 companies: Wolters Kluwer, Harman, Garmin, ASM International, Temenos Group, Imagination Technology Group, SimCorp, CompuGroup Medical, Pace, Kudelski, GoPro, Trimble Navigation, Fleetmatics Group, Elektrobit, Telenav, Mix Telematics, Fitbit, LoJack, Nokia HERE, ASML, Philips and NXP Semiconductors.
The Committee reviewed and discussed the outcome of the market competitiveness report prepared by the remuneration expert comparing the remuneration packages with the peer group companies and against prevalent practice in the Netherlands, Europe and within the high-tech sector. It concluded that the materials supported the Committee’s view that the company’s remuneration packages and Remuneration Policy are appropriate with the exception of the long-term incentive plan. The annual long-term incentive award levels continue to be below market median level i.e. are the least competitive remuneration component.
It was concluded that the vesting conditions for the options granted to the members of the Management Board in 2013 were met resulting in a vesting of 100% of the granted options, which equals a total number of 155,000 options for each Management Board member.
The Committee evaluated its own functioning and concluded that its activities are satisfactory and adequately serve the company’s needs.
The company's Articles of Association state that the Supervisory Board must propose the Remuneration Policy for the members of the Management Board and that the Remuneration Policy must be adopted by the General Meeting. The Supervisory Board determines the remuneration of individual members of the Management Board on the basis of criteria established by the Remuneration Policy. It reviews this policy regularly in the light of internal and/or external developments. The full text of the policy can be found on the company's corporate website: corporate.tomtom.com/remuneration.cfm.
The company's Remuneration Policy must ensure that the company is able to attract and retain highly qualified and expert executives to its Management Board in an internationally competitive market. It must also ensure that the Management Board members' remuneration is consistent with the company's strategy, its operational and financial results and delivery of value to shareholders.
Another aim of the policy is to apply a responsible and sustainable remuneration framework in line with the general result-driven remuneration principles and practices throughout the company. The Remuneration Policy establishes that remuneration for the Management Board must consist of four components: base salary, short-term incentive, long-term incentive and benefits (including pension scheme contributions).
The Remuneration Policy and each of the remuneration components of each of the members of the Management Board are benchmarked against a peer group every other year.
Application in 2015
The details of the individual remuneration of all members of the Management Board and its costs to the company are presented in note 33. Remuneration of members of the Management Board and the Supervisory Board in the consolidated financial statements. The information described in the best practice provision II.2.13 (d) of the Code is also provided there.
1. Base salary at median market level
Fixed remuneration consists of base salary plus holiday allowance, where applicable and in accordance with market practice. The objective of this element of the policy is to align the base salary levels of TomTom Management Board members with median market practice in a measured way. The base salary levels are reviewed annually, taking into account developments in the pay market and the level of position as graded within the company.
An indexation of the salaries of all members of the Management Board took place in 2015, reflecting an increase of 2.7%. In addition, the base salaries of the Management Board members were assessed relative to the benchmark. Using the outcome of the benchmark performed in 2015 as a base, the Supervisory Board concluded that Alain De Taeye's base salary was in line with the median market level and did not need adjustment for 2015. The base salary of the newly appointed CFO is in line with the median market level. The CEO's base salary remains under median market level. However, it was decided not to bring the CEO’s base salary closer to the median and therefore the CEO’s base salary has not been adjusted in 2015.
The base salaries of all Management Board members comply with the Remuneration Policy.
2. Short-term incentive
The intention of the percentage-of-salary bonus scheme is to ensure a uniform bonus structure throughout the organisation. It aligns the Management Board's bonus scheme with the bonus structure that applies to other staff within the company. This component of Management Board remuneration was benchmarked against the new peer group.
The level of cash payment is determined according to predetermined criteria and objectives. TomTom's 'on-target' bonus percentages are assessed relative to the median 'on-target' bonus percentages of our peer group companies. The on-target bonus percentage for the CEO position is 80% of his base salary. It is 64% of the base salary for the other members of the Management Board. The maximum bonus amount may be increased to 1.5 times the 'on-target' bonus amounts. For example, in cases of excellent performance the CEO may receive 120% of his base salary, and the other members of the Management Board 96% of their base salaries. In addition to the incentive scheme based on pre-determined performance criteria, the Supervisory Board may at its own discretion also decide to reward bonuses for exceptional individual performance.
Given the focus on revenue growth and the stability that now exists in the company’s financial position, it was decided to remove the cash flow KPI for 2015. The two performance criteria remaining were the revenue KPI weighted at 50% and the EBIT KPI weighted also at 50%. It is the Supervisory Board’s opinion that these strong financially driven KPIs appropriately measure the company’s strategy focus on growth. These KPIs are an important measure of the success of the execution of the company’s strategy and, as such, the remuneration is directly linked to performance and the company’s strategy.
Applying the pre-determined performance criteria to the 2015 results of the company, the Supervisory Board has awarded an overall pay-out ratio of 31% of the 'on-target' bonus percentage under the short-term incentive scheme, reflective of achievement on the revenue KPI and underachievement on the EBIT KPI. Marina Wyatt is not eligible for a bonus pay-out under this scheme.
The Supervisory Board is of the opinion that the continuous challenging economic environment and competitive market warranted strong financial control and that therefore the strictly financial nature of the KPIs set for 2015 was appropriate.
3. Long-term incentive
The long-term incentive component is laid down in the TomTom Management Board Stock Option Plan. The Management Board Stock Option Plan is aimed at attracting and retaining key talent in order to ensure the company's continued high performance. It therefore aligns the company's long-term incentives with common practices within international companies operating in the technology sector.
With regard to the Management Board Stock Option Plan, all options shall be granted conditional to continued employment of the Management Board members only. The vesting of the options is not subject to the achievement of pre-determined performance criteria. The options will vest three years after the grant date.
The Supervisory Board confirmed that the unconditional option plan, where value only materialises upon the successful execution of the company's long-term strategy by the Management Board, reflects the company’s vision and the corresponding strategy considerations for 2015 to 2017 with a strong focus on top-line growth.
The annual stock option grants are set as a percentage of the fixed salary of the Management Board members. The level for the CEO was set to a grant value equivalent to 100% of the fixed salary (resulting in 210,000 stock options), and for the other two members of the Management Board to a grant value equivalent to 60% of the fixed salary (resulting in 115.000 stock option for Marina Wyatt and 110,000 stock options for Alain De Taeye). All 115,000 options granted to Marina Wyatt in 2015 lapsed on 1 August 2015, including all remaining 315,000 (unvested) options granted under respective 2013 and 2014 plans. The newly appointed CFO Taco Titulaer will only be eligible to the Management Board Stock Option Plan applicable as of 2016.
Members of the Management Board are eligible for and can opt to participate in the company's pension plans or receive a contribution to their respective private pension plan. According to the Remuneration Policy, the contribution to be paid by the company on behalf of a member of the Management Board is based on a percentage of the gross annual base salary and is capped at 20% of the gross annual base salary.
Harold Goddijn has opted to waive his rights to take part in the company's pension plan or to receive a pension allowance; as a result he does not receive any contribution from the company.
The contributions to the respective private pension plan of Marina Wyatt and Alain De Taeye are capped at 20% of the individual gross annual base salary.
The 2015 company’s pension plan is based on a defined benefit part (up to €40,000) and a defined contribution part (for €40,000 - €100,000). As of 1 January 2015, the pensionable salary in the Netherlands has been capped at €100,000.
Under the 2015 company pension plan, Taco Titulaer pays a pension premium contribution of approximately 6.6% out of his pensionable-bearing salary. The company’s total pension contribution includes the company’s contribution to the company’s pension plan and a gross allowance that can be spent on private pension savings, and is capped at 20% of the CFO’s gross annual base salary in accordance with the Remuneration Policy.
In addition to the above-mentioned remuneration components, the Management Board members are entitled to remuneration for items such as medical insurance, death and disability insurance and car allowances. They also benefit from directors' and officers' liability insurance coverage. These benefits are in line with market practice. The company does not provide loans to members of the Management Board.
The Supervisory Board does not intend to change the Remuneration Policy in the foreseeable future.
The base salary for the CEO remains under median market level. However, it was decided not to bring the CEO’s base salary closer to the median in 2016. The base salaries of the other two members of the Management Board are in line with the median market level. Neither of the salaries of the members of the Management Board need adjustment for 2016.
For the short-term incentive scheme for 2016 the Supervisory Board feels it is appropriate to apply KPIs and weighting that measures the company’s strategy. Given the continued focus on growing the business the KPIs for 2016 will continue as in 2015 reflecting a revenue KPI weighted at 50% and an EBIT KPI weighted at 50%.
The Supervisory Board is of the opinion that the unconditional Management Board Option Plan is appropriate and corresponds with the company’s long-term focus on growth. To bring the long-term incentive component more in line with the market, the Supervisory Board decided to consider further in 2016 for implementation in 2017 to increase the percentage of the fixed salary of the Management Board members that determines the annual stock option grants.
Employee arrangements and severance agreements
The term of appointment for all members of the Management Board is four years, while the term of employment is indefinite. Management Board members may be re-appointed for another term of four years at a time. The employment of a member of the Management Board may be terminated by or on the initiative of TomTom with a notice period of 12 months. In such event, the Management Board member is entitled to a severance payment limited to 50% of one year's base salary, unless a higher statutory severance compensation applies. These terms will not apply if the employment of a member of the Management Board is terminated for any reason as set out in articles 7:677 (1) and 7:678 of the Dutch Civil Code. In such situations, the Management Board member will not be entitled to any severance compensation. A member of the Management Board will not be entitled to severance compensation if the employment is terminated by him or her, or on his or her initiative. Members of the Supervisory Board are not entitled to any benefits upon the termination of their appointment.
This Selection and Appointment Committee Report describes the main items discussed by the Selection and Appointment Remuneration Committee (Committee) during the year 2015.
The Committee consists of three members: Peter Wakkie (Chairman), Guy Demuynck and Jacqueline Tammenoms Bakker.
The Selection and Appointment Committee met four times during the course of 2015, with an overall attendance rate of 100%. Each meeting was also attended by Alain De Taeye, the Head of HR and the Company Secretary.
Significant improvements have been made in 2015 with regards to the Committee’s oversight of the company’s talent management and succession planning for key positions within the organisation.
At the beginning of 2015, the HR strategy within the company was shared with the Committee and quarterly updates were provided by the Head of HR. Topics which were shared in this respect with the Committee were initiatives from management in view of career development, management and leadership, policies and compensation and benefits. Those initiatives all underpin the company’s efforts on its talent management with the aim to attract, retain and develop talent.
It is important for the Supervisory Board to stay in touch with the talents within the company. Among others quarterly breakfast sessions were organised to facilitate a Meet & Greet between the Committee members and a selective number of talents. In an open and transparent setting the Committee was provided with feedback from the talents on several topics such as the TomTom culture and dynamics, specific business successes and operational challenges. The Committee members also had two meetings in 2015 with the Dutch Works Council.
The Committee focused on the company's progress on its succession planning for key positions within the company. On a quarterly basis, the Committee was updated on the recruitment status of vacant key positions and the leadership programme developed for talented senior leaders. An annual update was provided on TomTom’s Diversity Programme.
The Committee took prompt actions when it was informed about the departure of Marina Wyatt, former CFO of the company. After conducting a thorough executive selection process, that included external and internal candidates, Taco Titulaer was selected for the position based on his understanding of the company and the market, as well as his extensive financial experience. The Committee and Supervisory Board are proud to have found a successor within the organisation. Mr Titulaer was appointed on 1 August 2015 as CFO of the company and on 8 October 2015 as a member of the Management Board by the General Meeting. In the light of this appointment, the composition of the Management Board and the succession planning of the other Management Board members were also discussed.
The Committee considered the succession planning and composition of the Supervisory Board. The term of Ben van der Veer will expire at the 2016 General Meeting by which time he will have served for eight years on the Supervisory Board. The Committee concluded its recommendation to the Supervisory Board to nominate Mr Van der Veer for re-appointment for a term of another one year. This will mean that he will have served nine years. The Committee reviewed and concluded on the profile of the Chairman of the Audit Committee and engaged with an external agency to search for an appropriate candidate to succeed Mr Van der Veer in 2017. This would provide ample time to secure a smooth transition to the new Chairman of the Audit Committee. Interviews were held with several candidates which resulted in a recommendation by the Committee to the Supervisory Board.
It resolved to recommend to the Supervisory Board to nominate Jack de Kreij for appointment for a first term of four years as a member of the Supervisory Board starting as of 1 January 2017.Mr De Kreij shall succeed Mr Van der Veer as Chairman of the Audit Committee after the date of the 2017 General Meeting.
Guy Demuynck decided to step down from the Supervisory Board after the 2016 General Meeting by which time he will have served for eleven years. As a result hereof, the Supervisory Board shall consist of five members as from the date of the 2016 General Meeting to be complemented with one member as of 1 January 2017 subject to the appointment of Mr De Kreij at the 2016 General Meeting.
The Committee carried out a self-assessment of the functioning of the Committee performed by an independent third-party. The significant progress made on the Committee’s engagement in the company’s talent management as well as succession planning for key positions within the organisation was identified as a positive trend.
Since the company’s ambition is to be the employer of choice in the technology sector and to attract, develop and retain the best talents in the face of increasing competition for such talent, the Committee stressed the need to continue to focus on these topics also in 2016. The composition of the Supervisory Board and its succession planning shall also remain a high priority for the Committee.
This report describes the main items discussed by the Audit Committee (Committee) during 2015. The role and responsibility of the Committee as well as the composition and the manner in which it discharges its duties are set out in the Audit Committee Charter, which is available on the TomTom website.
The Committee consists of three members: Ben van der Veer (Chairman), Doug Dunn and Anita Elberse.
The Committee met four times during the course of 2015, with an overall attendance rate of 93%. All four meetings were held prior to the publication of the financial results. All meetings were attended in full by the CFO and the Head of Business Assurance during the year. The other members of the Management Board attended the meetings as required (for instance, where group risks and internal controls were discussed). The external auditor attended each of the four Audit Committee meetings to address agenda items relating to the external financial reporting and related press releases. The Committee and the external auditor also met separately, without the Management Board present, in order to facilitate free and open discussions. Other employees were invited when the Committee deemed it necessary and appropriate.
The Committee assisted the Supervisory Board in its responsibility to oversee the system of internal controls and risk management, the company’s financing and financial statements and its financial reporting process.
Throughout the year, the Committee monitored and reviewed the quarterly financial results and full year financial statements as presented under IFRS including the respective disclosures prior to their releases. Attention was paid to critical accounting policies, the valuation of goodwill and intangible assets and the clarity of the rules for disclosure, as well as the company's compliance with accounting standards, the requirements of NYSE Euronext Amsterdam and other corporate governance, legal and regulatory bodies.
During all quarterly Committee meetings, updates were provided on the maintenance and effectiveness of the system of internal controls and risk management relating to strategic, financial, operational and compliance matters. The company monitors its internal controls through a systematic approach, which is supported by the risk management process and the internal audit team. The Head of Business Assurance reports functionally to the Committee and administratively to the CFO.
The Committee further discussed items including the company’s policies related to financing, cash and foreign exchange management. In relation to tax, the committee discussed the recommendations from the Organisation for Economic Cooperation and Development (OECD) on Base Erosion and Profit Shifting (BEPS) as well as 'Country by Country' reporting and changes in the Research & Development Aftrek (RDA). Regular updates were received by the Committee on TomTom’s whistleblower programme. The Committee was provided with quarterly updates on the company’s ongoing effort to maintain the appropriate level of a risk-based information security management.
The Committee carried out a self-assessment of the functioning of the Committee and concluded it works effectively.
The role and functioning of the Internal Audit function, including its independence, were regularly discussed and the internal audit plan was approved by the Committee. This plan considers the key risk areas of the business, important IT projects as well as the geographical spread of TomTom offices and the core activities performed there. In consultation with senior management, Internal Audit selects the areas of the business to be audited during the year. Members of the Committee and the Management Board may at any time request Internal Audit to carry out an internal audit or special consulting service. Compliance with the recommendations made in this respect were observed by the Committee. The Head of Business Assurance reported each quarter to the Committee.
EY was appointed by the 2015 General Meeting for a term of three years until 2017. The transition plan which was prepared to ensure minimal disruption to the business when moving to the new external auditor, was closely monitored.
The audit plan, including the scope and materiality applied, were approved by the Committee. The Committee evaluated the external auditor. Reviews and discussions were held between the Committee and the Management Board on the findings of the external auditor in its management letter and the actions taken by management to address the recommendations and observations made by the external auditor.
The Committee reviewed the independence of the external auditor, taking into account qualitative and quantitative factors, and concluded that EY had sufficient objectivity and independence to perform the external audit function. Below a summary is provided of services performed by EY, its network affiliates and the fees earned.
Breakdown of fees by type of service
Table_7 Audit fees
|(€ in thousands)||20151||% of total||2014||% of total|
|Audit - group||360||61%||505||66%|
|Audit - statutory||155||26%||141||19%|
|1. In 2015 the auditor of the group is Ernst & Young Accountants LLP. (2014: Deloitte Accountants BV.)|
|2. Tax compliance comprises foreign tax compliance services, including local tax filings and HR-related compliance services.|
The consolidated annual Financial Statements of the company for 2015, as prepared by the Management Board, have been audited by Ernst & Young Accountants LLP . The financial statements, the report and management letter of the external auditor were discussed extensively with the auditors by the Audit Committee in the presence of the Management Board, and by the full Supervisory Board with the Management Board.
The Supervisory Board is of the opinion that the 2015 Financial Statements of TomTom N.V. meet all requirements for correctness and transparency. The Supervisory Board has approved these Financial Statements for 2015. All individual members of the Supervisory Board and members of the Management Board have signed the Financial Statements for 2015 pursuant to the statutory obligations under article 2:101 (2) of the Dutch Civil Code.
The Supervisory Board recommends to the General Meeting to adopt the Financial Statements for 2015 and requests that the 2016 General Meeting discharge the members of the Management Board of their responsibility for the conduct of business in 2015 and the members of the Supervisory Board for their supervision in 2015. The Annual Report 2015 is available at the company's offices on request and on the company's website: corporate.tomtom.com/annuals.cfm.
The Supervisory Board would like to thank Marina Wyatt and Toine van Laack for their highly valued contributions to the company. The Supervisory Board would also like to thank TomTom’s shareholders for their trust in the company and its management.
The Supervisory Board also would like to express its appreciation for the continued dedication and commitment of all employees and the Management Board.
Amsterdam, 9 February 2016
The Supervisory Board
Ben van der Veer
Jacqueline Tammenoms Bakker