Education: Dr. rer. soc.; lic. iur.
Career history: 1987–1996 General Secretary, Berne Directorate of Public Works, Transport and Energy (BVE); 1996–2010 General Secretary, Federal Department of the Environment, Transport, Energy and Communications (DETEC)
Other mandates: Member of the Board of Directors, BLS AG, Berne
3.4 Composition, election and term of office
With the exception of the representative of the Swiss Confederation, the Board of Directors of Swisscom Ltd is elected by shareholders at the Annual General Meeting. It currently comprises nine members. However, under the terms of the Articles of Incorporation it may comprise between seven and nine members and, if necessary, the number can be increased temporarily. Until now the members have been elected individually for a term of two years. Members may retire or be discharged prior to expiry of the term. As of 1 January 2014, the Annual General Meeting will elect the members and the Chairman of the Board of Directors for one year in accordance with the Ordinance Against Excessive Compensation in Listed Stock Companies (OaEC) of 20 November 2013. The term of office runs until the conclusion of the following Annual General Meeting.
The maximum term of office for members elected by the Annual General Meeting is twelve years. Members who reach the age of 70 retire from the Board as of the date of the next Annual General Meeting.
Under the Articles of Incorporation of Swisscom Ltd, the Swiss Confederation is entitled to appoint two representatives to the Board of Directors of Swisscom Ltd. Hans Werder is currently the sole representative. The maximum term of office or age limit for the federal representative is determined by the Federal Council. Under the terms of the Telecommunications Enterprise Act (TEA), employees must be granted appropriate representation on the Board of Directors of Swisscom Ltd. The Articles of Incorporation also stipulate that the Board of Directors must include two employee representatives. These are currently Hugo Gerber and Michel Gobet.
3.5 Internal organisation
The Board of Directors is convened by the Chairman and meets as often as business requires. If the Chairman is unavailable, the meeting is convened by the Deputy Chairman. The CEO and CFO Swisscom Ltd are regularly invited to the meetings of the Board of Directors. The Chairman sets the agenda. Any Board member may request the inclusion of further items on the agenda. Board members receive documents prior to the meeting to allow them to prepare for the items on the agenda. The Board of Directors may invite members of the Group Executive Board, senior employees of Swisscom, auditors or other experts to attend its meetings in order to ensure appropriate reporting to members of the Board. Furthermore, the Chairman of the Board of Directors and the CEO report to each meeting of the Board of Directors on particular events, on the general course of business and major business transactions, as well as on any measures that have been implemented.
The Board of Directors has three standing committees and one ad-hoc committee tasked with carrying out detailed examinations of matters of importance. The committees consist of between four and six members. Each member of the Board of Directors also sits on at least one of the standing committees. The Chairman is a member of all three standing committees; these are chaired by other Board members. The latter brief the Board of Directors on the committee meetings held. All members of the Board of Directors also receive copies of all Finance and Audit Committee meeting minutes. The duties and responsibilities of the Board of Directors are defined in the Organisational Regulations, those of the standing committees in the relevant committee regulations. The latest version of these documents as well as revised or superseded versions can be viewed online on the Swisscom website under “Basic Principles”.
The Board of Directors and the Audit Committee conduct self-assessments, usually once a year. The Board of Directors also supports the ongoing education of this body. It held a training course at the beginning of 2013. During the year various members also attended selected lectures and seminars. Wherever possible, the Board of Directors also attends the Swisscom Group’s annual management meeting.
The following table gives an overview of the Board of Directors’ meetings, conference calls and circular resolutions taken in 2013 as well as the participation of the individual members.
3.6 Committees of the Board of Directors
The composition, tasks and powers of the Board of Directors’ committees as at 31 December 2013 are described below. Information is also provided on the frequency of the respective committee meetings, the average duration of the meeting and the members’ attendance.
This Committee is chaired by Torsten G. Kreindl; the other members are Barbara Frei (until the end of 2013), Michel Gobet, Hansueli Loosli, Catherine Mühlemann and Hans Werder (until the end of 2013). The CEO, CFO and the CSO usually attend meetings of the Finance Committee. Depending on the agenda, other members of the Group Executive Board, the Management Boards of the strategic Group companies or project managers are also called upon to attend the meetings. The Committee prepares materials for the attention of the Board of Directors on transaction-related matters, for example, in connection with establishing or dissolving important Group companies, acquiring or disposing of significant shareholdings, or entering into or terminating strategic alliances. The Committee also acts in an advisory capacity on matters relating to major investments and divestments. The Finance Committee has the ultimate decision-making authority when it comes to approving rules of procedure and directives in the areas of mergers and acquisitions and corporate venturing. Details of the Committee’s activities are set out in the Finance Committee rules of procedure. The latest version of these documents as well as revised or superseded versions can be viewed online on the Swisscom website under “Basic Principles”.
The following table gives an overview of the Finance Committee meetings, conference calls and circular resolutions taken in 2013, as well as the participation of the individual members.
This Committee is chaired by Theophil Schlatter, who is a financial expert; other members are Hugo Gerber, Hansueli Loosli, Richard Roy and Hans Werder (from 2014). The CEO, CFO, Head of Accounting, Head of Internal Audit and the external auditors also attend the Audit Committee meetings. Depending on the agenda, other management members are called upon to attend. All members are independent, i.e. they neither work nor have worked for Swisscom in an executive capacity, nor do they maintain any significant commercial links with Swisscom Ltd or the Swisscom Group. The Audit Committee handles all financial management business (for example, accounting, financial controlling, financial planning and financing), assurance (risk management, the internal control system, compliance and the internal audit) and the external audit. It also handles matters dealt with by the Board of Directors that call for specific financial expertise (dividend policy, for example). The Committee is therefore the Board of Directors’ most important controlling instrument and is responsible for monitoring the Group-wide assurance functions. It formulates positions on business matters which lie within the decision-making authority of the Board of Directors and has the final say on those business matters for which it has the corresponding competence. Details of the Committee’s activities are set out in the Audit Committee rules of procedure. The latest version of these documents as well as revised or superseded versions can be viewed online on the Swisscom website under “Basic Principles”.
The following table gives an overview of the Audit Committee meetings, conference calls and circular decisions taken in 2013, as well as the participation of the individual members.
For information on the Compensation Committee, refer to the section “Remuneration Report”.
This Committee is formed on an ad-hoc basis for the purpose of preparing the groundwork for electing new members to the Board of Directors and the Group Executive Board. The Committee is presided over by the Chairman and the composition of the Committee is determined on a case-by-case basis. The Committee carries out its work based on a specific requirements profile defined by the Board of Directors and presents suitable candidates to the Board of Directors. The Board of Directors elects the members of the Group Executive Board and submits the proposal for presentation to the Annual General Meeting for the election and approval of members of the Board of Directors. Two Nomination Committees were formed in 2013: one to nominate a member of the Board of Directors (members: Hansueli Loosli, Michel Gobet, Torsten G. Kreindl, Catherine Mühlemann, Theophil Schlatter, Hans Werder) and one to nominate the CEO (members: Hansueli Loosli, Hugo Gerber, Richard Roy, Theophil Schlatter, Hans Werder). The Committees convened on three occasions; all members were present at the meetings, which lasted on average an hour.
3.7 Assignment of powers of authority
The Telecommunications Enterprise Act (TEA) makes reference to the Swiss Code of Obligations in respect of the non-transferable and irrevocable duties of the Board of Directors of Swisscom Ltd. Pursuant to Article 716a of the Code of Obligations, the Board of Directors is responsible first and foremost for the overall management and supervision of persons entrusted with managing the company’s operations.
It decides on the appointment and removal of members of the Group Executive Board of Swisscom Ltd. It also determines the strategic, organisational, financial planning and accounting guidelines, taking into account the four-year targets set by the Federal Council in accordance with the provisions of the Telecommunications Enterprise Act (TEA) and the intentions of the Swiss Confederation in its role as principal shareholder.
The Board of Directors has delegated day-to-day business management to the CEO in accordance with the TEA, the Articles of Incorporation and the Organisational Regulations. In addition to its statutory duties, the Board of Directors decides on business transactions of major importance to the Group, such as the acquisition or disposal of companies with a financial exposure in excess of CHF 20 million, or investments or divestments with a financial exposure in excess of CHF 50 million. The division of powers between the Board of Directors and the CEO is set out in Annex 2 to the Organisational Regulations (see function table in Rules of Procedure and Accountability). The latest version of these documents as well as revised or superseded versions can be viewed online on the Swisscom website under “Basic Principles”.
3.8 Information instruments of the Board of Directors vis-à-vis the Group Executive Board
The Chairman of the Board of Directors and the CEO meet once or twice a month to discuss fundamental issues concerning Swisscom Ltd and its Group companies. The CEO also reports in detail at each ordinary meeting of the Board of Directors on the general course of business, major events and any measures taken. The Board of Directors also receives a monthly report on all key performance indicators of the Group and all segments containing important Group companies. In addition, the Board of Directors receives quarterly detailed information on the course of business and on the financial position, results of operations, cash flows and risk position of the Group and the segments. It also receives projections for the income statement, cash flow statement and balance sheet for the current financial year. Internal financial reporting is carried out in accordance with the same accounting principles and standards as external reporting. Reporting also includes key non-financial information for controlling and steering purposes. Each member of the Board of Directors is entitled to request information on any matters relating to the Group at any time, provided this does not conflict with any abstention provisions or confidentiality obligations. The Board of Directors is also informed immediately of any events of an exceptional nature.
The Board of Directors deals with the areas of risk management, the internal financial reporting control system (ICS) and compliance management in detail once a year, on the basis of a written and oral report. The Audit Committee examines risk management in detail four times a year, on the basis of a report which includes all significant ICS and compliance risks. The Committee approves the integrated strategic audit plan and examines the Internal Audit reports at least four times a year. In urgent cases the Chairman of the Audit Committee is informed without delay about any significant new risks. He is also informed in a timely manner if there is a significant change in assessed compliance or ICS risks or if serious breaches in compliance (including violation of rules that are designed to ensure reliable financial reporting) are detected or currently being examined.
3.9 Controlling instruments of the Board of Directors vis-à-vis the Group Executive Board
The Board of Directors is responsible for establishing and monitoring the Group-wide assurance functions of risk management, the internal control system, compliance and internal audit.
3.9.1 Risk Management
Swisscom’s approach to risk management complies with established risk management standards, most notably COSO II and ISO 31000. The Group-wide risk management of Swisscom is aimed at safeguarding the company’s enterprise value. This is assured by maintaining a recognised and appropriate Group-wide risk management system as well as comprehensive, meaningful, level-appropriate reporting, appropriate documentation and a risk-aware corporate culture. Risk management covers risks in the areas of strategy, operations, compliance and financial reporting.
The Board of Directors delegates responsibility for implementing the risk management system to the CEO Swisscom Ltd. Risk Management reports to the CFO. It coordinates all organisational units charged with risk management tasks and systematically manages them as required for reporting purposes.
The main risks to which Swisscom Ltd and its Group companies are exposed are identified in a comprehensive risk analysis. Each risk is assigned a risk owner. To enable the early identification, assessment and management of risks and their inclusion in strategic planning, the central Risk Management unit collaborates closely with the Controlling department, the Strategy department and other departments concerned. The risks are assessed according to their probability of occurrence and their qualitative and quantitative effects in the event of occurrence, and managed on the basis of a risk strategy. The risks are evaluated in terms of their impact on key performance indicators reported by Swisscom. The risk profile is reviewed and updated quarterly. The Audit Committee and the Group Executive Board are informed about significant risks, their potential effects and the status of corrective measures on a quarterly basis, and the Board of Directors on an annual basis. The essential risk factors are described in the Risks section of the Management Commentary.
3.9.2 Internal control system
The internal control system (ICS) is designed, set up and maintained so as to ensure the reliability of external financial reporting with sufficient assurance. The design of the ICS is based on the internationally recognised COSO II risk framework. The system encompasses the internal control components: control environment, assessment of financial statement accounting risks, control activities, monitoring activities, information and communication. The implementation and effectiveness of the ICS is monitored periodically by a central ICS team and by Internal Audit. If any significant shortcomings in the ICS are detected during monitoring, the Audit Committee and the Board of Directors are notified in the periodic reports. Corrective action to remedy shortcomings is monitored centrally. A report on the internal control system is drawn up quarterly for the Audit Committee and once a year for the Board of Directors. The Audit Committee assesses the performance and reliability of the ICS.
3.9.3 Compliance management
Based on guidelines and objectives issued by the Board of Directors, Swisscom operates a central compliance system aimed at ensuring Group-wide compliance with legal requirements and other external regulations with comparable legal implications. The Board of Directors receives a full Group-wide compliance risk assessment report once a year. The Audit Committee receives a quarterly report on significant compliance risks.
3.9.4 Internal auditing
Internal auditing is carried out by the Internal Audit unit. Internal Audit supports the Swisscom Board of Directors and the Audit Committee in carrying out their statutory and regulatory supervisory and controlling obligations. It draws the attention of management to potential areas where business processes can be improved, documents audit findings and monitors any measures implemented.
Internal Audit is responsible for planning and performing audits throughout the Group in compliance with guidelines promulgated by the profession. It conducts an objective audit and evaluation of the appropriateness, efficiency and effectiveness in particular of the governance and control processes, the operational processes and the assurance functions of risk management, the internal control system and compliance in all organisational units in the Swisscom Group.
Internal Audit possesses maximum independence. Organisationally it is under the control of the Chairman of the Board of Directors and reports to the Audit Committee. At its meetings, the Audit Committee is briefed on audit findings and the status of any corrective measures implemented. In addition to ordinary reporting, Internal Audit informs the Audit Committee of any irregularities which come to its attention.
Internal Audit liaises closely and exchanges information with the external auditors. The external auditors have unrestricted access to the audit reports and audit documents of Internal Audit. Internal Audit closely coordinates audit planning with the external auditors. The integrated strategic audit, which includes the coordinated annual plan of both the internal and external auditors, is prepared annually on the basis of a risk analysis and presented to the Audit Committee for approval. Independently of this audit, the Audit Committee can commission ad-hoc audits based on information received on the whistle-blowing platform operated by Internal Audit. The reporting procedure approved by the Audit Committee ensures the anonymous and confidential receipt and handling of complaints relating to external reporting, financial reporting and assurance function issues. The Chairman of the Board of Directors and the Chairman of the Audit Committee are informed of notifications received and a report is drawn up at least once a year for the Audit Committee.