Board of Directors

3. Board of Directors

The Board of Directors is the highest executive body of the company. It has the non-transferable and inalienable responsibilities set forth by the law and the Articles of Incorporation. The Board currently consists of eight members elected by the General Meeting of Shareholders.

Three Committees: an Audit Committee, a Strategy Committee and a Remuneration and Nomination Committee: are formed within the Board of Directors and are responsible for specific tasks (see below pages 62 and 63).

Mr Stefan Kudelski has been the Honorary Chairman of the Board of Directors since 2 May 2006. Mr Nicolas Gœtschmann, who is not a Board member, was appointed as Corporate Secretary by the Board.

André Kudelski

André Kudelski began his career in 1984 as a Research & Development engineer with Kudelski SA. In 1986, after working for several months with a firm in Silicon Valley, he returned to work in the family business firstly as Pay TV Product Manager then as Director of Nagravision SA, a company in charge of the Pay TV sector. Mr Kudelski then took over from his father Stefan Kudelski and from 1991 became Chairman and Chief Executive Officer of the parent company Kudelski SA.

Current mandates

Kudelski Group:

• Nagravision SA, Chief Executive Officer
• NagraCard SA, Chief Executive Officer
• Nagra plus SA, Chairman and Chief Executive Officer - SkiData AG, Member of the Supervisory Board
• Open TV Corp., Executive Chairman
• NagraStar LLC., Board member

Other:

• Dassault Systèmes SA (France),
• Board member, member of the Audit Committee and of the Remuneration and Nomination Committee
• Edipresse SA (Switzerland), Board member, Chairman of the Audit Committee
• HSBC Private Banking Holdings (Suisse) SA (Switzerland), Board member
• Nestlé SA (Switzerland), Board member, member of the Audit Committee
• Comité d'economiesuisse (Switzerland), member
• Swiss-American Chamber of Commerce (Switzerland), Board member

Claude Smadja

After 15 years with Télévision Suisse Romande (TSR) as Deputy Editor of the Information Department, Claude Smadja joined the management of the World Economic Forum in 1987, a position that he held until 1992. He then returned to TSR as Director of Information until 1996, in which year he was appointed Managing Director of the World Economic Forum. In June 2001, Claude Smadja set up his own strategy consultancy Smadja & Associates, Strategic Advisory, which collaborates on strategic problems with multinationals and government bodies and organizes international events.

Current mandates

Kudelski Group:

• OpenTV Corp., Board member

Other:

• Edipresse SA (Switzerland), Board member, Chairman of the Remuneration Committee
• Infosys Technologies Ltd. (United States), Independent Director, Chairman of the Nomination Committee
• International Board of Overseers of the Illinois Institute of Technology (United States), member.

Norbert Bucher

Norbert Bucher began his professional career as an engineer with Sulzer, in Winterthur and in New York, then moved to Syska & Hennessy Inc, Consulting Engineers in New York. He then joined Philip Morris Europe SA as Deputy Managing Director. After eleven years as Deputy Managing Director at Interfood SA in Lausanne, he occupied the position of Senior Vice President with Jacobs Suchard in Zurich for seven years.

Current mandates

Kudelski Group:

• Nagra plus SA, Board member

Patrick FŒtisch

Patrick Fœtisch is an independent lawyer specializing in contracts and finance at an international level. He acts as legal counsel to Group companies as and when required, employing the benefit of his in-depth knowledge of their activities to provide assistance and legal advice.

Current mandates

Kudelski Group:

• Nagravision SA, Chairman
• NagraCard SA, Chairman
• Nagra plus SA, Board member
• NagraID SA, Chairman
• SkiData AG, member of the Supervisory Board

Other:

• Renault Finance SA (Switzerland), Board member

Laurent Dassault

After a career spanning thirteen years in the banking sector, in 1992 Laurent Dassault joined the Dassault Group in whose subsidiaries he holds important positions. Today he assumes around thirty mandates, including those of the Dassault Group, mainly in the financial, industrial and wine-producing sectors.

Current mandates

Other:

• 21 Centrale Partners SA (France), member of the Supervisory Board
• Arqana SAS (France), member of the Supervisory Board
• Artcurial Développement Sàrl (France), Co-gérant
• Artcurial Holding SA (France), Chairman of the Development Committee
• Association des Amis du Centre Georges Pompidou (France), Board member
• Banque Privée Edmond de Rothschild Europe SA (Luxembourg), Board member
• Catalyst Investments II L.P. (Israel), Chairman of the Advisory Board
• Château Dassault SAS (France) (since 1994), Chairman
• Dassault Belgique Aviation SA (Belgium) (since 1992), Président-Directeur Général
• Dassault Investissements Sàrl (France) (since 1991), Managing Director
• Dassault Systèmes SA (France) (since 1992), Board member
• Fauchier Partners Management Ltd. (England), Board member
• Financière Louis Potel & Chabot SAS (France), Board member
• GENERALI France SA (France), Board member and member of the Accounting Committee
• Génération Entreprise (French association), member of the Supervisory Board
• Groupe Industriel Marcel Dassault SAS (France), Vice-Chairman (since 1992)
• Immobilière Dassault SA (France) (since 2003), Chairman of the Supervisory Board
• Laurent Dassault Rond Point (LDRP) SCI (France), Associé Gérant
• Lepercq, de Neuflize & Co. Inc. (United States), Board member
• Organisation pour la Prévention de la Cécité (OPC) (France), Board member
• PECHEL INDUSTRIES SAS (France), membre du comité de suivi
• Power Corporation du Canada (company incorporated under Canadian law on joint stock companies) (Canada), Board member
• SAGARD PRIVATE EQUITY PARTNERS SAS (France), membre du comité consultatif - SGAM ALTERNATIVE INVESTMENTS SA (France), prestataire
• Société de Véhicules Electriques SAS (SVE) (France), Board member
• SOGITEC Industries SA (France) (1992), Board member
• Terramaris SA (Switzerland), Board member

Pierre Lescure

Save for a two year period (1972-1974) as a television news presenter for Antenne 2, Pierre Lescure spent the first fifteen years of his professional career with the RTL, RMC and Europe1 radio stations where he occupied successively a variety of positions, in particular Deputy Editor and Director of Programs. In 1981 he returned to television as Editor in Chief of Antenne 2. From 1984, he worked with André Rousselet on the launch project for the pay TV channel CANAL+ where he was appointed Director and then Chief Executive Officer. From 1993 to 2002, he was Chairman and Chief Executive Officer of the CANAL+ Group. From 2000 to 2002 Pierre Lescure was also co-Chief Executive Officer of Vivendi-Universal. Since 2002, he has been Chairman and Chief Executive Officer of Anna Rose Production SAS, a company active in audiovisual and cinematographic production as well as in communication consultancy services. Lastly, since July 2008, he has directed the Théâtre Marigny in Paris.

Current mandates

Other:

• Lagardère SCA (France), member of the Supervisory Board
• Thomson SA (France), Board member, member of the Remuneration Committee
• Havas SA (France), Board member
• Le Monde SA (France), external member of the Supervisory Board
• Le Monde Presse SAS (France), Chairman

Marguerite Kudelski

From 1991 to 1999, Marguerite Kudelski began her professional career with the Laboratory of Electromechanics and Electrical Machines of the EPFL and worked in parallel as development engineer within the Nagra Audio division of the Kudelski Group.

In 1999, she became the Head of R&D with Précel SA in Neuchâtel (then a Kudelski Group company) before being appointed as CEO and Board member of the same company in 2000, positions that she occupied until the end of 2002. After completing a number of marketing and financial analysis projects for NagraID in 2003, she took responsibility for certain key projects for the Group within the Finance Department from 2004 to 2006. Since March 2007, Marguerite Kudelski has worked as a consultant, offering various services (business development, counseling) to companies in Switzerland and internationally.

Current mandates

Kudelski Group:

• polyright SA, Board member

Alexandre Zeller

Alexandre Zeller began his professional career in 1984 with Nestlé as a Management Auditor. Three years later he joined Credit Suisse where he carried out various duties in the field of loans and asset management at a Swiss and international level, while at the same time managing various branches. In 1999 he was appointed to the Executive Board of Credit Suisse Private Banking. In November 2002, Alexandre Zeller joined the Banque Cantonale Vaudoise. Since July 2008, he is CEO of HSBC Private Bank (Switzerland).

 

3.2. Other activities and vested interests

Please refer to the individual profiles of Board members under 3.1 above.

3.3. Cross-involvements

The requirements of the SIX Swiss Exchange directive have been cancelled.

3.4. Election and term of office

The Board of Directors comprises a maximum of eight members. Board members are appointed by the General Meeting for a period of one year. The term of office ends on the day of the Ordinary General Meeting. They may be re-elected.

3.5. Internal organization

The Board of Directors performs inalienable and non-transferable duties prescribed by the law (art. 716 of the Swiss Code of Obligations) with the support of its three Committees: Audit, Strategy, and Remuneration and Nomination.

The internal organization of the Board of Directors is defined in the Articles of Incorporation and the Board Regulations. The regulations are available on request to the General Secretariat of the Kudelski Group.

3.5.1. Distribution of tasks within the Board of Directors

The Board of Directors constitutes itself by appointing from within its ranks the Chairman and the Deputy Chairman. The functions of Chief Executive Officer and Lead Director are allocated if the Board decides to elect a Chief Executive Officer. Otherwise management of the company is delegated in full to the Executive Board. A Corporate Secretary may be appointed and chosen from outside the Board of Directors. He or she is not a member of the Board of Directors.

The Chairman of the Board leads the discussions at the General Meeting, ensures that the minutes are taken, is in charge of protocol and directs meetings of the Board, informs Board members of the development of business and the half-yearly accounts, represents the company in dealings with administrative and/or judicial authorities subject to mandates entrusted by the Board of Directors to a third party, to a Director or to one of its members.

The Deputy Chairman may convene a meeting of the Board of Directors. He chairs the General Meeting in the absence of the Chairman.

Management of the company may be delegated to the Chief Executive Office, unless otherwise stipulated by law. In his management activities, the Chief Executive Officer acts in accordance with directives issued by the Board of Directors and safeguards the interests of the company. He also presents a report to each meeting of the Board of Directors covering the essential aspects of business development.

In the Group's current structure, the functions of Chairman of the Board of Directors and Chief Executive Officer are exercised by one person. This situation guarantees a rapid and fluid information and decision-making process, enabling the company to respond operationally and strategically at the pace required by developments in the sectors of activity pursued by the Group. There are mechanisms to counterbalance a potential risk resulting from the combination of these functions through the institution of the Lead Director.

The Lead Director ensures the independence of the Board of Directors vis-à-vis the Chairman and Chief Executive Officer and also the management of the company and chairs the Board of Directors in cases of conflict of interest involving the Chairman and Chief Executive Officer. He chairs the Board of Directors in situations of conflict of interest involving the Chairman and Chief Executive Officer. Thus the Lead Director may convene and direct autonomously a meeting of the independent members of the Board of Directors if the interests of the company require independent deliberation. He ensures a performance appraisal process for the Chairman of the Board of Directors and the Chief Executive Officer.

3.5.2. Composition, attributions and delimitation of competencies of Board Committees

Committees are constituted by the Board of Directors which appoints their members and chairpersons. The Board Committees meet as often as is necessary. They have a consultative and preparatory role vis-à-vis the Board of Directors, to which they report on a regular basis. Committee reports serve as the basis for decision making by the Board of Directors.

Audit Committee

The Committee consists of at least three non-executive members of the Board of Directors. At least one Committee member has proven experience in the field of accounting. All members may have knowledge or practical experience in the field of financial management. The Audit Committee meets in principle three times a year.

The Audit Committee may at any time request detailed risk analyses of the Group's different sectors of activity as well as relating to specific fields of its choice. The Committee calls on experts outside the Board of Directors where this is deemed necessary for the successful completion of its tasks.

The Audit Committee supervises the company's internal financial reporting process and ensures its integrity, transparency and quality. It ensures that accounting methods comply with applicable regulations and constantly updates and provides financial information to the company.

It assesses the quality of work of external

auditors and provides appropriate recommendations to the Board of Directors concerning renewal of the term of office of external auditors or, where necessary, their replacement. The Committee ensures that the recommendations of external auditors are followed up and safeguards their independence.

The Committee provides regular reports presenting its recommendations to the Board of Directors concerning the adequacy, efficiency and veracity of accounting processes.

Strategy Committee

The Strategy Committee is composed of three members of the Board of Directors, including the Chairman and Deputy Chairman. It meets at least twice a year.

The purpose of the Strategy Committee is to review and define Group strategy. It drafts strategic development options with a view to ensuring the long-term enhancement of the Group's competitive position and its shareholder value. To this end, the Strategy Committee monitors the development of markets and the Group's competitive position, drafts future development models and oversees the Group's development by means of investments, disinvestments and reorganization.

To define strategic choices, the Strategy Committee relies upon information supplied by the management, the members of the Board of Directors and, if deemed necessary, by external counsel.

The Strategy Committee periodically reviews the balance between the Group's objectives, its structure and the organization in place to achieve strategic objectives. The Strategy Committee makes proposals to the Board of Directors, who finally decides on strategic choices.

Remuneration and Nomination Committee

This Committee is composed of at least two non-executive members of the Board of Directors. It meets at least twice a year.

The Committee supervises the remuneration policy put in place by the company. It ensures that remuneration packages are in line with salary levels implemented in the regions and in sectors of activity. Managers whose activity exerts a significant influence on the development of business have an important variable component in their remuneration.

The Chairman of the Board of Directors takes part in determining the remuneration of Board members and key officers of the company, to the exclusion of his own remuneration.

The Committee presents to the Board of Directors proposals for the appointment of Board members to be submitted to the General Meeting.

It examines, at the request of the Chief Executive Officer, applications for management positions and may if it wishes meet with candidates.

The Committee calls upon outside experts where deemed necessary to support its recommendations and decisions.

3.5.3. Working methods of the Board of Directors and its Committees

The cooperation and allocation of competencies between the Board of Directors and its Committees are described in chapter 3.5.2.

The Board of Directors meets at least four times a year, but as often as is required for the proper conduct of business.

In 2008, the Board of Directors and its Committees met as follows:

Average attendance at Board meetings exceeded 90%. Meetings of the Board of Directors lasted between three and seven hours. Most Committee meetings lasted between two and three hours.

3.6. Competencies

Please see also section 3.5.1 for details of the internal organization of the Board of Directors and the position of Chief Executive Officer.

The Board of Directors

The Board of Directors:

• has the ultimate management of the company and issues all necessary instructions;
• determines the organization;
• determines the principles of the accounting system and of the financial controls and also of financial planning insofar as this is necessary for the management of the company;
• appoints and dismisses persons entrusted with management and representation;
• exercises ultimate supervision over persons entrusted with management to ensure in particular compliance with the law, the Articles of Incorporation, regulations and instructions given;
• writes the annual report, calls the General Meeting and implements its decisions;
• takes decisions on capital calls with respect to shares that are not fully paid up (article 634a of the Code of Obligations);
• takes decisions regarding the assessment of an increase in capital and relevant changes to the Articles of Incorporation (articles 651 para. 4, 651a, 652a, 652g, 652h, 653g, 653h of the Code of Obligations);
• informs the judge in the event of over-indebtedness;
• proposes decisions relating to the conversion of shares (bearer registered/registered bearer) in which case the decision must be taken by a majority of Board members representing shares A and B.

Group management

The Board of Directors has delegated full management of the company to the Chief Executive Officer, subject to legal imperatives and contrary provisions in the Articles of Incorporation. The Chief Executive Officer therefore coordinates the day-to-day operations of the Group companies.

3.7. Information and control instruments with respect to Group management

Because of the nature of the industry, mechanisms for controlling Group management and information feedback systems are very important. The Kudelski Group has therefore put in place information and control instruments at different levels, which it improves on a continuous basis: strategy, operations, finance, law, human resources and information management.

Strategy

• The Chief Executive Officer submits a report to the Board members prior to each meeting outlining key aspects of business development (key contracts, sales evolution, market trends, human capital) for each Group entity and activity.
• Board members receive weekly or quarterly press reviews concerning the Group, depending on their relevance, or other informative documents concerning the Group and its entities, as well as a message from the Chief Executive Officer whenever the latter deems this is necessary.
• At least twice a year, members of management are invited to present their activities to members of the Board of Directors. Members of the Board may also ask questions directly to company executives as and when they see fit.
• At each Board meeting, if justified by the business situation and depending on the agenda, members of management, Group executives or outside experts are invited to present specific subjects to members of the Board of Directors.

Operation and strategy

• In the Group's key sectors, ad hoc committees comprising a cross-disciplinary panel of internal experts evaluate market, strategic, operational, legal and financial risks. These ad hoc committees analyze risks, manage processes relating to the evaluation of such risks, propose measures and monitor their implementation. There is a committee for each segment, as well as a security committee and an innovation committee. Information and comments arising from these committees are conveyed to the Group management during the Executive Board Meetings which take place at least once a month. The Digital TV Executive Board Meetings, which take place at least once a month and last on average four hours, also use the information provided by the ad hoc committees and review in particular two specific and relevant topics for the Digital TV segment.

Finance

• The Controlling entity conducts regular financial and operational analyses intended to identify operational and financial risks throughout the value chain of the different activities of Group companies and proposes and coordinates necessary improvements and corrective actions. This entity also makes available a platform of analytical services to Group management and operational departments.
• In addition, the Group has an internal control system based on the COSO (Committee Of Sponsoring Organizations of the Treadway Commission) reference system. This system aims at providing "reasonable assurance" as regards the performance and efficiency of operations, the reliability of financial information and reporting, and compliance with laws and regulations in force. A team is in charge of internal controls.
• Each year the Group improves the level of detail and efficiency of its information management system, in particular by combining financial information and quantitative information while taking into account the different stages in the sales process. This provides an increasingly accurate and global view of the activity. Every month, the Business Analysis Office issues region, client and project-specific reports, while the Controlling entity provides entity, profit center and cost center-specific reports to concerned persons, namely in particular regional heads, heads of affiliated companies and the Chief Financial Officer.

Law

• Close involvement of the Legal Depart-ment in the Group's different fields of activity and in decision making contributes

to improving legal risk management.

Human Resources

• The Human Resources Department has implemented a Performance Development System (PDS) which seeks to ensure coordination between employee management programs and business needs. It includes performance assessment and individual career development based on the company's needs.

Information Management

• The Corporate IT department has developed and implemented a series of policies and procedures concerning IT security (for the use of computer systems, data protection and back-up, etc.).