sain t-gobain annu al report 2008 annual report

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110 Related party agreements Related party agreements entered into during the year At its meeting on March 20, 2008, the Board of Directors accepted the proposals made and the commitments given by Wendel in its letter to Compagnie de Saint-Gobain dated March 18, 2008 (1) . Acceptance of these proposals and commitments represented a related party agreement within the meaning of article L.225-38 of France’s Commercial Code. They were therefore submitted to and approved at the Annual General Meeting of June 5, 2008. Related party agreements entered into after the year-end At its meeting on February 19, 2009, the Board of Directors authorized the company to: Issue a counter-guarantee to a group of banks, led by BNP Paribas, that had guaranteed payment of the €896 million fine levied on the Flat Glass Division by the European Commission on November 12, 2008, plus interest at the rate of 5.25% for the period from March 9, 2009, pending the outcome of the appeal lodged with the Luxembourg Court of First Instance. Enter into an underwriting agreement with a group of banks led by BNP Paribas in connection with the rights issue decided the same day. Report on the internal control and risk management system Report of the Chairman of the Board of Directors on certain aspects of corporate governance, on Compagnie de Saint-Gobain’s internal control and risk management system and on any restrictions on the Chief Executive Officer’s powers. This report has been drawn up in application of article L.225-37 of France’s Commercial Code and has been approved by the Board of Directors. Corporate governance Under French law, the Chairman is required to report to shareholders on certain aspects of corporate governance. The required disclosures concern the composition of the Board, its organization and practices, the company’s compliance with and implementation of a recognized corporate governance code, the formalities for participating in General Meetings, the principles and rules applied by the Board to determine the compensation and benefits awarded to executive Directors and any other information that could affect a takeover bid for the company. This information is provided in the following sections of this registration document: Membership of the Board of Directors, Re-election of Directors, Board organization and practices, Committees of the Board, Corporate governance, Bylaws, Directors’ compensation and benefits, Information that could affect a takeover bid for the company (pages 87 to 106), which are incorporated by reference in this report of the Chairman. Compagnie de Saint-Gobain’s internal control and risk management system Saint-Gobain’s internal control system is based on the internal control framework issued by the French securities regulator (Autorité des Marchés Financiers – AMF) in January 2007 and complies with the legal requirements applicable to companies listed on the Paris Stock Exchange. Internal control is a set of resources, behaviors, procedures and initiatives tailored to each company’s specific characteristics that: • Contributes to the control of the business, the effectiveness of operations and the efficient use of resources • Enables the company to appropriately address material operational, financial, compliance and other risks. The internal control and risk management system is specifically designed to provide assurance concerning: • The company’s compliance with the applicable laws and regulations • Application of senior management’s instructions and guidelines • The efficiency and effectiveness of internal operating, industrial, marketing, financial and other processes • The protection of tangible and intangible assets and the prevention of fraud • The reliability of financial information. Internal control is therefore more than just a set of procedures and extends beyond accounting and financial processes. Overall organization of the internal control and risk management system Senior Management Group senior management oversees implementation of the internal control system and the existence and effectiveness of appropriate internal control and risk management monitoring systems with the subsidiaries. Saint-Gobain - 2008 Annual Report (1) See 2007 Annual Report, pages 14 and 15.
Internal Audit and Internal Control Committee The Internal Audit and Internal Control Committee: • Defines the overall architecture of the Group’s internal control system • Reviews executive summaries of the internal control self-assessment exercises • Examines material internal control incidents, dysfunctions and frauds brought to its attention • Draws up the annual internal audit plan and reviews the results of material internal audits • Ensures that the necessary corrective action is taken to resolve internal control dysfunctions, weaknesses and implementation difficulties The Committee, which met twice in 2008, is made up of: • The Senior Vice President, Internal Audit and Internal Control • The Corporate Secretary and the Vice President, Sustainable Development • The Chief Financial Officer and the Vice President, Financial Management • The Senior Vice President in charge of Human resources and International Development. Internal Audit and Internal Control Department On the instructions of senior management, the Internal Control unit is responsible for designing the Group’s internal control system and coordinating its deployment, working with the corporate departments, the general Delegations and the Sectors. Its main responsibilities are to: • Develop and maintain the internal control reference base • Communicate and provide training in the internal control reference base • Conduct the annual self-assessment process • Analyze incidents, self-assessments and the results of audits, and propose upgrades to the internal control system • Monitor implementation of the action plans decided following these exercises. The Internal Audit unit is tasked with deploying a systematic and methodical approach designed to provide assurance concerning the appropriateness and effectiveness of the internal control systems and with issuing recommendations for improvement. Its main responsibilities are to: • Check implementation of compulsory controls • Check the quality of the self-assessments conducted by the heads of the operating units • Audit internal control systems in order to obtain assurance concerning their compliance with the rules set by the Group and their effectiveness considering the situation of the audited unit. The internal auditors are based at the company’s head office and in the main General Delegations. Some 150 internal audits were carried out in 2008. Copies of the auditors’ reports were given to senior management, and to the Sector Senior Vice Presidents and General Delegates concerned. A report is issued at the end of each audit, describing the internal auditors’ observations. The audited unit is given the opportunity to respond to these observations, after which a set of recommendations is issued, together with an action plan that the audited unit is required to implement within a fixed timeframe. An executive summary is sent to the Financial Statements Committee of the Board of Directors. The audited units are required to report to the Internal Audit Department and Sector management every six months on the progress made in implementing the action plan until all the recommendations have been fully acted upon. When internal control weaknesses have been identified, once the time needed to implement the action plans has elapsed, the internal auditors perform a follow-up audit to assess the progress made. The annual internal audit plan is drawn up based on risk assessments prepared jointly by the Internal Audit and Internal Control Department, the Sectors and the General Delegations. It is presented to Group senior management and the Financial Statements Committee. The Internal Audit and Internal Control Department takes appropriate measures to deal with any suspected cases of fraud or embezzlement. An auditor specialized in fraud prevention techniques was hired in 2008. The internal and external auditors regularly exchange information, without compromising their independence, with the aim of increasing the effectiveness of existing controls and avoiding overlaps. For example, the external auditors are given copies of all internal audit reports, and the Internal Audit and Internal Control Department receives copies of the external auditors’ reports, as well as summary descriptions of their audit procedures, internal control reviews and information systems reviews. Environment, Health and Safety Department The Environment, Health and Safety (EHS) Department leads and coordinates Group policy in these areas. It has produced a reference manual (see below) that all site managers are required to comply with. The EHS Department checks application of the reference manual procedures through detailed audits commissioned by the company, the General Delegations or the Sectors. MANAGEMENT REPORT 111 Saint-Gobain - 2008 Annual Report
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2008 annual report
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Contents 05 • Strategy and busine
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3 STRATEGY AND BUSINESSES Jean-Loui
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Strategy and Businesses of Saint-Go
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Responding to recession by demonstr
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The High-Performance Materials Divi
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High-Performance Materials Business
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Insulation products are made from m
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Construction Products Businesses an
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Finland, Estonia, Lithuania and Pol
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ecovered glass can be recycled inde
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The “Germ-free Surfaces” progra
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24 2008 results dampened by the fin
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holders of the parent contracted 7.
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28 2008 business review 2008 sales
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30 The Division also continued to e
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32 In the Nordic countries, Dahl de
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Sustainable development 34 Sustaina
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Environment Challenges Action taken
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38 I. Products and services contrib
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40 Sun Saint-Gobain is a major supp
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42 a British trade association that
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44 Mobilizing resources to deploy t
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46 EHS auditors are drawn from a po
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48 Lastly, we make every effort to
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To help them to implement the plan,
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52 Wood dust is primarily an issue
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54 BRØDRENE DAHL’S PROGRAM FOR R
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56 2008-2010 OBJECTIVE Saint-Gobain
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58 warehouses and other similar spa
Page 62 and 63: product developed in 2006 by Lapeyr
Page 64 and 65: 62 Internships during a student’s
Page 66 and 67: 64 Geographical and job mobility is
Page 68 and 69: 66 SAINT-GOBAIN AND THE BROAD-BASED
Page 70 and 71: 68 Honest, open, high quality socia
Page 72 and 73: 70 Construction Products The Constr
Page 74 and 75: 72 IV. Values supporting responsibl
Page 76 and 77: 74 INTERNATIONAL CORPORATE FOUNDATI
Page 78 and 79: 76 In countries facing certain soci
Page 80 and 81: 78 for example, 91% of the Group’
Page 82 and 83: ENVIRONMENTAL INDICATORS 2007 2008
Page 84 and 85: Trading volume since September 2007
Page 86 and 87: Trading volume since September 2007
Page 88 and 89: Changes in capital over the last fi
Page 90 and 91: 88 The decision to grant stock opti
Page 92 and 93: Information Policy and 2009 Financi
Page 94 and 95: 92 Yuko HARAYAMA Professor at Tohok
Page 96 and 97: Other directorships and positions h
Page 98 and 99: 96 Director’s name and current ma
Page 100 and 101: 98 • Committees of the Board. Thr
Page 102 and 103: 100 The Committee’s remit, as def
Page 104 and 105: • The Annual General Meeting of J
Page 106 and 107: 4. Stock options granted to the Cha
Page 108 and 109: 106 Management compensation In Grou
Page 110 and 111: Fees paid by the Group to the Audit
Page 114 and 115: 112 The audits are based on a 20-st
Page 116 and 117: 114 being applied. The TAS framewor
Page 118 and 119: Statutory Auditors’ report Prepar
Page 120 and 121: Commitment concerning the payment o
Page 122 and 123: 120 Restructuring risks The Group h
Page 124 and 125: 122 • Volumes are not material, o
Page 126 and 127: 124 or any specific illness or phys
Page 128 and 129: The level of coverage is considered
Page 130 and 131: Consolidated balance sheet at 31 De
Page 132 and 133: Consolidated income statement (in
Page 134 and 135: Statement of recognized income and
Page 136 and 137: Notes to the consolidated financial
Page 138 and 139: 136 Non-current assets held for sal
Page 140 and 141: 138 asset’s fair value less costs
Page 142 and 143: 140 Fair value of financial instrum
Page 144 and 145: 142 Other business income and expen
Page 146 and 147: 2006 In 2005, the Group acquired th
Page 148 and 149: NOTE 4 Other intangible assets Pate
Page 150 and 151: NOTE 6 Investments in associates (i
Page 152 and 153: 150 NOTE 8 Inventories Dec. 31, Dec
Page 154 and 155: Movements relating to stock options
Page 156 and 157: The plan costs are calculated under
Page 158 and 159: The following tables show the funde
Page 160 and 161: Actuarial assumptions used to measu
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The effective tax rate paid by the
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Provisions for claims and litigatio
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isks is hedged wherever possible wi
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Bond issues On June 13, 2008, Saint
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NOTE 19 Financial instruments Deriv
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NOTE 21 Business income by expense
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The weighted average number of shar
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174 In addition, as of December 31,
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NOTE 28 Related-party transactions
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Innovative Construction Building Pa
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Information by geographic area Fran
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182 Principal fully consolidated co
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II - Justification of our assessmen
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Income statement at December, 31 (i
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Balance sheet at December, 31 ASSET
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Cash flow statement (in € thousan
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Risk management/Financial instrumen
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NOTE 5 Intangible assets Intangible
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Changes in Compagnie de Saint-Gobai
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Grant stock options exercisable for
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9.4 Compagnie de Saint-Gobain Group
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NOTE 12 Debt and payables Total deb
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12.1 Perpetual bonds In 1985, Compa
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NOTE 14 Investment portfolio Countr
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COMPANIES Capital Reserves % Book v
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NOTE 18 Fees paid to the Statutory
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Asbestos-related litigation in Braz
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Statutory Auditors’ report on the
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Main subsidiaries by country and de
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Saint-Gobain Vetrotex Deutschland G
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Saint-Gobain Construction Products
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Saint-Gobain Building Distribution
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Subsidiaries: Saint-Gobain Technica
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CHINA €1 = CNY 10.227 Saint-Gobai
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Table of concordance 1 Person respo
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COMPAGNIE DE SAINT-GOBAIN France He
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Notes 232 Saint-Gobain - Financial
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Saint-Gobain photo library ; p1 ©
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