ABB Annual Report 2012 PDF - ABB Group Annual Report 2012

1. Principles1.1 General principlesABB is committed to the highest international standardsof corporate governance, and supports the general principlesas set forth in the Swiss Code of Best Practice for CorporateGovernance, as well as those of the capital markets where itsshares are listed and traded.In addition to the provisions of the Swiss Code of Obligations,ABB’s key principles and rules on corporate governanceare laid down in ABB’s Articles of Incorporation, theABB Ltd Board Regulations and Corporate GovernanceGuidelines (which includes the regulations of ABB’s boardcommittees and the ABB Ltd Related Party TransactionPolicy), and the ABB Code of Conduct and the Addendumto the ABB Code of Conduct for Members of the Boardof Directors and the Executive Committee. It is the duty ofABB’s Board of Directors (the Board) to review and amendor propose amendments to those documents from time totime to reflect the most recent developments and practices,as well as to ensure compliance with applicable laws andregulations.This section of the Annual Report is based on the Directiveon Information Relating to Corporate Governance publishedby the SIX Swiss Exchange. Where an item listed in the directiveis not addressed in this report, it is either inapplicableto or immaterial for ABB.According to the New York Stock Exchange’s corporategovernance standards (the Standards), ABB is required todisclose significant ways in which its corporate governancepractices differ from the Standards. ABB has reviewedthe Standards and concluded that its corporate governancepractices are generally consistent with the Standards, withthe following significant exceptions:– Swiss law requires that the external auditors be electedby the shareholders at the Annual General Meeting ratherthan by the finance and audit committee or the board ofdirectors.– The Standards require that all equity compensation plansand material revisions thereto be approved by the shareholders.Consistent with Swiss law such matters aredecided by our Board. However, the shareholders decideabout the creation of new share capital that can be usedin connection with equity compensation plans.1.2 Duties of directors and officersThe directors and officers of a Swiss corporation are bound,as specified in the Swiss Code of Obligations, to performtheir duties with all due care, to safeguard the interests of thecorporation in good faith and to extend equal treatment toshareholders in like circumstances.The Swiss Code of Obligations does not specify whatstandard of due care is required of the directors of a corporateboard. However, it is generally held by Swiss legal scholarsand jurisprudence that the directors must have the requisitecapability and skill to fulfill their function, and must devotethe necessary time to the discharge of their duties. Moreover,the directors must exercise all due care that a prudent anddiligent director would have taken in like circumstances. Finally,the directors are required to take actions in the best interestsof the corporation and may not take any actions that may beharmful to the corporation.Exercise of powersDirectors, as well as other persons authorized to act onbehalf of a Swiss corporation, may perform all legal acts onbehalf of the corporation which the business purpose, asset forth in the articles of incorporation of the corporation, mayentail. Pursuant to court practice, such directors and officerscan take any action that is not explicitly excluded by thebusiness purpose of the corporation. In so doing, however,the directors and officers must still pursue the duty of due careand the duty of loyalty described above and must extendequal treatment to the corporation’s shareholders in like circumstances.ABB’s Articles of Incorporation do not containprovisions concerning a director’s power, in the absence ofan independent quorum, to vote on the compensation tothemselves or any members of their body.Conflicts of interestSwiss law does not have a general provision on conflictsof interest and our Articles of Incorporation do not limit ourdirectors’ power to vote on a proposal, arrangement orcontract in which the director or officer is materially interested.However, the Swiss Code of Obligations requires directorsand officers to safeguard the interests of the corporation and,in this connection, imposes a duty of care and loyalty ondirectors and officers. This rule is generally understood andso recommended by the Swiss Code of Best Practice forCorporate Governance as disqualifying directors and officersfrom participating in decisions, other than in the shareholders’meeting, that directly affect them.14 Corporate governance report | ABB Annual Report 2012