APPOINTMENT AND REPLACEMENT OF DIRECTORS

Since 2004, the Company Bylaws5 envisage that the Board is to be appointment based on the “voting list” system, thereby assuring that the so-called “minorities” can appoint one fifth of the Board Members if at least two lists are presented.

The lists presented by the shareholders, and duly signed by those presenting them, must be filed at the Company’s registered office, available to anyone who submits a request, at least 25 days prior to the date established for the Shareholders’ Meeting in first call (or only call) and are made available to the general public at the Company’s registered office, on the Pirelli Internet website and using the other methods envisaged by Consob at least 21 days prior to the date of the Shareholders’ Meeting.

Each shareholder may present or participate in the presentation of a single list and each candidate may be presented on only one list under penalty of ineligibility.

The Company Bylaws acknowledge the right to present lists of shareholders who, alone or together with other shareholders, hold a total number of shares representing at least 2% of the share capital entitled to vote in the Ordinary Shareholders’ Meeting, or the lower percentage required by the regulatory provisions issued by Consob (the percentage shareholding required for shareholders to present lists of candidates to be elected to the administration and audit bodies of Pirelli & C. was fixed at 1.5% of the share capital entitled to vote in the Ordinary Shareholders’ Meeting referred to the 2012 financial year)6 subject to an obligation to demonstrate the ownership of the number of shares required to present the lists within the deadline envisaged for their publication by the Company (21 days prior to the meeting).

Declarations in which the individual candidates accept their candidacy and the declarations in which the individual candidates concerned attest that there are no causes for ineligibility and incompatibility, and that they satisfy the requirements for the respective offices, if prescribed, are to be deposited with each list. A curriculum vitae is to be registered for each candidate together with the declarations detailing the personal and professional characteristics and providing information concerning (i) the administration and control positions held with other companies and (ii) the eligibility to be qualified as independent, in accordance with the criteria established by law and the criteria adopted by the Company.

Lists which are presented in breach of the provisions described are deemed not to have been presented.

Each person entitled to vote in the Meeting may only vote for one list.

The procedure outlined below will be adopted in the election:

  • four fifths of the Directors to be elected are selected in the progressive order in which they are listed from the list that obtained the majority of the votes cast rounding down to the nearest whole number, in the case of a fractional number;
  • the remaining Directors are appointed from the other lists; for this purpose the votes obtained by the lists will be divided subsequently by progressive whole numbers from one to the number of Directors still to be the elected.
    The quotients obtained in this way are assigned progressively to the candidates of each of these lists, according to the order in which they are listed, respectively.
    The quotients attributed to the candidates of the various lists are arranged in a single ranking in decreasing order. The persons that obtained the highest quotients are elected.

If more than one candidate obtained the same quotient, then the candidate from the list that has not yet elected a Director or that has elected the fewest Directors is elected.

If none of these lists has yet elected a Director or if all the lists have all elected the same number of Directors, then the candidate who obtained the highest number of votes within these lists is elected. In the case of parity votes on a given list and again with the same quotient, then the votes shall be cast again by the entire Shareholders’ Meeting and the candidate who obtains a simple majority of the votes cast is elected.

If application of the voting list mechanism does not assure the minimum number of Independent Directors envisaged by the applicable laws and regulations then the non-independent candidate elected, indicated with the highest progressive number in the list and who received the highest number of votes, will be replaced by the unelected independent candidate from the same list, in accordance with the progressive order of presentation and so on, list by list, until the minimum number of Independent Directors has been completed.
The Shareholders Meeting resolves with the majorities required by law when appointing Directors, who, for whatever reason, were not appointed in accordance with the procedure required by law.

The provisions set out under Article 2386 of the Italian Civil Code will apply if one or more Directors fall from office during the financial year.

Loss of the independence requirements by a Director does not represent a cause for the Director’s appointment to lapse provided the minimum number of Directors, as envisaged by the applicable laws and regulations, in possession of the legal requirements for independence remain in office.

In accordance with best practices, when the Board of Directors is to be renewed it is the Company’s accepted practice to allow shareholders to express their opinions with separate votes concerning the following aspects, respectively: (i) establishing the number of members of the Board of Directors (ii) appointing Directors by voting the lists presented (iii) establishing the term of office of the Board of Directors and (iv) establishing the fee due to the Directors.

5Article 10 of the Company Bylaws.
6Refer to Consob Resolution No. 18083 dated January 25, 2012.