INDEPENDENT DIRECTORS

independent directorsThe Company’s Board of Directors has been characterised from 2006 by a number of Independent Directors who represent the absolute majority of its members.

At the date of their appointment and subsequently once a year, the Board assesses the continued validity of the requirements of independence envisaged by the Self-Regulatory Code and the requirements envisaged by the Unified Finance Law (TUF) in relation to non-executive Directors who are qualified as Independent.

The Board of Directors identifies the independence of its Directors in terms of their freedom from relations with the Company and/or its principal shareholders and executives which may influence their opinion.

The Board referred to the requirements recommended by the Self-Regulatory Code30 for the purpose of performing the respective assessment, and, accordingly, a given Director cannot - as a rule - be deemed independent:

  • if the Director concerned controls Pirelli & C. directly or indirectly, also through subsidiaries, trust companies or third parties, or is able to exercise considerable influence on the company, or participate in a shareholders’ agreement through which one or more parties can exercise control or have a significant influence on Pire lli & C.;
  • if the Director concerned is or has been in the preceding three financial years, a prominent member31 of Pirelli & C., one of its strategic subsidiaries or a company subject to joint control with Pirelli & C., or a company or body that, also together with others, controls Pirelli & C., based on a shareholders’ agreement, or is able to exercise considerable influence on it;
  • if the Director concerned, directly or indirectly (for example: through subsidiaries or companies in which the Director is a prominent member, or as a partner of a professional firm or a consulting company), has or had an important commercial, financial or professional relationship in the previous financial year:
    • with Pirelli & C., one of its subsidiaries, or with any respective prominent representatives;
    • with a party that controls Pirelli & C., also together with others, based on a shareholders’ agreement, or with the respective prominent representatives, in the case of a company or body; or
    • is or was an employee of one of the foregoing parties in the previous three financial years;
  • if the Director concerned receives or received from Pirelli & C. or from one of its subsidiaries, in the previous three financial years, a significant supplementary remuneration, in addition to the “fixed” salary as a non-executive Director of Pirelli & C.,  including the participation in corporate performancebased incentive plans, also based on share options;
  • if the Director concerned was a Director of Pirelli & C. for more than nine months over the last twelve years;
  • if the Director concerned is an Executive Director in another company in which an Executive Director32 of Pirelli & C. is a Director;
  • if the Director concerned is a partner or Director of a member company or a member body of the network of the company mandated to audit the accounts33 of Pirelli & C.;
  • if the Director concerned is a close family member of a person who finds themselves in one of the situations described in the preceding points.

The Board of Directors assessed the applicability of the requirements of independence in the meeting held on April 21, 2011, in the light of a substantial evaluation of the information provided by the Directors and the information available to the Company, also on the basis of the requirements envisaged by the Unified Finance Law (TUF), in relation to the Directors who were qualified as Independent at the date in their candidacy and in particular: Carlo Acutis; Anna Maria Artoni; Alberto Bombassei; Franco Bruni; Luigi Campiglio; Paolo Ferro-Luzzi; Pietro Guindani; Elisabetta Magistretti; Francesco Profumo (substituted by the Board Member Manuela Soffientini after his resignation); Luigi Roth and Carlo Secchi. In the meeting held on March 12, 2012, the Board of Directors confirmed that the cited requirements of independence were still applicable with reference to the Directors still in office34.

A further seven35 Board Members (the deputy-Chairman Vittorio Malacalza and the Board Members Gilberto Benetton; Giulia Maria  Ligresti; Massimo Moratti; Renato Pagliaro; Giovanni Perissinotto and Giuseppe Vita) were eligible to be qualified as “non-executive Directors”.

It follows that the Independent Directors represent the majority of the Directors in office and approximately 2/3 of the total number of “nonexecutive Directors”. The average age of the Independent Directors at the Date of the Report is just over 59 with an average term in office that corresponds to approximately 4 years.

The Board of Statutory Auditors verified that the assessment criteria and procedures adopted by the Board to establish the  independence of its members were applied correctly, in line with the recommendations of the Self-Regulatory Code36.

Meetings of the Independent Directors

In line with the recommendations of the Self-Regulatory Code37, the Independent Directors met 3 times during the 2011 financial year in the absence of the other Directors.

The Independent Directors examined in detail issues relating to the Company’s corporate governance system confirming, as has become an accepted practice, their special attention to the self-evaluation system referred to the Board of Directors and to the remuneration mechanisms.

The Independent Directors examined some aspects relating to Pirelli’s entry in Russia in a meeting also extended to the other non-executive Directors and with the Chairman of the Board of Directors also in attendance.

Role of Independent Directors on committees

Pirelli deems that the central function of the Board of Directors is to define the strategic policy guidelines and to supervise the Company’s business activities and in order to perform this important task effectively a central role is represented by the presence on the Board of Directors of an adequate number of Independent Directors with high professional and personal skills and expertise, and, all the more so, on the Committees. As has been said, this applies in particular, from 2006, since the majority of the Board of Directors is composed of Independent Directors and the Remuneration Committee and the Committee for Internal Control, Risks and Corporate Governance are composed only of Independent Directors from 2000; a significant representation is assured in the framework of the recently established Appointments and Succession Committee and the Strategies Committee; in particular, the composition of the latter reflects the mix of skills and expertise and the presence of executive, non-executive and independent Directors of the Board of Directors.

Lastly, all the Directors elected by the so-called minorities sit on at least one Committee.

30 Application criteria 3.C.1. and 3.C.2.
31 In general terms the following are to be considered “prominent representatives” of a company or body: the Chairman of the body, the legal representative, the Chairman of the Board of Directors, the Executive Directors and the Executives with strategic  responsibilities in the company or in the body considered.
32 The Executive Directors of the Company issuing the Report are: the Chairman and Managing Director, Marco Tronchetti Provera and the Deputy Chairman, Alberto Pirelli.
33 The Company appointed to audit the accounts of Pirelli & C. is Reconta Ernst&Young S.p.A. a member of the Ernst&Young network (Refer to Section 12.4).
34 It is important to remember that Prof. Francesco Profumo, qualified as an independent at the date of his appointment resigned from office on November 16, 2011.
35 Enrico Tommaso Cucchiani who resigned from office on December 16, 2011 was qualified as a non-executive Director up to that date.
36 Self-Regulatory Code: Application criterion 3.C.5
37Self-Regulatory Code: Application criterion 3.C.6.