MANAGERIAL COMMITTEES

The Group has set up specific managerial committees composed of the Group’s top and senior management with the task of assisting the Board of Directors and the Executive Directors to define the guidelines for the business activities and to implement the policies established by the Board.

In particular, the following principal Managerial Committees have been established.

Management committee

Management committeeThe Management Committee has been extended to all the Managers of the Business Units, Regions and Departments who report directly to the Chairman or to the Executive Office to assure the policies are shared and to guarantee a more efficient information flow in the framework of the review (a) of the operating procedures; (b) the processes and (c) the top management relations of the organisation that will accompany the Group to “execute” the Industrial Plan described in Section 4.5.2.

The Management Committee is chaired by the Chairman of the Board of Directors and the Managing Director and has the task of supporting the latter in preparing the Group’s strategic guidelines to be submitted to the Board’s examination and to execute and implement the decisions taken by the Board of Directors in this regard, and to monitor their implementation.

The Management Committee meets once a month to verify constantly the Group’s economic performance; the development of the programmes, plans and initiatives common to the Group and the Business Units or Regions which have joint importance.

The risk management comite

The Committee is chaired by the General Counsel and has the task (i) of adopting and promoting a systematic and structured process to identify and measure risks; (ii) to examine information on internal and external, existing and future risks to which the Group is exposed; (iii) to propose strategies to respond to the risk based on the overall and precise exposure to the different risk categories; (iv) to propose the implementation of a risk policy to assure that the risk is reduced to “acceptable” levels; (v) to monitor the implementation of the defined risk response strategies and compliance with the risk policies adopted.

The Committee met on a quarterly basis during the 2011 financial year to identify, analyse and define the strategies to respond to the more significant risk events, in particular, to the risks strictly associated with the Group’s targets and the strategic choices they reflect (strategic risks) and the risks which may always concern the operational activities (so-called transversal risks).
The Risk Management Committee approved the 2011 Annual Risk Management Plan with reference to the so-called strategic risks, which defined the response strategies and the plans to mitigate the most significant risks already highlighted in the Annual Risk Assessment approved in November 2010 and referring to the 2011 budget period.

The Risk Management Committee monitored periodically during the year the overall exposure of Pirelli’s economic and financial results to the various risk “families” while verifying that the “risk value” was in line with defined risk propensity and tolerances.

The Committee analysed the most significant risk scenarios relating to the 2012-2014 Industrial Plan again with reference to the strategic risks and assessed the “soundness” of the economic and financial targets by submitting them to “stress tests” to verify the Group’s economic, financial and equity “capacity” at the occurrence of scenarios which could arise, in particular, due to the external context (economic situation, country risks).

Whereas, as far as the so-called transversal risks are concerned, the Risk Management Committee’s activity focused, in particular, on two macro areas: business interruption risks and risks associated with the IT systems.

The Committee analysed the results of the assessment relating to 7 production sites in 2011 with reference to the business interruption risks (5 sites had already been assessed during 2010).

The analyses performed confirmed an adequate supervision of the business interruption risks, thanks to a structured series of safety measures and prevention systems. In any event the preparation and implementation of specific “business continuity” plans were foreseen for all the production facilities analysed and which will also need to concern the supply chain.

The Risk Committee constantly monitored the implementation of the actions to enhance the safety supervision arrangements (physical, logical and infrastructural) with reference to the risks associated with Information Technology defined during 2010.

Lastly, the Committee also extended the risk assessment to the new strategic initiatives, in particular, to the investment projects designed to increase the production capacity.

The Sustainability Steering Commitee

The Sustainability Steering Committee is chaired by the Chairman of the Board of Directors and has the following tasks: (i) to prepare the Group’s sustainability plans based on the international policies and principles applicable to this area; (ii) to monitor the operative deployment of the plans; (iii) to prepare the Sustainability Report; (iv) to prepare the Company’s plans for Equal Opportunities.

The Sustainability Steering Committee includes all the functions of the value chain represented by the respective Director: Sustainability and Risk Governance, Institutional Affairs, Corporate Governance, Human Resources and Organisation, Administration and control, Product, Process, Procurement, Research & Development, Investor Relations, Environment, Health and Safety. The Departments mentioned represent the various interests of the reference stakeholders; converging the different interests within the Steering Committee, making the Committee become the key body to define the most balanced strategy in terms of a shared development and a multi-stakeholder approach.

The Steering Committee updated the threeyear sustainability plan during 2011, aligning the plan with the developing international scenario and with the respective new expectations, to achieve full integration with the updated version of the Group’s Development Plan. The 2012-14 Sustainability Plan integrates, accompanies and supports the achievement the Industrial Plan’s strategic targets.

All the objectives of the environmental, social and economic sustainability plan already initiated in 2011 and disclosed to the market in November of the same year, were rendered more challenging when updating the 2012-2014 Plan with an outlook extending to 2015.

The Plan’s principal targets are represented by process and product innovation designed to achieve the safety of persons and to protect the environment, extending Pirelli’s sustainable corporate management Model to the new industrial facilities which will become part of the Group, the commitment to transform the final customer’s education referred to road safety into an effective “safety culture”, to enhance the Company’s staff, in addition to a significant investment in training.

The Company’s sustainable management and development Model will be the central feature of the integration of the new production facilities in Mexico, Russia and Indonesia.

The co-operation with governmental and nongovernmental authorities will be strengthened in the framework of the relations with local and international communities to share initiatives designed to develop the sustainability culture, in particular, referred to road safety.

Lastly, the Committee analysed the results of the 2011 assessments performed by analysts concerning the main socially responsible investment indexes. In particular, Pirelli’s rating prepared by the EIRIS analysts referred to the FTSE4 Good indexes corresponded to 88/100, while the SAM Group that performs the analyses for the Dow Jones sustainability indexes, assigned Pirelli with the world sustainability Leadership award in the ‘Auto Parts and Tyre’ sector of the Dow Jones Sustainability Stoxx and the Dow Jones Sustainability World for the fifth consecutive year, with a rating  corresponding to 91/100 compared to a sector average that corresponds to 53.

The Sustainability Report (Volume C of the document “Financial Report as of 31/12/2011”) provides a complete description of Pirelli’s sustainable performance in 2011.

The Product Commitees

World sustainability awardThree Product Committees were established in the early months of the 2012 financial year (Car Product Committee; Truck, Agro and Vehicles Product Committee; Motorcycle Product Committee) in order to assure a common strategic policy and supervision of the product development process with the involvement of the various corporate areas concerned, all three Committees were chaired by the Chairman and Managing Director.

The Committees permanently include the respective Directors of the Business Units (Car, Truck, Agro and Special Vehicles; Motorcycle); the Management Control Director; the Investor Relations Director; the Research and Development Director; the Quality Director; the Operations Director; the MIRS Manager and the Managers with responsibility for the single Marketing areas.

The Product Committees have the following common objectives:

  • to assess the competitive position of Pirelli’s current product portfolio;
  • to study in detail the developments of each market segment, based on the expected technological innovation and the changing attitudes and requirements of consumers;
  • to define the product roadmap over the forthcoming years (3-5) on which to focus Research and Development, Production, Logistics and commercial lines;
  • to define the strategic position of each new product line, on the basis of specific technologies and the expected performance, the market entry price, the marketing and sales actions which will accompany the launch and the entire life cycle up to the decision to terminate production.

Business Unit and Region Performance Reviews

Performance review meetings are organised every month per single Business Unit and single Region. Based on an analysis of the economic and competitive context, these meetings render it possible:

  • to assess the economic and financial results of the previous month and align the information concerning the results expected for the current month.
  • to share the forecasts for the subsequent quarters up to the end of the financial year.
  • to assess the proposals for key actions to assure that the plan targets are achieved.

The meetings are chaired by the Executive Office and in addition to the Managers of Central Functions, the meetings are attended by the Business Unit Manager or the Region Manager undergoing the Performance Review, the Business Unit controller and the area Managers within the Business Unit or the Region who are invited according to the topics on the Agenda.

Organisation and People Review Commitee

The Organisation and People Review Management Committee was established during 2011, the Committee meets once a month to verify the consistency of the Group’s organisational structure with the growth targets and the business challenges and in order to monitor the quality of the managerial resources and their performance and to define development programmes to support the business initiatives.

The Committee is chaired by the Chairman and Managing Director and is composed of: the Chief Operating Officer; the General Counsel, the Senior Advisor Human Resources; the Human Resources and Organisation Director and avails of the support of the Senior Advisor Strategies.