REMUNERATION COMMITTEE

Composition

The Corporate Governance System that has been adopted by Pirelli & C. since 2000 envisages establishing a Remuneration Committee.

The Committee is composed of four members who are exclusively independent based on the more rigorous approach recommended by the Self-Regulatory Code of the Italian Stock Exchange (Borsa Italiana) of December 2011, in fact, the 2006 version of the Self-Regulatory Code recommended that the Remuneration Committee was to be composed of only nonexecutive Directors, of which “only” the majority were to be Independent Directors.

The Committee is appointed by the Board of Directors (that also indicates the Chairman) and remains in office for the Board of Directors’ entire mandate.

Three members of the Committee (Carlo Acutis, Anna Maria Artoni and Pietro Guindani) have adequate experience in financial and remuneration matters as duly assessed by the Board of Directors at the time the appointment was made.

The entire Board of Statutory Auditors has the authority to participate in the Committee’s activities.

The Remuneration Committee was composed of the following persons at the Date of the Report43:

  • Carlo Acutis (Chairman);
  • Annamaria Artoni;
  • Pietro Guindani;
  • Luigi Roth.

The Secretary of the Board of Directors, Ms. Anna Chiara Svelto, acts as the Secretary to the Committee.

Tasks assigned to the Committee

The Committee has advisory, proposing and supervisory functions to assure the definition and application of the remuneration policies to the entire Group which are designed, on the one hand, to attract, motivate and retain the resources which have the professional  qualities requested to achieve profitably the Group’s objectives and, on the other hand, are capable of aligning the management’s interests with the interests of the shareholders.

In particular, the Committee:

  • supports the Board to define the Group’s General Remuneration Policy and the respective Implementation Criteria;
  • periodically assesses the adequacy, overall consistency and the effective application of the General Remuneration Policy and the Implementation Criteria;
  • formulates proposals to the Board with reference to the Directors invested with special offices, the General Managers and the Executives with strategic responsibilities
    • concerning their remuneration, in line with the General Remuneration Policy and with the respective Implementation Criteria;
    • establishing the performance objectives related with the variable component of such remunerations;
    • defining possible non-competition agreements;
    • defining possible agreements to terminate the relationship also on the basis of the principles established in the General Remuneration Policy and in the respective Implementation Criteria;
  • supports the Board of Directors to examine the proposals to be submitted to the Shareholders’ Meeting concerning the adoption of stock option plans based on financial instruments;
  • monitors the application of the decisions adopted by the Board, in particular, verifying that the performance objectives established have actually been achieved;
  • examines and submits the Annual Remuneration Statement to the Board of Directors that, by name, in the case of the members of the administration and control bodies and for General Managers, and in a cumulative form in the case of Executives with strategic responsibilities:
  • a) provides an adequate representation of each of the items comprising the remuneration;
  • b) illustrates in detail the fees paid by the Company and by its subsidiaries during the reference financial year for whatever reason and in whatever form.

The Procedure for Transactions with Related Parties envisages that the respective Procedure adopted by the Company does not apply to the resolutions relating to remunerations of Directors and Executives with strategic responsibilities provided (i) the Company has adopted a remuneration policy that includes policies relating to agreements to consensually terminate the employment relationship; (ii) a Committee comprising exclusively of non-executive Directors, the majority of whom are independent was involved in defining the remuneration policy (the Remuneration Committee); (iii) a report that illustrates the remuneration policy was submitted to the advisory vote of the shareholders’ meeting; (iv) the remuneration assigned is consistent with this policy. The reader is referred to the paragraph “Remuneration Policy” for further information.

It is important to remember that the Board of Directors then assigned the Remuneration Committee the responsibilities of the Committee for Transactions with related parties envisaged by the Consob regulatory provisions for matters concerning the remuneration of Directors and Executives with strategic responsibilities.

Operation

The Committee meets whenever its Chairman deems it appropriate, or when requested by at least one member, by the Chairman of the Board of Directors or by the Managing Director, if appointed, and however, as frequently as necessary to ensure that its functions are performed correctly.

The entire Board of Statutory Auditors44 participates in the Committee’s meetings, as well as other representatives of the Company and/or the Group, as well as of the audit company, if deemed appropriate and at the Committee’s invitation. The General Counsel and the Senior Advisor Human Resources participates in all the meetings.

Directors invested with special offices do not participate in the Remuneration Committee’s meetings, in line with the recommendations of the Self-Regulatory Code45 and best practices.

The Committee’s meetings are convened with a notice, also sent by the Secretary, at the request of the Committee’s Chairman.

The documentation and information available (and in any event the documentation and information required) are transmitted to all the Committee members sufficiently in advance to enable the members to express their opinion in the meeting.

The presence of the majority of the members in office is necessary for the Committee’s meetings to be valid and the resolutions are passed with the absolute majority of the members in attendance.

The Committee’s meetings may also be held using telecommunication media and are duly reported under the Secretary’s responsibility and transcribed in the special register46.

The Committee has adequate financial resources to perform its duties with absolute expenditure autonomy and may avail itself of external consultants when performing its functions.

The Committee has the authority47 to access company information and the functions relevant to performing its duties, availing of the Secretary’s support for this purpose.

Activities during the financial year

The Remuneration Committee met 3 times during the 2011 financial year (2 times after its renewal); the average duration exceeded one hour and thirty minutes. All the members in office have always attended the Committee’s meetings; the tables provided at the end of this Report summarise the participations of the members at the Committee’s meetings reported during the financial year.

As detailed in section 4.6, the Committee also met informally after its renewal to carry out a structured and detailed study of the Remuneration Policy in general, and the structure of the remuneration paid to the Chairman, the General Manager and the other Executives with strategic responsibilities, in particular.

Before its renewal, the Committee approved the final balance proposals of the annual variable remuneration paid to the Chairman and to the Executives with strategic business responsibilities in relation to the results achieved in the previous financial year and approved the General Remuneration Policy, subsequently approved by the Board and submitted to the advisory vote by the Shareholders’ Meeting convened to approve the 2010 Financial Statements, as detailed at the end of this Report.

After its renewal the Committee examined and formulated its respective proposals to the Board, after its renewal, concerning the remuneration of the Chairman and the Deputy Chairmen, and assessed those of the Executives with strategic responsibilities and, in particular, the General Manager, the General Counsel and the Institutional Affairs Director, the Administration and Finance Director and the Control Director and also endorsed the criteria adopted for their determination. The Committee also proposed to the Board the procedures to apportion the overall fee assigned by the Shareholders’ Meeting.

The Committee developed its analysis by availing of leading consulting firms in the field of executive compensation (Towers Watson and Hay Group). The analysis was developed taking into account data published by Italian and international industrial Groups deemed to be comparable in terms of organisational structure and/or industrial sector and/or capitalisation.

As already indicated in the Report on Corporate Governance and the Structure of Share Ownership referred to the 2010 financial year, the Committee (prior to its renewal) had approved the final balance proposals of the variable annual remuneration for the Chairman and the Executives with strategic business responsibilities in relation to the results achieved in the 2010 financial year and had approved the General Remuneration Policy, subsequently approved by the Board and submitted to the advisory vote of the Shareholders’ Meeting convened to approve the 2010 Financial Statements detailed at the end of this Report.

The Committee met 2 times in the early months of the 2012 financial year.

43 Readers are referred to Table 4 for further details.
44 This circumstance characterises the corporate governance rules adopted by the Company and offers the entire Board of Statutory Auditors the opportunity to directly oversee the Committee's activities and to perform more effectively the control functions assigned to it.
45 Self-Regulatory Code: Application criterion 7.C.4.
46 Also in accordance with the recommendations of the Self-Regulatory Code: Application Criterion 5.C.1 sub-section d).
47Also in line with the requirements of the Self-Regulatory Code: Application Criterion 5.C.1., sub-section e).