Remuneration Committee

Composition

The Corporate Governance System 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 201140.

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

The Committee was composed of the following persons at the Date of the Report41:

  • Luigi Roth (Chairman);
  • Anna Maria Artoni;
  • Luigi Campiglio;
  • Pietro Guindani.

It is important to note that compared to the Committee’s composition as at December 31, 2012, following the resignation on August 5, 2013 of the Director Carlo Acutis42 as a Member and Chairman of the Committee, the Board of Directors appointed the Director Roth – already a Committee member – as the Committee’s Chairman and appointed the Director Luigi Campiglio as a “new” member of the Committee.

Two members of the Committee (Anna Maria Artoni and Pietro Guindani) have adequate experience in financial and remuneration matters as duly assessed by the Board of Directors at the date the appointment was made. The Secretary of Board of Directors, Ms. Anna Chiara Svelto, acts as the Secretary to the Committee.

Duties 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 Committee43:

  • 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 to 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:
    • provides an adequate representation of each of the items comprising the remuneration;
    • 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.

As has been stated, it is important to remember that the Board of Directors 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 CEO, 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.

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 telecommunications 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 5 times during the 2013 financial year; the average duration was approximately one hour and 30 minutes. The tables provided at the end of this Report summarise the participations of the members at the Committee’s meetings reported during the 2013 financial year.

The Committee approved the proposals relating to the annual variable remuneration paid to the Chairman and CEO, and to the Deputy Chairman Alberto Pirelli (as a Senior Manager) and to the Executives with strategic business responsibilities in relation to the results achieved in the previous financial year and the proposals relating to the structure of the variable remuneration paid to the same persons and referred to the 2013 financial year.

The Committee then approved the 2013 Remuneration Report and submitted the Report to be examined by the Board of Directors, and subsequently submitted the Report to the advisory vote by the Shareholders’ Meeting to approve the Financial Statements referred to 2013 concerning the part related to the Remuneration Policy.

The Committee then proposed to the Board, and the Board subsequently approved, the introduction of non-competition Agreements referred to Executives with strategic responsibilities and referred to some senior managers and the compensation package for the newly appointed Operations General Manager.

Furthermore, during the 2013 financial year, the Committee considered launching the “new” 2013/2017 Industrial Business Plan and expressed its intention to proceed, on the one hand, to anticipate the closure of the existing LTI Plan and, on the other hand, to “launch” a “new” Long Term Incentive Plan. The Committee duly defined the proposal during the 2014 financial year, based on its intention (and the proposal was subsequently approved by the Board of Directors) to anticipate the closure of the 2012-2014 LTI Plan and concurrently launch a “new” 2014-2016 LTI Plan. For further details, the reader is referred to the 2014 Remuneration Report that will be available on the Pirelli Internet website no later than 21 days prior to the Shareholders’ Meeting to approve the Financial Statements referred to 2013.

Members of the Senior Management and external consultants participated in the Committee’s work, at the Chairman’s invitation, with reference to several items on the Agenda of the above-mentioned meetings in order to assist the Committee to perform its functions. The Committee met 3 times at the Date of the Report.

40 The 2011 Self-Regulatory Code Principle 6.P.3.
41 The reader is referred to Table 4 for further details.
42
On July 17, 2013 the Director Carlo Acutis informed that he considered he longer met the independence requirements due to his role as a controlling shareholder of Vittoria Assicurazioni S.p.A. and Yura International B.V. – companies which acted together with Lauro Sessantuno S.p.A. in the full public purchase offer promoted with reference to the shares of Camfin S.p.A. – and for this reason he resigned as Chairman and member of the Remuneration Committee.
43 2011 Self-Regulatory Code Application Criterion 6.C.5.
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 2011 Self-Regulatory Code: Application criterion 6.C.6.
46 Also in line with the recommendations of the 2011 Self-Regulatory Code: Application Criterion 4.C.1 sub-section d).
47 Also in line with the requirements of the 2011 Self-Regulatory Code: Application Criterion 4.C.1., sub-section e).