Appointment and replacement of Directors

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

The slates 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 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 slate and each candidate may be presented on only one slate under penalty of ineligibility.

Shareholders who, alone or together with the other shareholders, hold a total number of shares representing at least 1% of the share capital entitled to vote in the ordinary shareholders’ meeting or the lower percentage required by the regulatory discipline issued by Consob6 are entitled to present slates, subject to the obligation of demonstrating the ownership of the number of shares required to present the slates within the deadline envisaged for their publication by the Company (21 days prior to the Shareholders’ Meeting).

Declarations in which the individual candidates accept their candidacy and 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 slate. 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.

Slates 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 slate.

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 slate 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 slates; for this purpose the votes obtained by the slates 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 slates, according to the order in which they are listed, respectively. The quotients attributed to the candidates of the various slates 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 slate that has not yet elected a Director or that has elected the fewest Directors is elected.

If none of these slates has yet elected a Director or if all the slates have all elected the same number of Directors, then the candidate who obtained the highest number of votes within these slates is elected. In the case of parity votes on a given slate 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 the application of the voting slate 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 slate and who received the highest number of votes, will be replaced by the unelected independent candidate from the same slate, in accordance with the progressive order of presentation and so on, slate by slate, 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 Company Bylaws envisage that the slates to elect the Board of Directors which include a number of candidates equal to or greater than three shall include a number of candidates of the gender less represented that corresponds to at least the minimum number required by the applicable legislation and/or regulations, in compliance with the requirements specified in the Notice of Call of the Shareholders’ Meeting in order to take into account the changes introduced by Law No. 120 dated July 12, 2011 concerning gender quotas in relation to the composition of company bodies of listed companies, and therefore, with the aim of assuring a balance between genders. In this regard, it is important to note that Pirelli will be called, inter alia, to appoint the Company’s “new” administrative body, effective from the Shareholders’ Meeting to approve the Financial Statements for 2013, and that on this occasion at least one fifth of the Directors must be reserved to the gender that is less represented, since this is the first renewal after the cited law became effective.

The Company Bylaws establish an automatic progressive substitution mechanism in order to assure compliance with the balance between genders, if the application of the voting slate mechanism does not assure the required minimum number of Directors from the gender less represented.

Furthermore, the balance between genders within the Board of Directors must be complied with, in any event, when the Shareholders’ Meeting or the Board of Directors (in the case of co-option) must appoint Directors without following the voting slate procedure.

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 in possession of the legal requirements for independence remain in office, as envisaged by the applicable laws and regulations. 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 slates presented (iii) establishing the term of office of the Board of Directors and (iv) establishing the fee due to the Directors.

The reader is referred to the Company Bylaws available on the Pirelli Internet website, as well as the documentation that will be made available at least 40 days prior to the Shareholders’ Meeting to approve the 2013 Financial Statements for further information regarding the mechanisms to elect members of the Board of Directors.

5 Article 10 of the Company Bylaws.
6 Refer to Consob Resolution No. 18775 dated January 29, 2014 that established that the percentage shareholding required for shareholders to present lists of candidates to elect the administration and control bodies of Pirelli & C. for the 2014 financial year corresponds to 1% of the share capital with voting rights in the ordinary shareholders’ meeting.