The Shareholders’ Meeting held on May 10, 2012 appointed the Board of Statutory Auditors for the 2012- 2014 financial years, by appointing Francesco Fallacara (appointed Chairman since drawn from the slate presented by the minorities): Antonella Carù and Enrico Laghi as Statutory Auditors and by appointing Umile Sebastiano Iacovino and Andrea Lorenzatti (drawn from the minority slate) as Alternate Auditors.
The appointment was based on the voting slate system. The slate presented by the members of the Pirelli & C. Shareholders’ Agreement (“Sindacato di Blocco Azioni Pirelli & C.”) obtained about 78% of the votes of the share capital with voting rights represented in the Shareholders’ Meeting, while the minority slate presented by a group of asset management companies and financial intermediaries59 obtained approximately 22% of the votes of the share capital with voting rights represented in the Shareholders’ Meeting.
The Shareholders’ Meeting also established the annual gross fee to be paid to each Statutory Auditor at euro 50,000 and the annual gross fee to be paid to the Chairman of the Board of Statutory Auditors at euro 75,000.
Furthermore, the Statutory Auditor invited to take part in the Supervisory Body, pursuant to Legislative Decree No. 231/2001 (Antonella Carù) is to be paid an additional annual gross fee of euro 25,000.
Table No. 5 illustrates the composition of the Board of Statutory Auditors at the Date of the Report.
The slate of positions held by Statutory Auditors in joint-stock companies, limited liability companies and companies with unlimited responsibility is published by Consob on its Internet website.
It is important to note that, at the Date of the Report, no Statutory Auditor in office notified that he had exceeded the aggregate number of positions of administration and control envisaged under Article 144-terdecies of the Issuers’ Regulations.
All the Statutory Auditors can be qualified as independent on the basis of the criteria envisaged by the same Self-Regulatory Code referred to Directors, in line with the provisions contained in the Self-Regulatory Code60 and as expressly ascertainment by the Board of Statutory Auditors, based on the information provided by the Statutory Auditors and the information available to the Board of Statutory Auditors, as well as in relation to Consob Communication No. 8067632 dated July 17, 200861.
The Procedure for Transactions with Related Parties qualifies Statutory Auditors as parties related to the Company, in compliance with the regulatory provisions.
Accordingly, if the Statutory Auditor has an interest in a given Company transaction, the cited procedure shall apply, as described in greater detail in the preceding section “Directors’ interests and transactions with related parties”. It follows that the Board of Directors receives adequate information concerning the nature of the relationship and how the transaction is to be executed, in line with the provisions set out in the Self-Regulatory Code62.
Activities of the Board of Statutory Auditors
The Board of Statutory Auditors held 8 meetings during the financial year and the percentage attendance of the Auditors was 100%. The reader is referred to table 5 for a detailed representation of the attendance of the individual members of the Board of Statutory Auditors in the meetings held during the 2013 financial year. Moreover, it is important to note that besides attending the Shareholders’ Meetings and the meetings of the Board of Directors, the members of the Board of Statutory Auditors also attended the meetings held during the financial year by the CICRCG and the Remuneration Committee, a circumstance that characterises the rules of corporate governance adopted by the Company and offers the entire Board the possibility of overseeing directly the activities of the Committees and to perform the control functions assigned to it more effectively.
The Chairman of the Board of Statutory Auditors also attended the meetings of the Appointments and Succession Committee and of the Strategies Committee.
During the 2013 financial year, the Board of Statutory Auditors monitored compliance with the law and the Company Bylaws, compliance with the principles of sound administration and the adequacy of the Company’s organisational structure, the internal control system and the administrative and accounting system, as well as the dependability of the latter to represent correctly the operating events.
The Board also monitored the correct implementation of the corporate governance rules envisaged by the codes of conduct prepared by the companies that manage the regulated markets or by trade associations, which the company declares it abides by and the adequacy of the instructions the Company issues to the subsidiaries in relation to the obligations to disclose price sensitive information63.
The Board of Statutory Auditors reported on the activities performed to the Shareholders’ Meeting held in May 2013 and expressed its opinion on the aspects within its area of jurisdiction concerning the Directors’ proposal regarding the allocation of profits and the size of the dividend to be distributed.
The Board of Statutory Auditors monitored64 the independence of the auditing company checking compliance with the provisions applicable to this aspect and the nature and extent of the services other than auditing the accounts which are rendered to Pirelli & C. and to its subsidiaries by the same auditing company and by other companies in the same network as the auditing company.
Moreover, the Board of Statutory Auditors, in addition to having verified the correct application of the evaluation criteria and procedures adopted by the Board of Directors to assess the independence of its members, monitored compliance with the TRP Procedure adopted by Pirelli (also considering the amendments introduced during the 2013 financial year), with the principles indicated in the TRP Regulations, as well as the Company’s compliance with such TRP Regulations.
The Board of Statutory Auditors65 coordinated its activities with the Internal Audit Department, and as has been stated, the respective members attended all the meetings of the CICRCG. The Board held periodic meetings with the representatives of the Auditing Company, pursuant to Article 150, paragraph 3 of Legislative Decree No. 58/1998 which did not reveal significant data and information worthy of being reported.
Moreover, the Board of Statutory Auditors expressed opinions during the financial year, pursuant to Article 2386 and Article 2389 of the Italian Civil Code.
With regard to the surveillance activity to monitor the effectiveness of the internal control systems, as stated previously, the Board of Statutory Auditors has the tools required for the new duties through its attendance in the meetings of the Committee for Internal Control, in particular, considering that the Board has received: (i) reports from the Internal Audit Management, at least every quarter; (ii) the audit plan once a year; (iii) the risk assessment and risk management plan once a year.
Lastly, the Board of Statutory Auditors examined in advance the results of the impairment test procedure which Pirelli decided to implement in compliance with the provisions of international accounting standard IAS 36.
59 Anima SGR S.p.A., manager of the Prima Geo Italia and Anima Italia funds; APG Algemene Pensioen Groep N.V. manager of the Strichting Depositary APG Developed Markets Equity Pool fund; Arca SGR S.p.A. manager of the Arca Azioni Italia and Arca BB funds; AZ Fund Management S.A. manager of the AZ Fund 1 Italian Trend fund; Credit Suisse Fund Management SA manager of the Credit Suisse Portfolio Fund (LUX) Reddito (Euro) and CS Equity Fund (LUX) Italy funds; Eurizon Capital SGR S.p.A. manager of the Eurizon Azioni Italia fund; Eurizon Capital SA manager of the following funds: Eurizon Stars Fund European Small Cap Equity, Eurizon Eurizon Stars Fund – Italian Equity, Eurizon Easy Fund Equity Consumer Discretionary LTE, Eurizon Easy Fund Equity Small Cap Europe; Fideuram Investimenti SGR S.p.A. Manager of the Fideuram Italia fund; Fideuram Gestions SA manager of the following funds: Fonditalia Equity Italy, Fonditalia Euro Cyclical, Fideuram Fund Equity Italy, Fideuram Fund Equity Europe Growth and Fideuram Fund Equity Europe; Interfund Sicav manager of the Interfund Equity Italy funds; JP Morgan Asset Management (UK) Limited manager of the following funds: JPMorgan Funds, Commingled Pension Trust Fund (International Equity Index) of JPMorgan Chase Bank N.A., Commingled Pension Trust Fund (Intrepid International) of JP Morgan Chase Bank N.A., JP Morgan European Investment Trust Plc, JP Morgan Fund Icvc-JPM Europe Dynamic (formerly UK) Fund, JPM Fund Icvc – JPM Europe Fund, JP Morgan International Equity Index Fund, JP Morgan Intrepid European Fund and JP Morgan Intrepid International Fund; Mediolanum International Funds Limited – Challenge Funds; Mediolanum Gestione Fondi SGR S.p.A. manager of the Mediolanum Flessibile Italia fund; Pioneer Investment Management SGR S.p.A. manager of the Pioneer Italia Azionario Crescita fund and Pioneer Asset Management S.A.
60 Self-Regulatory Code Application Criterion 10.C.1.
61 CONSOB Communication No. DEM/DCL/DSG/8067632 dated 17.07.2008 concerning “Situations of incompatibility of the members of control bodies, pursuant to Article 148, paragraph 3, sub-section c) of the Unified Finance Law (TUF)”.
62 Self-Regulatory Code Application Criterion 8.C.4.
63 Now referred to as “privileged information” (Article 114 of the Unified Finance Law (TUF)).
64 Also in line with the Self-Regulatory Code: Application Criterion 8.
65 Self-Regulatory Code Application Criteria 8.C.6. and 8.C.7.