General Managers and Key Managers

At December 31, 2011, Pirelli & C. had a General Manager (Mr Francesco Gori) and three Key Managers (Mr Francesco Chiappetta; Mr Francesco Tanzi; Mr Maurizio Sala).

The remuneration of the General Managers and Key Managers is composed of the following elements:

  • a gross annual fixed component;
  • an annual variable component that is based on the achievement of pre-set business objectives (i.e. MBO), part of which (50%) is deferred; of this part, half is not subject to fulfilment of the LTI Plan targets (deferred MBO), the other part is instead subject to them (co-investment LTI);
  • a variable medium-long term component (i.e. LTI).
  • benefits typically granted to Pirelli Executives.

Furthermore, the following is envisaged for the General Managers and Key Managers (analogously to what is provided for Senior Managers and Executives):

  • supplemental retirement plans that obligate the employer company to pay an amount equal to 4% of the gross annual remuneration received to a pension fund, up to a maximum gross amount of euro 150 thousand;
  • Supplemental health and life insurance in addition to what is prescribed by the National Collective Bargaining Agreement for Companies that Produce Goods and Services.

The fixed component for General Managers and Executives with strategic responsibilities is determined when they are hired and periodically revised according to their performance, as resolved by the Board of Directors on proposal by the Remuneration Committee.

When determining the remuneration of its individual members, the Board of Directors considers the following criteria:

  • the fixed component represents no more than 50% of the target-based annual total direct compensation;
  • the annual MBO incentive for General Managers is a pre-set, weighted, target-based percentage of the GAS in an amount of no less than 90% of that compensation and, for Key Managers, no less than 40% of their gross annual remuneration. A cap is set on the annual MBO that can be received, and once again is a pre-set percentage of GAS. This is 200% in the case of the General Manager and 150% in the case of Key Managers.
  • The annualised, target-based variable medium-long term component (LTI) accounts for no less than 50% of the aggregate variable component (target-based MBO and target-based LTI). The “pure LTI Bonus” is also subject to a cap, in the amount of 1.5 times the target-based bonus.

The fixed component payable to the General Manager currently totals euro 1.25 million gross (including the compensation received as Chief Executive Officer of Pirelli Tyre S.p.A.) in addition to payment of the annual instalment under the not-to-compete clause owed to him, in the amount of euro 200,000 in 2012.

In regard to the impact of the various components of the General Manager’s compensation package, if the annual targets envisaged by the MBO 2012, 2013 and 2014 and the targets set by the 2012-2014 LTI Plan were fulfilled, the structure of the target-based annual total direct compensation during the three-year period would be as follows:

  • fixed component: 37%;
  • total variable component: 63% of which:
    • annual (MBO) 23% of the annual total direct compensation (equal to about 37% of the total variable component);
    • medium-long term (co-investment LTI Bonus and pure LTI Bonus) 40% of the annual total direct compensation (equal to about 63% of the total variable component).

If both the annual and three-year maximum targets are achieved, the structure of the annual total direct compensation during the three-year period would be as follows:

  • fixed component: 22%;
  • total variable component: 78% of which:
    • variable component based on annual results (MBO) equal to 30% of the annual total direct compensation (equal to about 38% of the total variable component);
    • variable long-term component (co-investment LTI Bonus and pure LTI Bonus) equal to 48% of the annual total direct compensation (equal to about 62% of the total variable component).

Key Managers:

1) For Mr Francesco Chiappetta: the fixed component is currently set in the aggregate gross amount of euro 800 thousand.

In regard to the impact of the various components of his compensation package, if the annual targets envisaged by the MBO 2012, 2013 and 2014 and the targets set by the 2012-2014 LTI Plan were fulfilled, the structure of the target-based annual total direct compensation during the three-year period would be as follows:

  • fixed component: 41%;
  • total variable component: 59% of which:
    • annual (MBO) 14% of the annual total direct compensation (equal to about 23% of the total variable component);
    • medium-long term (co-investment LTI Bonus and pure LTI Bonus) 46% of the annual total direct compensation (equal to about 77% of the total variable component).

If both the annual and three-year maximum targets are achieved, the structure of the annual total direct compensation during the three-year period would be as follows:

  • fixed component: 22%;
  • total variable component: 78% of which:
    • variable component based on annual results (MBO) equal to 27% of the annual total direct compensation (equal to about 34% of the total variable component);
    • variable long-term component (co-investment LTI Bonus and pure LTI Bonus) equal to 51% of the annual total direct compensation (equal to about 66% of the total variable component).

2) For Mr Francesco Tanzi: the fixed component is currently set in the aggregate gross amount of euro 500 thousand.

In regard to the impact of the various components of his compensation package, if the annual targets envisaged by the MBO 2012, 2013 and 2014 and the targets set by the 2012-2014 LTI Plan were fulfilled, the structure of the target-based annual total direct compensation during the three-year period would be as follows:

  • fixed component: 47%;
  • total variable component: 53% of which:
    • annual (MBO) 16% of the annual total direct compensation (equal to about 29% of the total variable component);
    • medium-long term (co-investment LTI Bonus and pure LTI Bonus) 38% of the annual total direct compensation (equal to about 71% of the total variable component).

If both the annual and three-year maximum targets are achieved, the structure of the annual total direct compensation during the three-year period would be as follows:

  • fixed component: 24%;
  • total variable component: 76% of which:
    • variable component based on annual results (MBO) equal to 30% of the annual total direct compensation (equal to about 40% of the total variable component);
    • variable long-term component (co-investment LTI Bonus and pure LTI Bonus) equal to 45% of the annual total direct compensation (equal to about 60% of the total variable component).

3) For Mr Maurizio Sala: the fixed component is currently set in the aggregate gross amount of euro 450 thousand.

In regard to the impact of the various components of his compensation package, if the annual targets envisaged by the MBO 2012, 2013 and 2014 and the targets set by the 2012-2014 LTI Plan were fulfilled, the structure of the target-based annual total direct compensation during the three-year period would be as follows:

  • fixed component: 47%;
  • total variable component: 53% of which:
    • annual (MBO) 16% of the annual total direct compensation (equal to about 29% of the total variable component);
    • medium-long term (co-investment LTI Bonus and pure LTI Bonus) 38% of the annual total direct compensation (equal to about 71% of the total variable component).

If both the annual and three-year maximum targets are achieved, the structure of the annual total direct compensation during the three-year period would be as follows:

  • fixed component: 24%;
  • total variable component: 76% of which:
    • variable component based on annual results (MBO) equal to 30% of the annual total direct compensation (equal to about 40% of the total variable component);
    • variable long-term component (co-investment LTI Bonus and pure LTI Bonus) equal to 45% of the annual total direct compensation (equal to about 60% of the total variable component).

Group policy does not allow awarding discretionary bonuses to the General Managers and Key Managers. On proposal by the Remuneration Committee, the Board of Directors may grant bonuses to these individuals in relation to specific transactions that are exceptional in terms of their strategic importance and impact on the results of the Company and/or the Group. The General Managers and Key Managers have not been granted bonuses of this type during the past three years.

The process for definition of the remuneration of General Managers is analogous to that illustrated for the Directors holding special offices.

In regard to the Key Managers, the Remuneration Committee assesses the consistency of their remuneration with the Policy.

The remuneration of General Managers and Key Managers is also analysed with the assistance of independent firms specialising in executive compensation. Definition of this remuneration is revised annually and published on occasion of the annual Remuneration Statement.

In particular, different parameters (sector, geography, dimensions, etc.) are used to define the annually updated panel of benchmark companies.

In March 2012 the same two panels used for the Chairman and Chief Executive Officer were used for the General Manager, while the benchmark market used in regard to Key Managers includes 222 companies in the following European countries: Belgium, France, Germany, Italy, Spain, Netherlands and the United Kingdom.