Remuneration Committee

Composition

The Corporate Governance system adopted by Pirelli & C. since 2000 envisages the establishment of a Remuneration Committee.

The Committee has four members, all of whom are independent, on the basis of the most rigorous approach recommended by the “new” Corporate Governance Code issued by Borsa Italiana in December 2011. The 2006 version of the Corporate Governance Code recommended that the Remuneration Committee be composed only of directors without executive authority, and of whom “only” the majority were to be independent.

The Remuneration Committee is appointed by the Board of Directors (which also appoints its Chairman), and its term lasts as long as the term of the Board of Directors.

The Remuneration Committee, all of whose members were appointed after appointment of the new Board of Directors on April 21, 2011, is composed of the following individuals:

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

Three members of the Committee (Carlo Acutis, Anna Maria Artoni and Pietro Guindani) have adequate experience in financial and remuneration matters, as determined by the Board of Directors when they were appointed.

The entire Board of Statutory Auditors may participate in the activities of the Remuneration Committee.

The Secretary of the Board of Directors acts as Secretary of the Remuneration Committee.

Duties of the Remuneration Comite

The Remuneration Committee has advisory, policy making and supervisory functions to assure definition and application within the Group of remuneration policies aimed, on the one hand, at attracting, motivating and retaining resources having the professional skills necessary to profitably pursue Group objectives and, on the other hand, aligning Management and shareholder interests.

In particular, the Remuneration Committee:

  • assists the Board of Directors in defining the General Remuneration Policy of the Group and its Application Criteria;
  • periodically assesses the adequacy, overall consistency and concrete application of the General Remuneration Policy and Application Criteria;
  • makes proposals to the Board of Directors in regard to Directors holding special offices, the General Managers and the Key Managers and concerning:
    • their remuneration, consistently with the General Remuneration Policy and Application Criteria;
    • establishment of performance targets related to the variable component of their remuneration;
    • the definition of any not-to-compete clauses;
    • definition of any agreements for termination of the relationship, including on the basis of the principles set out in the General Remuneration Policy and the Application Criteria;
  • assists the Board of Directors in examining proposals by the Shareholders’ Meeting on adoption of sharebased compensation plans;
  • monitors application of the decisions taken by the Board of Directors, verifying in particular the effective achievement of established performance targets;
  • examines and submits the Annual Remuneration Report to the Board of Directors; referring to the individual members of the Board of Directors, the Board of Statutory Auditors, the General Managers and the Key Managers, this Report:
    • adequately presents each item that composes remuneration;
    • analytically illustrates the compensation paid during the reference year for any reason and in any form by the Company and by its subsidiaries.

The Board of Directors then delegates the responsibilities of the Committee for Related Party Transactions established by Consob regulations to the Internal Control, Risks and Corporate Governance Committee, with the sole exception of issues concerning the remuneration of Directors and Manager with strategic responsibilities delegated to the Remuneration Committee.

Functioning

The Remuneration Committee meets whenever its Chairman deems appropriate, or on request by at least one of its members, the Chairman of the Board of Directors or, if designated, by the Chief Executive Officer and, in any event, as frequently as necessary for properly performing its duties.

The Remuneration Committee meetings are attended by the entire Board of Statutory Auditors2 and – if deemed appropriate and on invitation by the Remuneration Committee – other representatives of the Company and/or the Group as well as the Independent Auditor. The Group General Counsel and Senior Advisor for Human Resources also attend all meetings.

In accordance with the recommendations of the Corporate Governance Code and best practices, the Directors holding special offices do not attend Remuneration Committee meetings.

The Remuneration Committee meetings are called with notices sent by, inter alia, the Secretary, as delegated by the Chairman of the Remuneration Committee.

The available documentation and information (or, at any rate, those that are necessary) are sent to all members of the Remuneration Committee sufficiently in advance of the meeting for them to express their opinions.

A majority of current members must be present for the Remuneration Committee meeting to have a quorum, and its decisions are approved by an absolute majority of the members who are present. Remuneration Committee meetings may be held by means of telecommunication systems and are regularly recorded in minutes by the Secretary and transcribed in the specific register of minutes.

The Remuneration Committee – which may avail itself of external consultants for performing its functions – possesses adequate financial resources for discharging its duties and has absolutely independent spending authority.

The Remuneration Committee may access material corporate information and functions to discharge its duties, availing itself of the Secretary’s assistance for this purpose.

For a more detailed description of the activities performed in 2011 by the Remuneration Committee, please refer to the Report on Corporate Governance and Structure of Share Ownership for 2011.

1 This circumstances characterises the corporate governance rules adopted by the Company and offers the entire Board of Statutory Auditors the possibility of directly monitoring Committee activities and performing its delegated supervisory functions more effectively.