Senior Managers and Executives

The remuneration of Senior Managers and Executives in general is composed of the following elements:

  • a gross annual fixed component (i.e. GAS);
  • 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 recognised by business practice (e.g. company car and, in the case of foreign assignments, contribution to housing costs and contribution to children’s school expenses).

Furthermore, the Executives and Senior Managers are entitled to:

  • 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 Pirelli Group considers the following criteria when determining the gross remuneration and individual components of remuneration of Senior Managers and Executives:

  • a. fixed component: (i) for Senior Managers, its weight is generally not more than 60% of the target-based annual total direct compensation, and (ii) for Executives, its weight is generally not more than 70% of the target-based annual total direct compensation;
  • b. a target-based MBO (annual) incentive generally representing no less than 40% of GAS for Senior Managers and no less than 20% for Executives.
  • c. The annualised, target-based variable mediumlong term component (LTI) accounts for no less than 50% of the aggregate variable component (target-based MBO and target-based LTI).

In regard to all Senior Managers, the impact of the various components of their compensation packages during the three-year period would be as follows if the annual targets envisaged by the MBO 2012, 2013 and 2014 and the targets set by the 2012-2014 LTI Plan were fulfilled:

  • fixed component: 47%;
  • total variable component: 53% of which:
    • annual (MBO) 15% 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: 32%;
  • total variable component: 68% of which:
    • variable component based on annual results (MBO) equal to 21% of the annual total direct compensation (equal to about 31% of the total variable component);
    • variable long-term component (co-investment LTI Bonus and pure LTI Bonus) equal to 47% of the annual total direct compensation (equal to about 69% of the total variable component).

In regard to all Executives, the impact of the various components of their compensation packages during the three-year period would be as follows if the annual targets envisaged by the MBO 2012, 2013 and 2014 and the targets set by the 2012-2014 LTI Plan were fulfilled:

  • fixed component: 68%;
  • total variable component: 32% of which:
    • annual (MBO) 12% of the annual total direct compensation (equal to about 38% of the total variable component);
    • medium-long term (co-investment LTI Bonus and pure LTI Bonus) 20% of the annual total direct compensation (equal to about 62% 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: 52%;
  • total variable component: 48% of which:
    • cvariable component based on annual results (MBO) equal to 18% 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 30% of the annual total direct compensation (equal to about 62% of the total variable component).

The Group may grant one-off bonuses according to operating requirements or the achievement of specific, extraordinary targets. It may also offer them share-based incentives or stock options in schemes that might be adopted by the Group. In regard to this last-mentioned possibility, the Company does not have any share-based incentive programmes in place at the date of this Report.

The remuneration of Executives and Senior Managers is also analysed with the assistance of independent firms specialising in executive compensation. Inter alia, this analysis considers the position held by the individual manager and the country where he or she is assigned.

N.B.: In accordance with best practices and as proposed by the Internal Control, Risks and Corporate Governance Committee, the Board of Directors envisages that the fixed component have a greater weight than the variable component for the Compliance Officer. However, the Compliance Officer (and, generally speaking, the managers of the Internal Audit function) are not included in the LIT Incentive Plan, but benefit only from the annual incentive plan linked to largely to qualitative objectives subject to review by the Internal Control, Risks and Corporate Governance Committee and the Board of Directors, on proposal by the Director assigned to supervise the internal control system.