Compliance

Compliance management activities are performed by the Group Compliance Function, a unit of the Corporate Affairs and Compliance Department, through crossdisciplinary interaction with all corporate functions to guarantee that internal regulations, process and corporate activities are always consistent with the applicable statutory and regulatory framework. The Compliance Function discharges its duties by actively participating in the identification of risks of compliance violation with the internal and external regulations that might result in legal and administrative penalties and consequent harm to the Company’s reputation. During 2013, revision of the Legislative Decree 231 Compliance Programmes adopted by Group companies continued, resulting in the updates and modifications deemed necessary in the light of the new “presumed offences” added to the list of offences given in Legislative Decree 231/2001. This includes the offence of “bribery between private parties”. Methodological support activities on Law 262/05 also continued for the “Corporate Financial Reporting Manager” and Group companies to guarantee that corporate activities are performed in compliance with Law 262/05.

The activity begun at the end of 2011 in connection with the anti-corruption programme was completed in 2013. The aim of this programme is to evaluate several areas deemed potentially at risk of bribery (intermediaries; relations with the Public Administration; business transactions for purchase or sale; gifts, trips and entertainment expenses; sponsorships and promotional activities; charitable activities; financing of parties or politicians; human resources; facilitation payments), in the 15 countries of material interest to the Group, the issue of business liability for corruption offences to determine specific safeguards, if appropriate.

On August 5, 2013 the Board of Directors of Pirelli & C. S.p.A. approved the anti-corruption programme, called the Premium Integrity Programme. This is the set of benchmark guidelines concerning prohibited practices of corruption. These represent a systematic set of principles and rules that have already been adopted at Pirelli, complemented by “new” and specific measures, to prevent or reduce the risk of corruption, while further reinforcing the anti-corruption policy of the Group. In Italy, this programme also complements the Legislative Decree 231 Compliance Programme.

The anti-corruption programme was agreed with the Internal Control and Corporate Governance Committee and then approved directly by the Company Board of Directors. Formal notice thereof was given to all Group employees in their local language. The document has also been published on the Company website in 22 different languages for the benefit of all stakeholders.

The programme is fully consistent with the approach taken by the Company which, as set out in the Group Values and Ethical Code and Code of Conduct, has a clearly stated position of not tolerating “corruption in any guise or form, or in any jurisdiction, or even in places where such activity is admissible in practice, tolerated, or not challenged in the courts. “For this reason,” the Code continues, “addressees of the Code are prohibited from offering complimentary gifts or other benefits that could constitute a breach of rules, or are in conflict with the Code, or might, if brought to public notice, damage the Pirelli Group or just its reputation.” The Code also states that Pirelli “defends and protects its corporate assets, and shall procure the means for preventing acts of embezzlement, theft, and fraud against the Group”; and that it “condemns the pursuit of personal interest and/or that of third parties to the detriment of social interests.”

Premium Integrity has been developed out in the following steps:

  • Mapping of National and International Regulatory Framework applicable to corporate liability for acts of corruption;
  • Risk Profile Analysis on the basis of two scenarios:
    • perceived risk stemming from combination of the level of perceived corruption (associated with the Corruption Perception Index 2011 benchmark calculated by Transparency International) with management’s perception of the level of risk in each country;
    • adequacy of safeguards against vulnerability derived from combination of the guaranteed protection in areas deemed to be exposed to contingent corruption risks associated with the benchmark provided by the Internal Audit Function on the Internal Control System.

The risk profile analysis made it possible to rank the vulnerability risks of analysed countries in ascending order, as illustrated in the following figure.

Pirelli monitors the risk of corruption, and if appropriate updates its risk analysis if its scope changes following “the admission” of “high-risk” countries (as defined in the Transparency International index), and defining education and awareness programs as appropriate.

CORRUPTION RISK PROFILE ANALYSIS

CORRUPTION RISK PROFILE ANALYSIS

In 2013 training and communication of the administrative liability of companies continued, pursuant to Legislative Decree 231/2001. This activity has been substantially completed and affected 98% of 1,649 employees at 12 Italian companies. A project to implement a Segregation of Duties (“SoD”) program was launched in 2013, aimed at further reinforcing the internal control system and preventing fraud.

In regard to the contributions made in favour of the External Community, for years Pirelli has adopted an internal procedure to regulate the distribution of gifts, contributions and payments to the External Community by Group companies and in regard to the roles and responsibilities of the functions involved, the operating process of planning, realisation and monitoring of the initiatives and disclosures related to these projects. A key contribution to the initiatives satisfying local requirements is given by the dialogue with the locally operating NGOs. Priority is given to the initiatives whose positive effects on the External Community are tangible and measurable according to objective criteria.

The internal procedure also specifies that no initiatives may be taken in favour of beneficiaries for whom there is direct or indirect evidence of violation of human rights, worker rights, environmental protection or business ethics.

As envisaged in the “Pirelli Values and Ethical Code”, the Pirelli Group, “does not provide contributions, advantages, or other benefits to political parties or trade union organizations, or to their representatives or candidates, this without prejudice to its compliance with any relevant legislation.”

In regard to sponsorship activities, in 2013 Pirelli updated its own operating procedure regulating the conception, planning, approval, management and control process of sponsorship activities by defining the roles and responsibilities of the functions involved, while guaranteeing the functional segregation of the activities.

The projects to be sponsored must always satisfy specific Guidelines in order to be approved by the Brand and Advertising Committee. The responsible function may grant formal and traced authorisation of the sponsorship only upon complete and total compliance with the Guidelines and necessary requirements.

The Guidelines define the following as prerequisites for obtaining approval of sponsorship projects:

  • synergy with Group strategy and consistency with brand strategies and corporate communication;
  • high visibility and impact of sponsored project;
  • measurable return in terms of business or measured on the basis of media equivalent measurement standards for brand and communication projects;
  • morality, fairness and integrity of the sponsored party, the parties controlled by, controlling or otherwise related to the sponsored party;
  • expected use of Pirelli brands in accordance with Group policy.

As in the case of the procedure that governs charitable donations, the rules governing sponsorships specifies that no initiatives may be taken in favour of political parties, labour unions or their representatives or candidates, or in favour of beneficiaries for whom there is direct or indirect evidence of violation of human or worker rights, environmental protection, or business ethics.

Finally, the Pirelli Compliance Programme envisages two specific internal control systems concerning sponsorships and charitable donations, respectively based on the definition of criteria for:

  • identification of the sponsorship projects and adequate contractual organisation;
  • identification of the initiatives and adequate assessment of how the donations or payments are used or the outcome of the initiatives.

For control and prevention purposes, all internal audits are also designed to monitor the risk of criminal offences, including corruption and fraud risk.

Once again, in 2013 there was no case of corruption or any public prosecution involving corrupt practises.

Finally, in 2013 support of the activities of Transparency International continued to be provided. Pirelli has joined this organisation as a supporter of educational projects, aimed at promoting the active role of civic and moral education in strengthening civil society against crime and corruption, holding that only proactive and concrete measures to promote values can lead to general improvement in the quality of life.