The Pirelli Corporate Governance system is based on: the central role played by the Board of Directors, in its capacity as the supreme body in charge of strategic policy and overall company management, with authority to set general management policy and to take direct action on a series of significant decisions that are necessary or useful to pursuing the corporate purpose:
- the central role played by the Board of Directors, in its capacity as the supreme body in charge of strategic policy and overall company management, with authority to set general management policy and to take direct action on a series of significant decisions that are necessary or useful to pursuing the corporate purpose;
- the central role of independent directors who account for the large number of the members of the Board of Directors;
- an effective internal control system;
- an innovative and proactive risk management system;
- a remuneration system, in general, and an incentive system, in particular, of managers tied to medium and long-term economic goals, by creating a strong link between remuneration, on the one hand, and individual and Pirelli performance, on the other;
- a rigorous set of rules governing potential conflicts of interest and a robust code of conduct for executing related party transactions.
For the fourth year in a row, Pirelli was recognised as having the “Best Corporate Governance in Italy” by the World Finance Corporate Governance Award.
Pirelli & C. has adhered to the Corporate Governance Code of listed companies ever since it was first published by Borsa Italiana (in October 1999; Pirelli subsequently adopted the new July 2002 version, and then the March 2006 version). At the Board of Directors meeting held on March 12, 2012, Pirelli declared its acceptance of the new Corporate Governance Code (December 2011) published on the Borsa Italiana website. In accordance with the provisions of the traditional management and control model, management of the Company is delegated to the Board of Directors, which plays a key role in its strategic guidance, and in supervision of the overall business activity, with authority to set policy for overall management and to act directly in a series of significant decisions that are necessary or useful to pursue the corporate purpose.
The Board of Directors relies on the support of its own internal committees to perform its duties. These standing committees have investigative, policy making and/or consultative duties. The Board is also supported by managerial committees whose members are drawn from Group senior management to implement the directives and policies issued by the Board and delegated bodies, with which they collaborate on the definition of proposals to be made to the Board of Directors as a whole.
After its renewal on April 21, 2011, the current Board of Directors established four committees: the Internal Control, Risks and Corporate Governance Committee, the Remuneration Committee, the Nominations and Succession Committee and the Strategies Committee, designating their members and the Chairman of each one. At the first meeting that can be held after the committee meetings, the Chairmen of these committees report to the Board of Directors on the activities that they perform, possibly submitting proposals for resolutions. Moreover, at least once every six months, the Internal Control, Risks and Corporate Governance Committee and the Remuneration Committee send a report to the Board of Directors on the activities performed during the six-month period (see the functions of the committees as illustrated in the Corporate Governance Report).
Since 2004 the “slate voting” system assures noncontrolling interests the right to designate one fifth of all Directors, if at least two slates of nominees are submitted. At December 31, 2013 the Pirelli Board of Directors had 20 Directors, who were elected by the Shareholders’ Meeting on April 21, 2011. Noncontrolling interests were able to designate four directors, or one fifth of the total number.
After it was renewed, the Board of Directors elected Mr Marco Tronchetti Provera as Chairman and Chief Executive Officer. Since 2006, a large number of of seats on the Board of Directors has been held by independent directors.
Since November 2005, in view of further reinforcing the role of independent directors, the Board of Directors decided to introduce the position of Lead Independent Director as the contact person for coordination of motions and contributions made by the independent directors. During 2013 members of senior management attended the Board of Directors and Board committee meetings. Their participation aims at providing the Directors with detailed information about financial, social and environmental issues, among others. In particular, aside from the detailed analysis of the period results, when the Board of Directors approved the Sustainability Report 2012 (which is an integral part of the Annual Financial Report), it also verified the integration of the financial choices made by Pirelli with those adopted in the social and environmental areas.
Moreover, consistently with the the recommendations made by the Corporate Governance Code of Borsa Italiana and consolidated Company practice, in view of improving the knowledge of Company affairs and dynamics by all Directors and Statutory Auditors, several working lunches were also held in 2013 to examine specific business and corporate governance issues in closer detail. Since 2004 the Pirelli by-laws have required that the Board of Directors be elected by using the slate voting system. To comply with the modifications introduced by Law 120 of July 12, 2011 in regard to gender quotas for the composition of listed companies and, therefore, to assure gender balance, the by-laws require that the slates submitted for election of the Board of Directors which contain three or more candidates must include a number of candidates of the least represented gender that is at least equal to the minimum number required by current law and/ or regulations, as specified in the notice of call for the Shareholders’ Meeting. For more information about the mechanisms established to guarantee gender balance on the Board of Directors, reference is made to the Company By-laws available on the Pirelli website, Governance section. When the shareholders prepared the slates for election of the Board of Directors, they considered the individual candidates’ experience in handling economic, social and environmental issues.
This was stemmed partly from the fact that the Corporate Governance Code of Borsa Italiana requires that at least one member of the Internal Control, Risks and Corporate Governance Committee and the Remuneration Committee have adequate experience have adequate experience in accounting, finance or risk management and in finance or remuneration policies.
In the Directors’ Report to the Shareholders’ Meeting for renewal of the Board of Directors, the Board of Directors recommended that shareholders consider the slate preparation recommendations of the Corporate Governance Code when they submit their slates.
Similar attention was also dedicated by the Board of Directors when they co-opted directors when Board seats were vacated.
In regard to “conflicts of interest”, the Director must notify the Board of each interest (even if not in conflict) that he has on his own behalf or on behalf of third parties in a specific transaction of the Company, by specifying its nature, terms, origin and scope. If this involves the Chief Executive Officer, he must abstain from executing the transaction, deferring the decision to the Board of Directors.In these cases, the Board of Directors must adequately justify the reasons and advantages of the transaction for the Company.
It is also noted that:
- in the Annual Report on Corporate Governance and the Structure of Share Ownership 2013 prepared by the Board of Directors pursuant to Art. 123-bis of the Consolidated Law on Finance (“TUF”, available on the Pirelli website, Governance section), information is provided about the principal positions held by the Directors in other companies not belonging to the Pirelli Group.. Moreover, the Board of Directors has also adopted a specific policy consistent with the recommendations of the Corporate Governance Code that limit the number of positions that each Director may hold in other companies;
- in the Annual Report on Corporate Governance and the Structure of Share Ownership 2013 prepared by the Board of Directors pursuant to Art. 123-bis of the Consolidated Law on Finance information is provided about the principal positions held by the Directors in other companies not belonging to the Pirelli Group, with those positions being construed as holdings that exceed 2% of the Pirelli share capital. Moreover, the Investors section on the Pirelli website provides a detailed view of the ownership structure;
- no shareholder presently exercises control or dominant influence over the Company pursuant to Art. 2359 Italian Civil Code;
- in the Annual Financial Report, the Half-yearly Financial Report, the quarterly reports and the Annual Report on Corporate Governance and the Structure of Share Ownership the relationships between Pirelli and its related parties is documented.
For more information on the experience of the individual Directors in regard to economic, social and environmental matters, reference is made to their curricula vitae, which are available on the Pirelli website, Governance section.
The Board of Directors approves the Sustainability Report, as well as the sustainability strategies and plans that are presented to the market together with the Group Industrial Plan.
The Sustainability Report is approved on a voluntary basis, since for the Company this is presently not mandated by any statutory or regulatory obligations.
In regard to risks and opportunities, including environmental, social and governance (ESG) strategic and governance risks, the Board of Directors of the parent company Pirelli & C. examines and approves the Annual Risk Assessment by periodically monitoring its implementation.
For more details on the Corporate Governance System, please refer to the “Annual Report on Governance and Share Ownership” – Volume 2 of the Annual Financial Report at December 31, 2013.