Board Committees

The Audit, Risks and Corporate Governance Committee ("ARCGC"), which incorporates the functions of the “control and risks committee”, helps the Board of Directors to assess and make decisions relating to the internal control and risk management system, as well as the approval of periodic financial and non-financial reports.

• assists the Board of Directors with:
• defining guidelines for the internal control and risk management system, in keeping with the Company’s strategies;
• evaluating, at least once a year, the adequacy of the internal control and risk management system with respect to the characteristics of the business and the risk profile assumed, as well as its effectiveness;
• appointing and removing the head of the Internal Audit department, defining the remuneration of this figure in line with the company’s policies, ensuring that the same has adequate resources to perform its duties;
• approving, at least once a year, the work plan prepared by the head of the internal audit department, having consulted the supervisory body and the Chief Executive Officer, and by the head of the compliance department;
• assessing the adoption of measures aimed to ensure the effectiveness and impartiality of judgement of the other company departments involved in the controls, checking that they have adequate professionalism and resources;
• assessing, having consulted the Board of Statutory Auditors, the results presented by the external auditor in any letter of recommendations and in the additional report addressed to the Board of Statutory Auditors;
• describing, in the report on corporate governance, the main characteristics of the internal control and risk management system and the methods used to coordinate the various parties involved in said system, indicating the models and best national and international practices of reference, expressing its opinion on the overall adequacy of the same;
• assessing, having consulted the manager responsible for the preparation of the corporate financial documents as well as the firm appointed to undertake the external audit of the accounts and the Board of Statutory Auditors, the proper and consistent application of the accounting standards within the Group when preparing the consolidated financial statements;
• assessing the suitability of the periodic, financial and non-financial information, correctly representing the business model, the Company's strategies, the impact of its activities and the performances achieved in coordination with the Strategies Committee;
• examining the content of the periodic non-financial information relevant for the internal control and risk management system;
• expressing opinions on specific aspects concerning identification of the main company risks and supporting the assessments and decisions of the Board of Directors on the management of risks deriving from adverse facts that have come to the attention of the Committee;
• examining the periodic reports prepared by the internal audit manager and the manager of the compliance function;
• monitoring the autonomy, adequacy, effectiveness and efficiency of the internal audit function;
• requesting that the internal audit department, if deemed appropriate, perform checks in specific operational areas, notifying the Chairman of the Board of Statutory Auditors at the same time;
• reporting to the Board of Directors on the work performed and on the adequacy of the internal control and risk management system, at least at the time of approving the financial statements and the half-year report;
• monitoring compliance with and the periodic update of the corporate governance rules, as well as compliance with any codes of conduct adopted by the Company and its subsidiaries; it is in charge of proposing methods and times for carrying out the annual self-assessment of the Board of Directors;
• defines the optimum composition of the Board of Directors and its Committees, providing opinions for the Board of Directors on the size and composition of the Board, and makes recommendations about the professional roles whose presence on the Board is deemed appropriate.

The Related-Party Transactions Committee (RPT Committee) advises and makes recommendations to the Board of Directors on related-party transactions in accordance with Consob regulations and the RPT Procedure.

The Committee has support functions to ensure the definition and application within the Group of remuneration policies that, on the one hand, pursue the sustainable success of the Company/Group in aligning the interests of management with those of the shareholders and, on the other hand at having, retaining and motivating human resources with the expertise and professional standing required by the role held in the Company.

• assists the Board of Directors with preparing the Group Remuneration Policy, assessing its overall consistency;
• with regard to the executive directors, other directors holding specific offices and General Managers, it expresses opinions to the Board:
  • about their remuneration, in compliance with the Remuneration Policy;
  • about setting performance objectives linked to the variable element of that remuneration;
  • about the definition of any no-competition agreements;
  • about the definition of any agreements for the termination of working relationships, on the basis of the principles established in the Remuneration Policy;
• monitors the correct application of the Remuneration Policy and checks the actual achievement of the performance objectives;
• checks the conformity of the remuneration of the executive directors, other directors holding specific offices, general managers and key managers with the Remuneration Policy and expresses an opinion on this, where required by the relative procedure adopted within the company, also in accordance with the Related Party Transaction Procedure;
• helps the Board of Directors to examine proposals to the Shareholders’ Meeting for the adoption of compensation plans based on financial instruments;
• monitors application of the decisions adopted by the Board of Directors, checking in particular the effective achievement of the established performance objectives;
• examines and submits to the Board of Directors the Remuneration Report;
• in any case, provides opinions in relation to transactions with related parties on matters concerning the remuneration of executive directors, including Directors holding specific offices, General Managers and key managers within the limits and according to the criteria allowed by the procedure on transactions with related parties adopted by the Company ("RPT Procedure");
• assesses whether there are exceptional circumstances that allow for a derogation from the Remuneration Policy.

The Appointments and Succession Committee has support functions to the Board of Directors on appointments and succession matters, in particular:

• assists the Board of Directors in identifying candidates for the office of director in the event of co-optation;
• prepares opinions for the Board of Directors on the adoption and/or amendment by the Board of its orientation towards the number of appointments considered compatible with the effective performance of the role of director.

The Committee supports the Board of Directors in examining the Significant Matters and in particular in examining:

• business plans and annual budget;
• Industrial partnerships and strategic joint venture of Pirelli and its subsidiaries.

The Sustainability Committee supports the Board of Directors in the analysis of sustainability issues related to business operations, corporate social responsibility and the analysis of issues relevant to the creation of long-term value.

Advisory Committees are appointed by the Board of Directors (which also appoints their Chairman) and remain in office for the entire duration of the mandate granted by the Board of Directors.

Each Committee meets whenever deemed appropriate by its Chairman, or when requested by at least one member, by the Chairman of the Board of Directors or, if appointed, by the Vice Chairman, the Chief Executive Officer and, in any case, with the frequency necessary in order to carry out its functions properly.

The Secretary of each Committee is the Secretary to the Board.

Each Committee meetings are called by a notice sent, by the Secretary or otherwise, at the request of the Committee Chairman.

The documentation and information available (and, in all cases, the necessary information) are sent to all the members of each Committee, in several languages taking into account the nationalities of the members, and in good time (usually 10 days before the meeting) so that they can contribute to the meeting.

Each Committee meetings are quorate when attended by the majority of appointed members and resolutions are adopted by the majority of those present.

For each Committee meeting participants shall have access to a simultaneous translation of the interventions in the languages commonly used by the members of the Committees.

With regard to the meetings of the Appointments and Succession Committee , in the event of a tie, the vote of the Executive Vice Chairman prevails.

Each Committee meetings may be held by conference call; their minutes are taken by the Secretary and recorded in the related minute book.

Each Committee - which may make use of external advisers in carrying out its functions - is given adequate financial resources to perform its tasks with absolute spending autonomy.

Each Committee is entitled to access relevant business information and functions in the performance of its tasks, with support from the Secretary to the Board of Directors for this purpose.

The entire Board of Statutory Auditors is entitled to participate in the activities of the Audit, Risks and Corporate Governance Committee, the Remuneration Committee and the RPT Committee.

One member of the Board of Statutory Auditors is invited to attend the meetings of the Appointments and Succession Committee, the Strategies Committee and the Sustainability Committee, (usually the Chairman).