Board Committees

The system of Corporate Governance adopted by the Company foresees - since 2000 - the establishment, within the Board of Directors, of Board Committees with investigative, advisory and/or recommendation functions concerning particularly "sensitive" and economically, financially and strategically significant matters, in order to have both a discussion of opinions and a series of checks in order to ensure the Board takes conscious and effectively informed decisions.

Also taking into account of the recommendations of the Code of Conduct of the Italian Stock Exchange, to which Pirelli had resolved to adhere, the Board of Directors in the meeting held on 31 August 2017, approved the following committees:

Audit, Risks, Sustainability and Corporate Governance Committee

comprising the following Directors:


FAN Xiaohua – Chairman1 *

Laura Cioli1 *

Cristina Scocchia1 *


*Independent
1Has adequate experience in accounting, finance or risk management matters


The Board of Directors, on 31 August 2017, approved that the Committee will be integrated with the Director that will be elected during the first Company’s meeting.

Committee for Transactions with Related Parties

comprising the following Directors:


Domenico de Sole – Chairman*

Marisa Pappalardo*

Cristina Scocchia*


*Independent

Remuneration Committee

comprising the following Directors:


TAO Haisu - Chairman*

Laura Cioli2 *

BAI Xingping


*Independent
2Has knowledge and experience in remuneration policies and financial matters


The Board of Directors, on 31 August 2017, approved that the Committee will be integrated with the Director that will be elected during the first Company’s meeting.

Appointments and Successions Committee

comprising the following Directors:


Marco Tronchetti Provera - Chairman

Ren Jianxin

Giovanni Tronchetti Provera

BAI Xingping

Strategies Committee

comprising the following Directors:


Marco Tronchetti Provera - Chairman

Giorgio Bruno

YANG Xingqiang

BAI Xingping

Ze’ev Goldberg

Domenico de Sole*

WEI Yintao*


*Independent


COMMITTEE FUNCTIONING


    1. Corporate Governance, Sustainability, Control and Risks Committee

      1. The Corporate Governance, Sustainability, Control and Risks Committee (CGSCRC), which incorporates the functions of the “control and risks committee”, helps the Board of Directors to assess and make decisions relating to the system of internal control and risk management, as well as the approval of periodic financial reports, as required by art. 7 of the Corporate Governance Code.

        In particular, the CGSCRC:
        • assists the Board of Directors by:
          • defining guidelines for the system of internal control and risk management, so that the principal risks faced by the Company and its subsidiaries are correctly identified and adequately measured, managed and monitored;
          • determining the compatibility of those risks with managing the business in a manner consistent with the strategic objectives identified, while also considering any risks that may be significant in terms of the medium/long-term sustainability of the activities of the Company;
          • identifying an executive director to supervise the functioning of the system of internal control and risk management, having regard for the characteristics of the business and the risk profile;
          • assessing, on at least an annual basis, the adequacy of the system of internal control and risk management having regard for the characteristics of the business and the risk profile adopted, as well as its effectiveness and functioning in practice;
          • approving, on at least an annual basis, the work plan prepared by the internal audit manager and the manager of the compliance function;
          • describing, in the report on corporate governance, the essential elements of the system of internal control and risk management and the methods used to coordinate the various parties involved in the system, expressing an opinion on its overall adequacy;
          • assessing, having consulted with the Board of Statutory Auditors, the results and recommendations contained in any management letters issued by the legal auditor and in any reports on key issues identified during the legal audit work;
        • expressing an opinion on proposals for the appointment, revocation, powers and remuneration, consistent with corporate policies, of the internal audit manager, as well as on the adequacy of the resources assigned to that person in order to carry out the specified functions;
        • assessing, together with the administrative managers of the Company and the chief reporting officer, having consulted the auditing firm and the Board of Statutory Auditors, the proper and consistent application of the accounting policies within the Group when preparing the consolidated financial statements;
        • expressing opinions, at the request of the appointed director, on specific matters regarding identification of the principal business risks, as well as the design, implementation and management of the system of internal control and risk management;
        • 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, if deemed appropriate, the performance of 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 system of internal control and risk management at least every six months, at the time of approving the financial statements and the half-year report;
        • upon request from the Board, supporting - via the performance of an adequate investigation - the assessments and decisions of the Board of Directors about the management of risk deriving from adverse facts that have come to the attention of the Board of Directors;
        • 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. This committee is also responsible, in particular, for recommending the methodology for and timing of the annual self-assessment carried out by the members of the Board of Directors;
        • monitoring the operations of the business in terms of their sustainability and the dynamics of the interactions of the business will all stakeholders;
        • defining and recommending “sustainability” guidelines to the Board of Directors and monitoring compliance with any codes of conduct adopted by the Company and its subsidiaries;
        • helping the Board of Directors to prepare and subsequently examine and approve the sustainability report.

    1. Related-Party Transactions Committee

      1. The Related-Party Transactions Committee (RPTC) advises and makes recommendations to the Board of Directors in relation to transactions with related parties, as envisaged pursuant to the Consob regulations and the RPT Procedure, with the sole exception of matters relating to the remuneration of directors with specific responsibilities and executives with strategic responsibilities, which are assigned to the Compensation Committee.

        In particular, the RPTC:
        • prepares advance opinions on the procedures governing the identification and management of related-party transactions arranged by Pirelli and/or by its subsidiaries, as well as on the related amendments;
        • prepares advance and reasoned opinions, when expressly requested, on the interest of Pirelli in carrying out the related-party transactions arranged, as well as on the reasonableness and substantial propriety of the related terms and conditions;

        In the event of transactions of greater significance with related parties, participates in the negotiations and the due diligence work by receiving a complete and timely flow of information, with the right to request information and make comments to the persons authorised to carry out the negotiations or the due diligence work.

    1. Compensation Committee

      1. This Committee has advisory and supervisory functions and makes recommendations to ensure the definition and application within the Group of compensation policies that, on the one hand, attract, motivate and retain human resources with the professional qualities required to pursue profitably the objectives of the Group and, on the other, are capable of aligning the interests of management with those of the shareholders.

        In particular, the Compensation Committee:
        • helps the Board of Directors to define the General Policy for Group Remuneration, making recommendations in this regard;
        • assesses periodically the adequacy, overall consistency and concrete application of the General Policy for Remuneration, making reference in this last regard to the information provided by the chief executive officers; makes recommendations to the Board of Directors on this matter;
        • with regard to the executive directors and the other directors with specific responsibilities, makes recommendations or expresses opinions to the Board:
          • about their remuneration, consistent with the General Policy for Remuneration;
          • 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, having regard for the principles established in the General Policy for Remuneration;
        • with regard to the executives with strategic responsibilities, checks the consistency of their remuneration with the General Policy for Remuneration and expresses an opinion on it pursuant to the Related-Party Transactions 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, checking in particular the effective achievement of the established performance objectives;
        • examines and submits to the Board of Directors the Annual Compensation Report that, by name for the members of the administrative and control bodies and in aggregate for the executives with strategic responsibilities:
          1. provides adequate information about each component of their remuneration;
          2. explains in detail all the remuneration paid during the year, for whatever reason and in whatever form, by the Company and its subsidiaries.

        The Compensation Committee is assigned the functions of the Related-Party Transactions Committee, envisaged pursuant to the Consob regulations and the procedure for transactions with related parties adopted by the Company (“RPT Procedure”), for matters concerning the remuneration of directors with specific responsibilities and executives with strategic responsibilities.

    1. Appointments and Succession Committee

      1. The Appointments and Succession Committee advises and makes recommendations to the Board of Directors on appointment and succession matters, as envisaged in art. 5 of the Corporate Governance Code.

        In particular, the Appointments and Succession Committee:
        • prepares opinions for the Board of Directors on the size and composition of the Board and makes recommendations about the professional persons whose presence on the Board is deemed appropriate;
        • 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 of the Company;
        • makes recommendations to the Board of Directors on any problematic circumstances linked to application of the ban on competition envisaged in art. 2390 of the Italian Civil Code, if the Shareholders’ Meeting has authorised in advance, for organisational reasons, any general exceptions to this ban;
        • if an independent director must be replaced, recommends candidates to the Board of Directors so that a new director can be co-opted;
        • makes recommendations to the Board of Directors on any “emergency” succession plans for the most senior decision-makers;
        • prepares opinions for the Board of Directors on the appointment (by co-option or otherwise) of candidates to the position of Chief Executive Officer;
        • following a proposal from the Chief Executive Officer, identifies criteria for the succession plans covering top and senior management in general, in order to guarantee the continuity of business strategies.

    1. Strategies Committee

      1. The Committee advises and makes recommendations to the Board of Directors on the definition of strategic guidelines, as well as on the identification and definition of terms and conditions for individual transactions of strategic importance.

        In particular, the Strategies Committee:
        • examines the strategic, industrial and financial plans - both short and long term - of the Company and the Group before their submission to the Board of Directors;
        • helps the Board to assess transactions, initiatives and activities of strategic importance including, in particular:
          • entry into new geographical markets and businesses;
          • industrial alliances (e.g. joint ventures);
          • special transactions (mergers, spin-offs, capital increases and capital reductions, except for those to cover losses);
          • investment projects;
          • industrial and/or financial restructuring projects and programmes.
        • examines periodically the organisational structure of the Company and the Group, presenting any suggestions and opinions to the Board.

    1. FUNCTIONING OF BOARD COMMITTEES

      1. Board 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 Chief Executive Officer and, in any case, with the frequency necessary in order to carry out its functions properly. The Strategies Committee meets at least five days before the Board of Directors called to approve the annual budget and/or business plan, having received the related documents at least three days prior to the meeting.

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

        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 in good time to all Committee members so that they can contribute to the meeting.

        Committee meetings are quorate when attended by the majority of appointed members and resolutions are adopted by the majority of those present. With regard to the meetings of the Appointments and Succession Committee regarding the succession of the Chief Executive Officer, the outgoing CEO casts the deciding vote in the event of a voting tie. 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. The RPTC is entitled to assistance, at the expense of the Company, from one or more independent experts selected by that Committee.

        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 Corporate Governance, Sustainability, Control and Risks Committee and the Compensation Committee.

        One member of the Board of Statutory Auditors is invited to attend the meetings of the Appointments and Succession Committee and the Strategies Committee.

        The members of the Board of Statutory Auditors are invited to attend the meetings of the RPTC.