Board Committees

The Audit, Risks, Sustainability and Corporate Governance Committee ("ARSCGC"), 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;
• 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.

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. In the cases envisaged in the RPT Procedure, the issues concerning (i) the remuneration of executive directors, other directors holding specific offices, general managers and key managers assigned to the Remuneration Committee (ii) the approval of derogations from the Remuneration Policy, having assessed that there are exceptional circumstances that allow for this can be assigned to the Remuneration Committee.

• 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.

The Committee has investigatory, advisory and supervisory functions and makes recommendations 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;
• assesses periodically the adequacy and overall consistency of the Remuneration Policy for directors of the Company and in particular directors holding specific offices, General Managers and key managers (“KM”);
• with regard to the executive directors, other directors holding specific offices and General Managers, it makes recommendations or 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, which, on behalf of the governing and supervisory bodies, the General Managers and in aggregate form for 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.
• in any case, provides the Related-Party Transactions Committee with opinions if the responsibilities of said Committee regarding Related-Party Transactions do not cover issues pertaining to the remuneration of executive directors, including Directors holding specific offices, General Managers and key managers;
• assesses whether there are exceptional circumstances that allow for a derogation from the Remuneration Policy.

In the cases envisaged in the related-party transactions procedure adopted by the Company (“RPT Procedure”), the Remuneration Committee may be assigned the responsibilities of the Related-Party Transactions Committee in accordance with Consob regulations and the RPT Procedure for matters concerning (i) the remuneration of executive directors, those holding specific offices, General Managers and key managers and (ii) the approval of derogations from the Remuneration Policy, having assessed that there are exceptional circumstances that allow for this.

The Appointments and Succession Committee examines, advises and makes recommendations to the Board of Directors on appointments and succession matters.

• assists the Board of Directors in identifying candidates for the office of director in the event of co-optation;
• 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;
• 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 “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.

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.

• supports the Board of Directors in examining the business plans of the Company and the Group, also based on an analysis of the relevant topics for value generation in the long term;
• 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;
• monitors and assesses managements’ achievement of the Group's economic-financial targets over time on the basis of the internal information flows procedure, proposing to the Board of Directors any actions and/or the adoption of corrections to achieve the economic-financial targets approved by the Board of Directors.

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 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 quarterly and in any case prior to the Board of Directors meeting called to approve the annual budget and/or the business plan, receiving the related documentation at least 3 days prior to the meeting.

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 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 regarding the succession of the Chief Executive Officer, the outgoing CEO casts the deciding vote in the event of a voting tie.

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. The RPT Committee 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 Audit, Risks, Sustainability 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 and the Strategies Committee.