The Board of Auditors is entrusted with monitoring the following aspects, in accordance with the law and the Company Statutes:
- compliance with the law and the Company Statutes and respect for the principles of good management;
- adequacy of the organisational structure for its duties, the internal control system and the accounting system and its reliability in correctly representing management;
- procedures to implement effectively the corporate governance rules envisaged by the Self-Regulation Code that Pirelli has adopted;
- adequacy of instructions given to subsidiaries in relation to mandatory disclosure of inside information;
- the financial reporting process;
- the efficiency of the internal control, internal audit and risk management systems;
- the statutory audit of the annual accounts and the consolidated accounts;
- the independence of the statutory auditor or the statutory auditing company, in particular, concerning services other than auditing services rendered to the company whose accounts are to be audited.
Appointment of Auditors
At the date of this Report, the Board consists of three permanent and one alternate auditor. In order to ensure compliance with local regulations relating to gender balance, on 13 May 2013 the Shareholders’ Meeting amended the Company Statutes by increasing from two to three the number of alternates, as well as joint takeover mechanisms that ensure a balance between genders. This change will be applied at the next election to the Board of Auditors.
Below is a summary of the provisions contained in the Company Statutes in relation to the appointment and replacement of members of the Board of Auditors, for further information please see, in any case, to the document (which must be considered prevalent over that which follows).
In order to allow minority shareholders to elect one permanent auditor and one alternate auditor, they will be elected using a "voting list", under which an Auditor (who will chair the College) and an Alternate Auditor are elected from the minority list. In case there are lists with the same number of votes, a new vote is held between these lists by all eligible voters present at the meeting; the candidates are elected from the list that obtains a simple majority of votes.
The remaining members of the Board of Auditors are elected from the majority slate.
Again with the aim of providing supplementary criteria to make it possible to ensure compliance with the balance between genders on the Board of Auditors, the Company Company Statutes also envisage (i) that the voting lists which indicate a number of candidates equal to or greater than three, considering both sections, must include candidates of a different gender in the section of the slate that refers to Statutory Auditors and in the section of the slate that refers to Alternate Auditors and (ii) an automatic progressive substitution mechanism if the application of the voting list mechanism does not assure the required minimum number of Permanent Auditors, or of Alternate Auditors, belonging to the gender less represented.
Shareholders have a right to present lists when they, alone or together with other shareholders, represent at least 1% of the shares entitled to vote at an ordinary General Meeting , or the minimum percentage required by the Consob regulations8.
The lists are to be lodged at the Company's registered office at least 25 days prior to the date foreseen for the Shareholders' Meeting convened to resolve this point, unless there has been an extension, as envisaged by the applicable rules. In this last regard, the current regulations specify that, in the event of submission of a single list or multiple lists presented by shareholders who are inter-connected, lists may be submitted until the third day after the deadline for submission of lists (25 days before the Meeting), and the thresholds required for their presentation are reduced by half.
Each shareholder may present or participate in the presentation of only one voting lists. Any documentation required by the Company Statutes or by the law must be submitted at the same time.
Each candidate may appear on only one list, under penalty of ineligibility.
The lists are divided into two sections: one for candidates for the position of Permanent Auditor and the other for candidates for the position of Alternate Auditor. The first candidate in each section must be selected from among persons entered in the Register of Auditors who have worked in the legal audits of accounts for a period of not less than three years.
Each person entitled to vote may vote for only one list.
In the case of death, waiver or forfeiture of a Permanent Auditor, then the position shall be filled by the Alternate Auditor chosen from the same voting list which included the auditor who has just left office. If the succession does not enable a Board of Auditors to be reconstituted in compliance with the applicable legislation or gender balance, then the position shall be filled by the second Alternate Auditor drawn from the same voting list. If it later proves necessary to replace an additional auditor drawn from the list that received the most votes, in each case the additional alternate member from the same list will be elected. In the event of replacement of the Chairman of the Board of Auditors, the chair is taken by the auditor on the same list as the former Chairman, following the order of the list, it being understood, however, that they possess the legal and/or regulatory requirements for the office and there is respect for the gender balance required by the laws and/or regulations currently in force; if it is not possible to proceed in the manner described above, a meeting will be convened to appoint the Board by majority vote.
When the General Meeting is required to appoint the permanent and/or alternate members needed to complete the Board of Auditors, they shall be appointed as follows: if it is necessary to replace auditors elected on the majority list, the appointment is made by majority vote on any list; however the gender balance required by the laws and/or regulations currently in force must be respected; if, however, it is necessary to replace Auditors elected from the minority list, the General Meeting replaces them with a relative majority vote, choosing where possible from among the candidates on the list which included the Auditor being replaced and in compliance with the principle of the necessary representation of minorities since the Company Statutes assure the right to participate in appointments to the Board, respecting, however, the gender balance required by the laws and/or regulations currently in force. The principle of representation of minorities Is respected in the case of appointment of auditors who had been candidates on the minority list or other lists different from the list which, in the appointment of the Permanent Auditors, had obtained the highest number of votes.
If only one list is submitted, the General Meeting shall vote on it; if the list obtains the relative majority, the Permanent Auditors and alternate candidates listed in the respective section of the list shall be elected; the chairmanship of the Board of Auditors goes to the person named in first place on that list.
For the appointment of Auditors for any reason not appointed pursuant to the procedure described above, the decision shall rest with the legal majority of shareholders, respecting, however, the gender balance required by the laws and/or regulations currently in force. Outgoing Auditors may be re-elected.
The General Meeting of 10 May 2012 appointed the Board of Auditors for the financial years 2012 to 2014 (and therefore for the forthcoming Shareholders' Meeting), appointing as Permanent Auditors F. Fallacara (appointed Chairman as taken from the minority list), A. Carù and E. Laghi, and alternate auditors U.S.. Iacovino and A. Lorenzatti (taken from the minority list).
The appointment was based on the voting list system. The list presented by the members of the Shareholders’ Block of Pirelli & C. received about 78% of the votes of the share capital with voting rights represented at the meeting, while the minority list presented by a group of savings management companies and financial9 intermediaries, got about 22% of the votes of the share capital represented at the meeting.
The meeting also settled 50,000 euros as the gross annual remuneration of each auditor and 75,000 euros as the gross annual remuneration of the Chairman of the Board of Auditors.
In addition, the Auditor appointed to the Supervisory Board (Antonella Carù) shall receive an additional gross annual fee of EUR 25,000.
Following the resignation of Prof. Laghi on 12 June 2014, in accordance with law and the Company Statutes, Dr Iacovino took over the office of Permanent Auditor. At the date of the Report, there is a vacancy for the position of alternate auditor.
The tables in the end of this Report show the composition of the Board of Auditors as at the date of this Report, the changes during the year 2014, the number of meetings held and the percentages of attendance by individual members. As from the next report, the average duration of meetings of the Board of Auditors will be published.
The number of positions held by the auditors in other shareholder companies, limited liability companies and companies with unlimited responsibility is published by Consob on its website.
It should be noted that, at the date of the report, no currently serving auditor exceeds the maximum number of positions of administration and control allowed by the Issuer Regulations.
As established by the Board of Auditors, on the basis of the information provided and available to the Board of Auditors, all Auditors are considered independent based on the criteria contained in the Self-Regulation Code with regard to Directors and in relation to Consob Communication 8067632 of 17 July 200810.
The OPC procedure, in accordance with regulatory requirements, qualifies the auditors as related parties of the Company.
It shall be noted that the Board of Auditors will be renewed upon approval of the financial statements of the company as at 31 December 2014.
8 Cf. Consob Resolution 19109 of 28 January 2015. The percentage of shares required for the submission, by shareholders, of lists of candidates for the election to the administrative and control organs of Pirelli & C., is 1% of the share capital entitled to vote at an ordinary General Meeting.
9 Anima SGR S.p.A., manager of the Prima Geo Italia and Anima Italia funds; APG Algemene Pensioen Groep N.V., manager of the Strichting Depositary APG Developed Markets Equity Pool fund; Arca SGR S.p.A. manager of the Arca Azioni Italia and Arca BB funds; AZ Fund Management S.A. manager of the AZ Fund 1 Italian Trend fund; Credit Suisse Fund Management SA, manager of the Credit Suisse Portfolio Fund (LUX) Reddito (Euro) and CS Equity Fund (LUX) Italy funds; Eurizon Capital SGR S.p.A. manager of the Eurizon Azioni Italia fund; Eurizon Capital SA manager of the following funds: Eurizon Stars Fund European Small Cap Equity, Eurizon Eurizon Stars Fund – Italian Equity, Eurizon Easy Fund Equity Consumer Discretionary LTE, Eurizon Easy Fund Equity Small Cap Europe; Fideuram Investimenti SGR S.p.A., manager of the Fideuram Italia fund; Fideuram Gestions SA, manager of the following funds: Fonditalia Equity Italy, Fonditalia Euro Cyclical, Fideuram Fund Equity Italy, Fideuram Fund Equity Europe Growth and Fideuram Fund Equity Europe; Interfund Sicav manager of the Interfund Equity Italy funds; JP Morgan Asset Management (UK) Limited, manager of the following funds: JPMorgan Funds, Commingled Pension Trust Fund (International Equity Index) of JPMorgan Chase Bank N.A., Commingled Pension Trust Fund (Intrepid International) of JP Morgan Chase Bank N.A., JP Morgan European Investment Trust Plc, JP Morgan Fund Icvc-JPM Europe Dynamic (formerly UK) Fund, JPM Fund Icvc – JPM Europe Fund, JP Morgan International Equity Index Fund, JP Morgan Intrepid European Fund and JP Morgan Intrepid International Fund; Mediolanum International Funds Limited – Challenge Funds; Mediolanum Gestione Fondi SGR S.p.A., manager of the Mediolanum Flessibile Italia fund; Pioneer Investment Management SGR S.p.A., manager of the Pioneer Italia Azionario Crescita fund and Pioneer Asset Management S.A.
10 CONSOB Communication DEM/DCL/DSG/8067632 dated 17-7-2008 concerning "Situations of incompatibility of the members of control bodies, pursuant to Article 148, Paragraph 3, Sub-section c) of the Unified Finance Law (TUF)”.