Remuneration of Directors vested with special roles

Upon appointment, or at the first subsequent meeting, the Remuneration Committee proposes, to the Board of Directors, the compensation to which the Directors vested with special roles are entitled.

Remuneration of the Directors vested with special roles, who are also assigned specific responsibilities, is determined on the basis of the following criteria.

ComponentCriterion
Fixed component for all the roles covered within Pirelli
  • approved by the Board of Directors at the time of appointment and for a full term in a comprehensive annual measure, including any fixed components for other positions in the Pirelli Group;
  • no greater than 50% of the Annual Total Direct Compensation at Target.
Annual incentive (MBO)
  • Access threshold: 75% of the MBO at target;
  • MBO at target: 100% of the compensation for the main executive role;
  • Max MBO (cap): 250% of the MBO at target;
Medium/long term annualised variable component at target
  • composed of the LTI award and the rolling annual disbursement deferment mechanism for the portion of the MBO accrued, and awarded for an increase in the entire MBO accrued based on the level of MBO achieved in the following year;
  • not less than 60% of the total variable component.

At the date of this Report, the Chairman and CEO, Marco Tronchetti Provera, is the only Director vested with special powers and assigned specific responsibilities.

The gross annual fixed component for Chairman and CEO, Marco Tronchetti Provera, is a total of EUR 2,950,000 divided as follows:

RoleGross annual fixed compensation
Chairman and CEO (including Director compensation) of Pirelli & C. S.p.A. 950,000 Euro
Chairman and CEO of Pirelli Tyre S.p.A. (main executive role) 2,000,000 Euro
 

As regards the incidence of the various components, below is the structure of the compensation package of the Chairman and CEO in the event of achievement of the annual MBO 2014, 2015 and 2016 targets and the three-year targets of the LTI Plan 2014-2016 (i) at access threshold, (ii) at target and (iii) at maximum level.

Annualised structure of the remuneration of the Chairman and CEO
 Achievement of the access threshold objectivesAchievement of the at target objectivesAchievement of the objectives at maximum (cap) level
Fixed component 51.8% 42.0% 22.2%
Variable annual component (MBO) 19.7% 21.4% 28.2%
Medium/long term annualised variable component at target 28.5% 36.6% 49.6%
Total 100% 100% 100%
 

Depending on the 12-month deferral of a portion of the MBO award, with the risks and opportunities mentioned in paragraph 1 and specified in paragraph 5, the accrual of a portion of the variable component for the medium/long period shown in the table is subject to the results achievement level for the year 2017, and may therefore be disbursed in the year 2018.

Also, for Directors vested with special roles, and to whom specific responsibilities are assigned, in the event that these are not related to management labour relations (at the date of this report, the Chairman and Chief Executive Officer, Marco Tronchetti Provera), the Board of Directors has provided, as guaranteed by law and/or the National Collective Employment Contract, to the Group’s Italian executives:

  • assignment of a severance indemnity (T.F.M.) ex art. 17, paragraph 1, c) of T.U.I.R. (Income Tax Consolidation Act) no. 917/1986 having characteristics similar to those typical of Employee Severance Indemnity (TFR) ex art. 2120 c.c. awarded in law to Italian executives of the Pirelli Group and including contributions paid by the employer, which would be due for social security Institutions or Funds in the event of executive employment;
  • a policy relating to (i) accidents occurring while fulfilling the mandate and (ii) non-occupational accidents with premiums charged to the Company;
  • severance indemnity for permanent disability and for death due to disease;
  • further benefits typical for their role and currently awarded by the Pirelli Group to Executives with strategic responsibility and/or to Senior Managers (company car).

In the event that the Director is vested with a special role, but is not assigned specific responsibilities (at the date of this Report, the Vice Chairman Alberto Pirelli), the remuneration of the Director is composed exclusively of a gross annual fixed component.

When the Director vested with a special role is also an Executive/Senior Manager (this is the case for Alberto Pirelli) the remuneration as Executive/Senior Manager is determined based on the criteria in the Policy relating to the position held, and this is also submitted, for examination, to the Remuneration Committee and the Board of Directors.

For Directors who are vested with special roles, but to whom no specific responsibilities are assigned, there is no insurance cover, whether for social security or for pensions, other than that which is obligatory and that which is provided for Directors.

Analysis of the positioning, composition and, more generally, of the competitiveness of the remuneration of Directors vested with special roles is carried out by the Remuneration Committee and the Board of Directors, with the assistance of independent companies specialising in Executive Compensation, using methodological approaches that allow full assessment, albeit within the limits typical of benchmark analyses, of the complexity of the roles from an organisational standpoint, and of the specific functions assigned, as well as the impact of the individual on the final business results.

In particular, when defining the panel of annually updated reference companies, various components (sector, geography etc.) are taken into account.

The sample of reference companies used for the competitiveness analysis and for reviewing the remuneration of the Chairman and CEO of Pirelli & C. is composed, on the one hand, of 8 Companies in the “Car and Tyre” sector and, on the other hand, of 28 European “Large Cap” companies.

The 8 companies making up the “Car and Tyrepanel are:

BMWDAIMLERMICHELINRENAULT AND NISSAN
CONTINENTAL FIAT PEUGEOT VOLKSWAGEN

The 28 companies that comprise the “Large Cap Europe” panel are:

BURBERRY GROUPHEINEKENMANRENAULT &  NISSAN
CARREFOUR HENKEL MICHELIN REPSOL YPF
CONTINENTAL HERMES INTL. PERNOD-RICARD RICHEMONT
DANONE IBERDROLA PEUGEOT ROLLS-ROYCE
ELECTROLUX IMPERIAL TOBACCO GROUP PHILIPS ELTN TELECOM ITALIA
E ON LINDE RECKITT BENCKISER GROUP VOLVO
FIAT LUXOTTICA REED ELSEVIER WPP