Senior Managers and Executives

The remuneration of Senior Managers and Executives is more generally composed of the following elements:

  • one gross annual fixed component (RAL);
  • one variable annual component (MBO);
  • one variable medium/long term component (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);
  • benefits awarded from business practices (e.g. car).

Also, for Executives and Senior Managers with an Italian labour contract, there is provision of:

  • supplementary pension plans that involve the company paying into a pension fund a sum equal to 4% of the gross annual salary received, up to a maximum of 150,000 Euro gross;
  • supplementary health and life insurance to that of the national collective employment contract for Executives of Companies that Produce Goods and Services.

In determining the remuneration, and its individual components, of Senior Managers and Executives, the Pirelli Group takes into account the following criteria:

  • the fixed component: (i) for Senior Managers there is a weighting generally no greater than 60% of the Annual Total Direct Compensation at Target and (ii) for Executives there is a weighting generally no greater than 75% of the Annual Total Direct Compensation at Target;
  • an accrued annual incentive (MBO) which, at target, represents a percentage of the RAL that is no less than 20% of that remuneration;
  • the annualised medium/long term variable component at target has a weighting of no less than 60% of the total variable component. For the LTI award there is a limit to the maximum attainable incentive, which is equal to 2 times the award at target.

Below is the remuneration structure of Senior Managers and Executives (intended together) with evidence of the incidence of the various components (annualized) of their compensation package, 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 remuneration for Senior Managers
 Achievement of the access threshold objectivesAchievement of the at target objectivesAchievement of the objectives at maximum (cap) level
Fixed component 58.2% 49.1% 31%
Variable annual component (MBO) 13.1% 14.7% 18.6%
Medium/long term annualised variable component at target 28.7% 36.2% 50.4%
Total 100% 100% 100%

   

Annualised Executive Remuneration structure
 Achievement of the access threshold objectivesAchievement of the at target objectivesAchievement of the objectives at maximum (cap) level
Fixed component 78.4% 71.1% 52.8%
Variable annual component (MBO) 8.8% 10.7% 15.8%
Medium/long term annualised variable component at target 12.8% 18.2% 31.4%
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.

Analysis of the remuneration of Executives and Senior Managers is also carried out with assistance from independent companies specialising in Executive Compensation and takes into account the position filled by the individual Manager and the Country in question.

For the Internal Audit Manager, we note that, in line with best practices, the Board of Directors, at the suggestion of the Committee for Internal Control, Risk and Corporate Governance has provided for a greater role of the fixed component than that of the variable component. The Internal Audit Manager (and Internal Audit Managers in general) is not included in the LTI Incentivisation Plan, and is only beneficiary of the annual incentivisation plan linked to the mainly qualitative objectives, assessment of which is left to the Committee for Internal Control, Risk and Corporate Governance, and the Board Of Directors, at the recommendation of the Director responsible for overseeing the internal control system.