Transactions with related parties

  • Most of the Company’s procedural policies are more restrictive than required by the Regulations.
  • The Company requires the Committee asked to express its opinion on transactions with related parties to be composed entirely of Independent Directors.

The Company has had rules of conduct for transactions with related parties since the year 2002, aimed at guaranteeing effective procedural and substantial correctness and transparency in transactions undertaken by the Company, directly or through subsidiaries, with parties related to itself. Subsequently, following Consob's adoption of regulations governing transactions with related parties in March 2010, the Company approved (on 3 November 2010) a specific structured procedure for transactions with related parties. In particular, the Procedure adopted by the Company establishes procedural rules which further reinforce the procedural and substantial transparency of transactions undertaken by the Company with related parties.

The Board of Directors, in response to a proposal of the Committee for Internal Control, Risks and Corporate Governance (appointed under the regulations to express its opinion on the procedure) deliberated to extend application of the Procedure and the Consob Regulations to all members of the Pirelli Shareholders' Agreement even if they are not considered related parties under the definition contained in the Regulations (already mentioned in the "Activities of the Committee for Internal Control, Risks and Corporate Governance" section).

Most of the Company's procedural policies are more restrictive than required by the Regulations. Particularly, the Company has adopted very restrictively low thresholds and established higher qualitative thresholds than those obligatory under the Regulations governing transactions with related parties.

Moreover, the Procedure established that the opinion of the Committee for Transactions with Related Parties is binding even in the case of smaller transactions, and the whitewash mechanism will not be used in the event of an unfavourable opinion on transactions with related parties of greater amounts.

Moreover, the Procedure is also applicable, in a provision which is much more restrictive than required by the Regulations, to transactions conducted autonomously by subsidiaries with parties related to the Company, not only those conducted "through" them.

Confirming the importance of the role of Independent Directors, the Company requires the Committee asked to express its opinion on transactions with related parties to be composed entirely of Independent Directors (and not only in the case of particularly significant transactions with related parties as required by the regulations).

The Company has also adopted a remuneration policy for remuneration of Directors and managers with strategic business responsibility, including policies pertaining to agreements for consensual termination of the relationship, which makes it possible to exempt these decisions from the ordinary procedure provided that: (i) the remuneration policy was defined by a committee made up entirely of non-executive directors, the majority of whom were independent (refer to the "Remuneration Committee" section; (ii) the policy has been submitted to the advisory vote of the Shareholders' Meeting; (iii) the remuneration assigned is consistent with this policy (in this regard the reader is referred to the General Remuneration Policy appearing at the end of this Report).

Moreover, the Consob recommendation of reviewing the Procedure at least once every three years will be applied. The Board considers the Board Committees set up in the Board of Directors to meet the requirements of the Consob Regulations and those set forth in the Procedure submitted to the Board for examination, and therefore assigned the powers of the Committee for Transactions with Related Parties required under this procedure to the Committee for Internal Control, Risks and Corporate Governance, with the sole exception of remuneration of directors and managers with strategic business responsibilities, which are attributed to the Remuneration Committee.

For more information, the reader is referred to the Procedure, published on the Company's website and reported at the end of this Report, which will be implemented in full beginning on 1 January 2011.