In order to carry out its responsibilities more efficiently, the Board, on May 9, 2011, set up two committees: the Audit Committee and the Compensation Committee, which, at the Board Meeting of February 13, 2012 were changed to the Audit and Risk Committee and the Compensation and Nomination Committee. Both are comprised entirely of non-executive independent Board Directors, all of whom are accounts and finance experts.
The Board of Directors, at their meeting of May 9, 2011, had made the following appointments:
- Audit and Risk Committee: Mauro Sacchetto (Chairman), Maurizio Montagnese, and Michele Volpi;
- Compensation and Nomination Committee: Gabriele Galateri di Genola (Chairman), Nicola Greco, and Maurizio Montagnese.
The Audit and Risk Committee has the duty to consult and support the Board of Directors in matters relating to the internal control and risk management systems, and the approval of the periodic financial reports. The current composition of the Audit and Risk Committee complies with the requirements of the latest Corporate Governance Code, being comprised entirely of non-executive independent Directors.
The responsibilities of the Compensation and Nomination Committee, in addition to those provided for in the Corporate Governance Code, include propositive and consultative activities towards the Board in relation to: senior managerial appointments within the competence of the Board of Directors; annual review of the Board of Directors and its committees; direction on the cumulation of offices held by Directors; assessment of their meeting legal requirements. The current composition of the Compensation and Nomination Committee is already compliant with the requirements of the Corporate Governance Code, being made up entirely of non-executive independent Directors.
Following the introduction of the procedure ‘Transactions involving interests held by Board Directors and Statutory Auditors and transactions with related parties’, the Audit and Risk Committee and the Compensation and Nomination Committee provide the Board of Directors with opinions, as per the procedure (please refer to the section ‘Directors’ interests and transactions with related parties’, page 36).
Audit and Risk Committee
In compliance with the Board resolution of November 9, 2000, the Audit and Risk Committee fulfils a preparatory, consultative and propositive role regarding the general management of the Company. On February 13, 2012, the Board of Directors implemented the Audit and Risk Committee, in accordance with the Corporate Governance Code for Listed Companies issued by Borsa Italiana SpA in December 2011.
On May 29, 2013, the Board also approved an updated version of the Regulations of the Audit and Risk Committee. In accordance with the current Regulations, the Chairman of the Board of Statutory Auditors, or an Auditor appointed by the Chairman, and the Chief Financial Officer (now CFCO) takes part in the Committee’s activities; meetings can be attended by Saipem’s CEO. The Senior Vice President of Internal Audit is the Committee’s Secretary and assists the Audit and Risk Committee in its duties. The Internal Audit department is responsible for ensuring the implementation and updating of the risk assessment, mapping and classification systems for auditing purposes.
The Audit and Risk Committee’s responsibilities are: (i) assisting the Board of Directors in the following areas: (a) setting guidelines for the internal control and risk management system; (b) periodically checking that it is adequate and operates effectively and efficiently; (c) ensuring that major risks facing the Company are adequately measured, properly monitored and managed; (ii) evaluates together with the Officer responsible for the Company’s financial reporting and the external auditors, the adequacy of accounting principles adopted, and their consistency throughout the Annual and Interim Reports, subject to the preliminary approval by the Board of Directors; (iii) evaluates the work programme prepared by the Internal Audit Manager and receives from the latter periodic reports on work performed; (iv) evaluates issues raised through communications received from the Board of Auditors or individual Auditors, reports and the management letter issued by the external auditors, the periodic reports issued by the Compliance Committee in its capacity as the Guarantor of the Internal Code of Practice, information documents on the internal control and risk management systems relating to other company departments; from inquiries and studies by third parties; (v) assesses audit plans put forward and works carried out by the external auditors, also in terms of their independent opinions; (vi) in the annual Corporate Governance Report, it describes the fundamentals of the internal control and risk management system, ascertaining its overall adequacy; (vii) reviews and produces an opinion on regulations governing transparency and substantial and procedural correctness of transactions with related parties and those in which a Board Director holds an interest, on his own or a third party’s behalf; (viii) ensures the adequacy of powers and means entrusted to the Officer responsible for the Company’s financial reporting.
The Audit and Risk Committee has access to information and Company departments as required to carry out its duties. The Audit and Risk Committee can draw on the necessary financial resources, approved by the Board of Directors, to carry out its responsibilities. The Audit and Risk Committee convened 17 times in 2013, with meetings lasting on average 2 hours and average attendance of 86% of members. Main activities consisted of:
- reviewing the Integrated Risk Assessment system aimed at setting up the integrated audit programme of the Internal Audit department;
- approving the annual audit plan;
- reviewing and evaluating internal audit activities;
- reviewing and evaluating whistle-blowing notifications received within the Saipem Group;
- meeting with the CEO and the CFO, the Chairman of the Board of Statutory Auditors and the partner from the Independent Auditors to examine the main issues pertaining to the 2012 and 2013 Financial Statements;
- monitoring and evaluating the proposal for a re-organisation of the Internal Audit department, performance targets and the positive results of the External Quality Review carried out by KPMG on the department’s responsibilities;
- acknowledging Company activities relating to Law Decree No. 231/2001 particularly those activities relating to compliance, training and the analysis of sensitive processes;
- carrying out an in-depth study of the risk analysis and risk management model of the Saipem Group;
- acknowledging the Company’s organisational structure and the powers of attorney and proxy systems at the basis of the Saipem Group decision making mechanism;
- monitoring Company activities related to the implementation of the accounting processes necessary to adopt the new International Financial Reporting Standards (IFRS);
- checking that the Head of Internal Audit continues to meet the integrity, professionalism, competence and independence requirements;
- evaluating the performance and adequacy of the fixed and variable remuneration structure of the Head of Internal Audit;
- drafting plan of activities for the coming year;
- reviewing the Company’s anti-corruption procedures;
- reviewing the Company’s procedure regulating related parties’ transactions.
All meetings were minuted.
As of the date of the approval of this Report (March 14, 2014), the Committee has already met on four occasions.
The Audit and Risk Committee reports to the Board of Directors at least every six months, providing a detailed account of work carried out, and the adequacy of the internal control and risk management system. The Committee also ensures the information flow towards the Board of Statutory Auditors to enable the prompt exchange of information necessary for the fulfilment of their respective responsibilities within the common remit and to ensure the orderly performance of business functions.
Compensation and Nomination Committee
The Compensation Committee, renamed ‘Compensation and Nomination Committee’ on February 13, 2012, was set up by the Board of Directors in 1999. The composition, appointment, responsibilities and method of operations of the Committee are governed by its Regulations approved by the Board of Directors on February 13, 2012 and available at www.saipem.comunder the section ‘Corporate Governance’.
In line with the latest recommendations of the Corporate Governance Code, the Committee is comprised of three non-executive independent Directors. The Committee’s regulations provide that at least one member have adequate knowledge and experience in matters of finance and compensation, as assessed by the Board at the time of their appointment.
The current members of the Committees are the following Board Directors, who are non-executive and independent pursuant to the Law and the Corporate Governance Code: Gabriele Galateri di Genola, in his capacity as Chairman, Nicola Greco and Maurizio Montagnese. Saipem’s Executive Vice President for Human Resources and Organisation, or in his stead the Senior Vice President for Development, Organisation, Communication and Compensation acts as Secretary of the Committee.
The Committee fulfils a propositive and consultative role for the Board of Directors and specifically:
- submits for approval by the Board of Directors the Remuneration Report and the remuneration policy for executive Directors and senior managers with strategic responsibilities, which will be put forward to the approval of the Shareholders’ Meeting called to review the financial statements, as provide by law;
- puts forward proposals for the remuneration of the Chairman and Executive Directors, taking into account the various forms and types of compensation;
- puts forward proposals for the remuneration of non-executive Directors, who are members of Board Committees;
- having first reviewed CEO directions, it proposes the general remuneration criteria applicable to senior managers with strategic responsibilities, annual and long-term incentive plans, and stock-based plans; it sets performance targets and reviews the Company’s performance results in order to determine the variable remuneration of executive Directors and the implementation of incentive plans;
- periodically assesses the adequacy, consistency and actual operation of the Remuneration Policy, providing the Board with relevant proposals;
- provides opinions to the Board of Directors regarding its size and composition and expresses recommendations regarding professional profiles who are deemed appropriate in the Board;
- advises the Board of candidates to the office of Board Directors in the event of co-optation, when independent Directors need to be replaced;
- provides guidance to the Board, in accordance with the Corporate Governance Code, regarding the maximum number of offices a Director may hold;
- expresses opinions to the Board regarding the nomination of the Company’s senior managers, whose appointment is the responsibility of the Board;
- oversees the annual Board Review and that of its Committees;
- provides an evaluation of the independence and integrity requirements required by Directors;
- monitors implementation of resolutions taken by the Board;
- provides the Board of Directors with an account of work carried out every six months.
In fulfilling its duties, the Committee provides opinions, as and when required by the current internal regulation in terms of transactions with related parties.
The Committee meets as often as is required to carry out its role, usually on the dates provided for in the annual meeting schedule approved by the Committee itself. A Committee Meeting is deemed valid when a majority of members is present, and resolutions are passed with the absolute majority of attending members. The Board of Directors provides the Committee with the necessary resources to carry out its responsibilities. The Committee can access information and the relevant Company departments in order to fulfil its duties, and it can also have recourse, through the latter, to external consultants, ensuring that no reasons exist that could compromise the independence of their judgement.
The Chairman of the Board of Statutory Auditors (or other Statutory Auditor designated by the latter) may attend Committee meetings; other Statutory Auditors may also attend when the Committee discusses matters for approval by the Board of Directors that are subject to the mandatory opinion of the Board of Statutory Auditors. At the request of the Chairman of the Committee, other persons can be invited to attend Committee meetings to provide information and evaluations within their area of expertise on single items on the meeting agenda.
The meetings of the Compensation and Nomination Committee are not attended by the Directors involved where remuneration proposals are discussed that are to be put forward to the Board.
The Committee carry out their responsibilities based on their annual programme, which comprises of the following phases:
- ascertaining the adequacy, overall consistency and proper implementation of the remuneration policy adopted the previous year, vis-à-vis results achieved and remuneration benchmarks from highly specialised providers;
- identification of remuneration proposals for the following year and performance targets proposals linked to short and long-term incentive schemes;
- proposals related to the implementation of existing short and long-term variable incentive schemes, subject to actual results achieved versus the relevant performance targets;
- preparation of the Remuneration Report to be submitted annually to the approval first of the Board of Directors and then of the Shareholders’ Meeting;
- review of votes cast by the Shareholders at their General Meeting on the remuneration policy approved by the Board of Directors.
In 2013, the Committee convened on nine occasions, with meetings lasting an average of 1 hour and 43 minutes and average attendance of 96% of members. The Chairman of the Board of Statutory Auditors attended seven meetings and was substituted by a Statutory Auditor at one meeting.
During the first part of the year, the work of the Committee focused on the following: its periodic evaluation of the remuneration policy implemented in 2012, drawing up the new Remuneration guidelines for 2013 in light of recent events and Company results, reviewing the Company’s actual results for 2012, identifying performance targets for 2013 vis-à-vis variable short-term incentive plans, finalising the proposals for the implementation of the Deferred Monetary Incentive Plan for executive Directors and senior managers and the Long-Term Incentive Plan applicable to top managers and critical resources, and reviewed Saipem’s 2013 Remuneration Report. Finally, the Committee evaluated candidates to the offices of Head of the Internal Audit department and Chairman of the Compliance Committee. During the second part of the year the Committee reviewed the votes cast by the Shareholders’ Meeting on the Remuneration Policy for 2013. They also evaluated candidates to positions on the Compliance Committee, the Head of the Integrated Risk Management function, and the Officer responsible for the Company’s Financial Reporting. The Committee predisposed the proposal for the remuneration of the Internal Audit Manager and that of the Deputy Chairman. Also, the results of the risk analysis were reviewed for the process of the succession plans for positions with strategic responsibilities. It fulfilled the requirements related to the review of the Board of Directors and its Committees. It also reviewed possible evolutions of the management incentive system and the impact of Article 84-ter of Law 98 dated August 9, 2013.
The Committee scheduled at least 6 meetings to take place in 2014, three of which have already been held as of March 14, 2014. These focused on the impact of Article 84-ter of Law No. 98 dated August 9, 2013 and the review of the remuneration policies of 2013 and the definition of remuneration proposals for 2014.
The Committee reports, through the Chairman of the Committee, on the methods used to carry out its responsibilities to the Shareholders’ Meeting called to approve the Financial Statements, pursuant to the provisions set forth in the Committee’s Regulations and the Corporate Governance Code, with the aim of establishing a dialogue with Shareholders and Investors.
Further information on the Compensation and Nomination Committee is available, in compliance with Article 123-ter of Law No. 58/1998, in the Remuneration Report.