2018 Report on corporate governance and ownership structure - FY 2017 REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE pursuant to art. 123-bis of Legislative Decree 58/1998 (Consolidated Finance Act or CFA) (standard model for administration and control) - 2017 - Modena, 8 March 2018 2018 Report on corporate governance and ownership structure - FY 2017 Content CONTENT ......................................................................................................................................................... 2 GLOSSARY ....................................................................................................................................................... 6 INTRODUCTION ............................................................................................................................................... 8 1 PROFILE OF THE ISSUER ..................................................................................................................... 9 2 INFORMATION ON THE OWNERSHIP STRUCTURE (ART. 123-BIS, PARAGRAPH 1, LEGISLATIVE DECREE 58/98) ............................................................................................................. 14 2.1 STRUCTURE OF SHARE CAPITAL (ART. 123-BIS, PARAGRAPH 1.A), LEGISLATIVE DECREE 58/98) ................ 14 2.2 RESTRICTIONS ON THE TRANSFER OF SECURITIES (ART. 123-BIS, PARAGRAPH 1.B), LEGISLATIVE DECREE 58/98)...………………………………………………………………………………………………………... 14 2.3 SIGNIFICANT HOLDINGS OF SHARE CAPITAL (ART. 123-BIS, PARAGRAPH 1.C), LEGISLATIVE DECREE 58/98) …………………………………………………………………………………………………………………15 2.4 SECURITIES CARRYING SPECIAL RIGHTS (ART 123-BIS, PARAGRAPH 1.D), LEGISLATIVE DECREE 58/98) .... 15 2.5 SHARES HELD BY EMPLOYEES: MECHANISM FOR EXERCISING VOTING RIGHTS (ART. 123-BIS, PARAGRAPH 1.E), LEGISLATIVE DECREE 58/98) ......................................................................................................... 15 2.6 RESTRICTIONS ON VOTING RIGHTS (ART 123-BIS, PARAGRAPH 1.F), LEGISLATIVE DECREE 58/98) ............. 15 2.7 AGREEMENTS BETWEEN SHAREHOLDERS (ART 123-BIS, PARAGRAPH 1.G), LEGISLATIVE DECREE 58/98) .. 16 2.8 CHANGE OF CONTROL CLAUSES (ART 123-BIS, PARAGRAPH 1.H), LEGISLATIVE DECREE 58/98) AND PROVISIONS OF THE ARTICLES OF ASSOCIATION RELATING TO TAKEOVER BIDS (ARTS. 104, PARAGRAPH 1- TER, AND 104-BIS, PARAGRAPH 1) .......................................................................................................... 16 2.9 MANDATES TO INCREASE SHARE CAPITAL AND AUTHORISATIONS TO PURCHASE TREASURY SHARES (ART. 123-BIS, PARAGRAPH 1. M), LEGISLATIVE DECREE 58/98) ....................................................................... 17 2.10 MANAGEMENT AND COORDINATION ACTIVITIES (ART. 2497 ET SEQ. OF THE ITALIAN CIVIL CODE) ............... 17 3 ADOPTION OF CODES OF CONDUCT (ART 123-BIS, PARAGRAPH 2.A), LEGISLATIVE DECREE 58/98) ..................................................................................................................................................... 18 4 BOARD OF DIRECTORS ...................................................................................................................... 19 4.1 APPOINTMENTS AND REPLACEMENTS (ART. 123-BIS, PARAGRAPH 1.L), LEGISLATIVE DECREE 58/98) ........ 19 4.2 COMPOSITION OF THE BOARD (ART 123-BIS, PARAGRAPH 2.D) AND 2.D-BIS), LEGISLATIVE DECREE 58/98) …………………………………………………………………………………………………………………23 4.2.1 Maximum accumulation of offices that can be held in other companies ................................... 29 4.3 ROLE OF THE BOARD OF DIRECTORS (ART. 123-BIS, PARAGRAPH 2.D), LEGISLATIVE DECREE 58/98) ........ 31 4.4 CHAIRMAN OF THE BOARD OF DIRECTORS .............................................................................................. 36 4.5 RESPONSIBLE BODIES ........................................................................................................................... 37 4.5.1 Chief Executive Officer .............................................................................................................. 37 4.5.2 Executive Committee (under art. 123-bis, paragraph 2, letter d), Legislative Decree 58/98) ... 38 This is a translation into English of the original in Italian. The Italian text shall prevail over the English version. 2 2018 Report on corporate governance and ownership structure - FY 2017 4.5.3 Information for the Board of Directors ........................................................................................ 40 4.6 OTHER EXECUTIVE DIRECTORS ............................................................................................................. 41 4.7 INDEPENDENT DIRECTORS ..................................................................................................................... 41 4.8 LEAD INDEPENDENT DIRECTOR .............................................................................................................. 41 5 PROCESSING OF CORPORATE INFORMATION ............................................................................... 43 6 BOARD COMMITTEES (ART. 123-BIS PARAGRAPH 2D), LEGISLATIVE DECREE 58/98) ............ 44 7 NOMINATIONS COMMITTEE ............................................................................................................... 45 7.1 COMPOSITION AND FUNCTIONING OF THE NOMINATIONS COMMITTEE (ART. 123-BIS, PARAGRAPH 2.D), LEGISLATIVE DECREE 58/98) ................................................................................................................. 45 7.2 FUNCTIONS OF THE NOMINATIONS COMMITTEE ....................................................................................... 46 8 REMUNERATION COMMITTEE ........................................................................................................... 49 8.1 COMPOSITION AND FUNCTIONING OF THE REMUNERATION COMMITTEE (ART. 123-BIS, PARAGRAPH 2.D), LEGISLATIVE DECREE 58/98) ................................................................................................................. 49 8.2 FUNCTIONS OF THE REMUNERATION COMMITTEE .................................................................................... 50 9 REMUNERATION OF DIRECTORS ...................................................................................................... 53 9.1 INDEMNITIES FOR DIRECTORS WHO RESIGN, ARE TERMINATED OR CEASE TO SERVE FOLLOWING A PUBLIC OFFER FOR THE PURCHASE OF SHARES (ART 123-BIS, PARAGRAPH 1.I), LEGISLATIVE DECREE 58/98) ....... 55 10 CONTROL AND RISK COMMITTEE ..................................................................................................... 56 10.1 COMPOSITION AND FUNCTIONING OF THE CONTROL AND RISK COMMITTEE (ART. 123-BIS, PARAGRAPH 2.D), LEGISLATIVE DECREE 58/98) ................................................................................................................. 56 10.2 FUNCTIONS ATTRIBUTED TO THE CONTROL AND RISK COMMITTEE ........................................................... 58 11 INDEPENDENT DIRECTORS COMMITTEE ......................................................................................... 61 11.1 COMPOSITION AND FUNCTIONING OF THE INDEPENDENT DIRECTORS COMMITTEE (ART. 123-BIS, PARAGRAPH 2.D), LEGISLATIVE DECREE 58/98) ......................................................................................................... 61 11.2 FUNCTIONS OF THE INDEPENDENT DIRECTORS COMMITTEE .................................................................... 62 12 STRATEGY COMMITTEE ..................................................................................................................... 64 12.1 COMPOSITION AND FUNCTIONING OF THE STRATEGY COMMITTEE (ART. 123-BIS, PARAGRAPH 2.D), LEGISLATIVE DECREE 58/98) ................................................................................................................. 64 12.2 FUNCTIONS OF THE STRATEGY COMMITTEE ............................................................................................ 65 13 SYSTEM OF INTERNAL CONTROL AND RISK MANAGEMENT ....................................................... 67 13.1 FINANCIAL REPORTING PROCESS - RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS (AS PER ART. 123- BIS, PARAGRAPH 2.B), LEGISLATIVE DECREE 58/98) ............................................................................... 70 13.2 DIRECTOR RESPONSIBLE FOR THE SYSTEM OF INTERNAL CONTROL AND RISK MANAGEMENT ...................... 74 13.3 HEAD OF INTERNAL AUDIT ..................................................................................................................... 76 This is a translation into English of the original in Italian. The Italian text shall prevail over the English version. 3 2018 Report on corporate governance and ownership structure - FY 2017 14 SUPERVISORY BOARD AND ORGANISATION MODEL (LEGISLATIVE DECREE 231/2001) ........ 78 15 AUDIT FIRM ........................................................................................................................................... 81 16 MANAGER RESPONSIBLE FOR PREPARING THE COMPANY'S FINANCIAL REPORTS AND MANAGERS IN CHARGE OF CONTROL FUNCTIONS ...................................................................... 82 17 COORDINATION OF ALL THOSE INVOLVED IN THE SYSTEM OF INTERNAL CONTROL AND RISK MANAGEMENT ............................................................................................................................ 85 18 DIRECTORS' INTERESTS AND RELATED-PARTY TRANSACTIONS AND/OR ASSOCIATED PERSONS .............................................................................................................................................