The By-laws establish that the Company’s Board of Directors may be composed of between nine and fifteen members. With due consideration given to the Company’s increased focus in the automobiles sector following the demerger of the capital goods activities to Fiat Industrial, on 4 April 2012 Shareholders voted – at the recommendation of the Board – to set the number of board members at nine. In addition, in recognition of the benefits of gender diversity among the board’s members, shareholders voted to elect two women directors, resulting in early application by the Company of the legal requirements that will apply from 2015. Under Article 11 of the By-laws, Board members are elected through a voting list system, which ensures minority shareholders the opportunity to elect a director to the Board. The minimum equity interest required for submission of a list of candidates is established by Consob with reference to the Company’s market capitalization in the fourth quarter of the last financial year of the Board’s mandate. Each list must indicate at least one candidate that satisfies the legal requirements for independence.
The voting list system was utilized for the first time for the election of the Board of Directors at the General Meeting of 27 March 2009 and was used for the renewal of the Boards of Directors and Statutory Auditors at the General Meeting of 4 April 2012. The Company invited shareholders who, individually or jointly with others, owned at least 1% of ordinary shares (as established by Consob with reference to Fiat’s average market capitalization for the fourth quarter of 2011) to submit lists of candidates – indicated in numerical order and who satisfied the requirements of law and the Company’s By-laws – to the Company at its registered office at least 25 days prior to the General Meeting.
Two lists of candidates for the Board of Directors were presented: one list was presented by EXOR S.p.A., holder of 30.465% of shares, and the other by a group of Italian and international asset managers and institutional investors, holders of a combined 1.86% of shares.
Under Article 16 of the By-laws, all directors with executive responsibilities are vested, separately and individually, with the power to represent the Company and under Article 12 the Vice Chairman, if appointed, shall act as Chairman if the latter is absent or unable to carry out his duties. In application of this provision, the Board of Directors has, as in the past, adopted a model for delegation of broad operating powers to the Chairman and the Chief Executive Officer by which they are authorized, separately and individually, to perform all ordinary and extraordinary acts that are consistent with the Company’s purpose and not reserved by law for, or otherwise delegated or assumed by, the Board of Directors itself. In practice, the Chairman has the role of coordination and strategic direction for the activities of the Board of Directors, while the Chief Executive Officer is responsible for the operational management of the Group. From an operational perspective, the Chief Executive Officer is supported by the Group Executive Council (GEC), a decision-making body led by the Chief Executive and composed of the heads of the operating sectors and certain central functions. As a result of the acquisition of majority ownership of Chrysler Group and consistent with the objective of enhancing the operational integration of Fiat and Chrysler, on 1 September 2011 a new Group Executive Council was formed which is composed of 4 main groupings: regional operations, brands, industrial processes, and support/corporate functions. Certain functions that are fundamental to the governance structure of individual companies (such as Legal and Internal Audit) remain independent within the ambit of the operating companies (Fiat and Chrysler Group).
Effective 1 January 2011, the Company adopted procedures for transactions with related parties to ensure full transparency and substantial and procedural fairness in transactions with related parties, as defined under IAS 24. The Procedures define “significant transactions” which require the prior approval of the Board – subject to the binding opinion of the Internal Control and Risk Committee, which is the committee responsible for related-party transactions, with the exception of those matters relating to compensation, for which the Compensation Committee is responsible – and must be publicly disclosed in the form of an information document.
Other transactions, except those falling within the residual category of minor transactions – i.e., transactions less than €200,000 in value or, for transactions with legal entities having consolidated annual revenues in excess of €200 million only, transactions less than €10 million in value – are defined as “non-significant” and may be entered into with the prior non-binding opinion of the above committee. The Procedures also establish exemptions, including: transactions taking place in the ordinary course of business and entered into at standard or market terms; transactions with or between subsidiaries and transactions with associates, provided that no other parties related to the Company have a significant interest; and transactions of minor value.
The task of implementing the Procedures and disseminating them to Group companies is assigned to the manager responsible for the Company’s financial reporting, who must also ensure coordination with the administrative and accounting procedures required under Article 154-bis of Legislative Decree 58/1998.
As established in the “Guidelines for Significant Transactions”, transactions having a significant impact on the Company’s earnings and financial position are subject to prior examination and approval by the Board.
Accordingly, the powers attributed to the executive directors specifically exclude decision-making authority for significant transactions, pursuant to the criteria for significance established by Consob. A reasonable period in advance of the Company undertaking a significant transaction, the executive directors are to provide the Board a summary report on their analysis of the strategic compatibility, economic feasibility and expected return.
As provided under Articles 70 (8) and 71 (1-bis) of the Consob Issuer Regulations, on 30 October 2012 the Board of Directors approved the opt-out from the obligation to publish an information document for significant transactions (e.g., significant mergers, spin-offs, share capital increases by means of in-kind contributions of assets, acquisitions and disposals).
Pursuant to Article 12 of the By-laws, after consultation with the Board of Statutory Auditors, the Board of Directors appoints one or more managers responsible for the Company’s financial reporting. If more than one manager is attributed that responsibility, it is to be carried out jointly and with joint responsibility. It is a requirement that the individual(s) appointed have several years of accounting and financial experience within a large company. In implementation of that provision, the Board of Directors appointed the Chief Financial Officer as the manager responsible for the Company’s financial reporting, vesting him with the relevant powers.
At 31 December 2013, the Board of Directors was composed of three executive directors and six non-executive directors (i.e., directors without specific executive powers or responsibilities within the Company or the Group), four of whom qualified as independent on the basis of the criteria approved by Shareholders on 4 April 2012 and adopted for past elections. All of those independent directors (Joyce Victoria Bigio, René Carron, Gian Maria Gros-Pietro and Patience Wheatcroft) also meet the independence requirements established under Legislative Decree 58/98.
The Chairman and Chief Executive Officer are executive directors. They also hold executive responsibilities at subsidiary companies: John Elkann is Chairman of Editrice La Stampa S.p.A. and Sergio Marchionne, in addition to being Chairman of the principal subsidiaries, is also Chairman and Chief Executive Officer of Fiat Group Automobiles S.p.A. and of Chrysler Group LLC. Luca Cordero di Montezemolo also qualifies as an executive director by virtue of his position as Chairman of Ferrari S.p.A.
An adequate number of independent directors is an essential element in protecting the interests of shareholders, particularly minority shareholders, and third parties. For this reason, considering it to be significantly in the Company’s interests to maintain adequate guarantees against potential conflicts of interest, in its proposal of 22 February 2012, the Board of Directors recommended that, in relation to re-election of the Board on 4 April 2012, Shareholders elect a significant number of independent directors. In consideration of the current legal requirement that at least two directors are independent and the provision of the Corporate Governance Code that at least one-third of the members of the Board of Directors are independent, Shareholders voted to elect four directors who meet the requirements of independence adopted for previous elections.
The independence of directors is assessed annually and is based on the absence or non-relevance, during the previous three years, of economic or shareholding relationships or other relationships, whether direct, indirect or on behalf of third parties, with the Company, its executive directors and executives with strategic responsibilities, its controlling companies or subsidiaries, or any other party related to the Company. The criteria also exclude directors as being considered independent if they were partners or directors of major competitors, rating agencies or audit firms engaged by the Company or Group companies in the previous three years, or are executive directors at other companies where the Company’s directors are non-executive directors. The results of those assessments are published in the Annual Report on Corporate Governance.
The Board of Directors verified that Joyce Victoria Bigio, René Carron, Gian Maria Gros-Pietro and Patience Wheatcroft satisfied the requirements of independence.
Some directors also hold positions at other listed companies or companies of significant interest. Excluding the positions held by the executive directors within Fiat Group, the most significant are as follows:
- Andrea Agnelli: Chairman of Juventus FC S.p.A., General Partner of Giovanni Agnelli e C. S.a.p.A., Director of EXOR S.p.A. and Member of the Advisory Board of BlueGem Capital Partners LLP;
- Joyce Victoria Bigio: Director of Simmel Difesa S.p.A. and Gentium S.p.A.;
- Tiberto Brandolini D’Adda: Chairman of EXOR S.A., General Partner of Giovanni Agnelli e C. S.a.p.A. and Vice Chairman of EXOR S.p.A.;
- Luca Cordero di Montezemolo: Chairman of Charme Management S.r.l., Vice Chairman of UniCredit S.p.A., Director of Poltrona Frau S.p.A., N.T.V. S.p.A., Tod’s S.p.A., Kering S.A. (previously Pinault Printemps Redoute S.A.), Montezemolo & Partners SGR and Delta Topco Ltd.;
- John Elkann: Chairman of Giovanni Agnelli e C. S.a.p.A., Chairman and Chief Executive Officer of EXOR S.p.A., Director of CNH Industrial N.V., Gruppo Banca Leonardo S.p.A., The Economist Group and News Corporation;
- Gian Maria Gros-Pietro: Chairman of ASTM S.p.A., Chairman of the Management Board of Intesa Sanpaolo S.p.A. and Independent Director of Edison S.p.A. and Caltagirone S.p.A.;
- Sergio Marchionne: Chairman of CNH Industrial N.V., CNHI International S.A., Iveco S.p.A., FPT Industrial S.p.A. and SGS S.A., Director of EXOR S.p.A. and Philip Morris International Inc.;
- Patience Wheatcroft: Member of the Advisory Board of Huawei Technologies (UK) and Bell Pottinger LLP, Non‑executive Director of St. James’s Place PLC.