The Group’s governance supports the Group’s mission to grow and create value by supplying innovative products and services for maximum customer satisfaction with due respect to the legitimate interests of all categories of stakeholders.
The Group's governance structure consists of a management and control system and general meetings of shareholders. In addition, as required by law, the accounts are reviewed by independent auditors.
The system of management and control adopted by Fiat is based on a Board of Directors and a Board of Statutory Auditors. Within that structure, the Board of Directors – which is responsible for management and, both directly and through committees assigned propositive and advisory functions, ensuring that controls to adequately monitor company performance are in place – is supported by the Board of Statutory Auditors that has an independent role and powers and is composed of individuals who meet the requirements of professionalism, integrity and independence prescribed by law and the By-laws.
The Board of Directors is vested with the broadest powers for the ordinary and extraordinary management of the Company. It guides the Group’s activities through definition of a model of delegation and the direct delegation and revocation of powers, as well as review, approval and continuous monitoring of: the strategic, industrial, and financial plans formulated by directors with executive powers; the organizational structure of the Group; transactions having a material impact on the earnings and financial position of the Group; transactions in which the executive directors have a conflict of interest; and, transactions with related parties that are subject to its approval pursuant to the relevant procedures.
Based on the recommendations of the Internal Control and Risk Committee, the Board also sets guidelines for the system of internal control and risk management aimed at identifying, measuring, managing and monitoring the principal risks to which the Company and its subsidiaries are exposed, determining the level of acceptable risk consistent with its strategic objectives. The Board of Directors is also responsible for: evaluating the adequacy of the organizational, administrative, and accounting structure; the system of risk management and internal control; and the general performance of the Group on the basis of reports from the executive directors, as well as for supervising effective compliance with the administrative and accounting procedures and the adequacy of the powers and resources attributed to the manager responsible for the Company’s financial reporting.
The Board of Statutory Auditors is responsible for supervising compliance with law and the By-laws, respect of the principles of proper management and, in particular, the adequacy of the internal control and risk management system and the organizational, administrative, and accounting structure of the Company and its effective functioning, in addition to supervising effective implementation of the rules of corporate governance to which the Company adheres. It is also the role of the Statutory Auditors to make recommendations to shareholders in relation to the independent auditors’ appointment, removal and compensation.
General meetings are the mechanism through which all shareholders are represented. At ordinary general meetings, shareholders vote on approval of the annual financial statements, appointment and dismissal of members of the Board of Directors, appointment of members of the Board of Statutory Auditors and its Chairman, compensation of the Directors and Statutory Auditors, engagement of the independent auditors, and actions relating to the obligations of the Directors and Statutory Auditors. At extraordinary general meetings, shareholders vote on amendments to the By-laws and transactions of an extraordinary nature such as capital increases, mergers and demergers, except where decision-making authority is attributed to the Board of Directors under Article 15 of the By-laws, as indicated above. As required under Article 123-ter of Legislative Decree 58/98, the Compensation Policy, which forms the first section of the Compensation Report, is submitted to the non-binding vote of shareholders.
In 1999, the Board of Directors established following commitees: the Internal Control Committee and the Nominating and Compensation Committee.
The roles and requirements of these committees are constantly updated to reflect current best practice in corporate governance.
In 2007, as part of the continuous review of the system of corporate governance and to better align itself with best practice, the Board passed a resolution to split the Nominating and Compensation Committee into the Compensation Committee and the Nominating and Corporate Governance Committee.
In recognition of the importance of integrating economic choices with those of a social and environmental nature, in 2009 Fiat S.p.A. assigned the Nominating and Corporate Governance Committee the further responsibility of evaluating proposals related to strategic guidelines on sustainability-related issues and for reviewing the annual Sustainability Report, changed its name to Nominating, Corporate Governance and Sustainability Committee.
The Committee is composed of the following three directors, two of whom are independent: John Elkann (Chairman), Joyce Victoria Bigio and Patience Wheatcroft.
The governance structure demonstrates the important role attributed to management of sustainability topics across the business: at Fiat Group, each employee and every organization plays a role in helping the company continue to follow the path of continuous improvement and long term commitments which are at the core of our sustainability model.
Composition of highest governance bodies and its committees
For a description of composition of the highest governance body and its committees please see the table provided in the 2014 Annual Report of Corporate Governance at page 17, 19, 20 and 23.
Executive powers of the Chairman
The Chairman of the Board of Directors, John Elkann is an executive. The model for delegation of powers, which is described in detail in this Report, is based on the fact that the Chairman and Chief Executive Officer have the same powers. In practice, the Chairman provides the 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. This division of responsibilities complies with the Code principle, which states that in principle, the Chairman should not be responsible for operational management of the Company. Accordingly, Fiat has not deemed it necessary to appoint a lead independent director.
Qualification and expertise of Directors
With regard to the nomination and selection process of the Board of Director and its committees, criteria considered include independence, expertise and precedent experiences.
The Board of Directors is currently made up of nine members, four of whom are independent. The current number also allows for the Board to continue to have an adequate mix of technical abilities, professional background and experience, both general and specific, gained in an international environment and pertaining to the dynamics of the macro-economy and globalization of markets, more generally, as well as the industrial and financial sectors, more specifically. It also allows for a mix of skills and experience that is adequate in terms of the size of the Company and the Group, as well as the complexity and specific characteristics of the sectors in which the Group operates and the geographic distribution of its businesses.
It was the Board’s view that a reduction in the number of members was appropriate in consideration of the Group’s increased concentration in the automobiles business, and would also facilitate more effective execution of the Board’s activities, while at the same time ensuring adequate diversity of membership on the Committees. The Board also emphasized the benefits of gender diversity in its membership.
The Internal Control and Risk Committee established by the Board of Directors of Fiat S.p.A. (the Committee) is composed of at least three independent directors with adequate experience in accounting and financial matters or risk management. The Committee’s members and Chairman are appointed by the Board of Directors, which may also dismiss them. If the Board has not already done so, the Committee may appoint a secretary that need not be one of its members.
The Nominating, Corporate Governance and Sustainability Committee is composed of at least three Directors, the majority of whom independent. The Board of Directors appoints the members of the Committee and its Chairman. The Committee may name a secretary that need not be one of its members; the Secretary draws up the minutes of the meetings.
The Compensation Committee is composed of three non-executive directors, the majority of whom are independent. The Committee’s members and Chairman are appointed by the Board of Directors. If the Board has not already done so, the Committee may appoint a secretary that need not be one of its members. The Secretary is responsible for preparing minutes of the meetings.
Relations with shareholders is an essential element of the Group governance structure. The Company has created dedicated entities to establish and maintain a constant dialog with the market for the purpose of maintaining the confidence of investors and improving their understanding of the Company and its activities.
Throughout the year, the Investor Relations team maintains constant contact with financial analysts, individual shareholders and institutional investors, as well as organizing conference calls and public presentations to present financial results, and participating in industry conferences. Information presented and discussed on those occasions is also published on the Company’s website (www.fiatspa.com). Corporate information, regular and extraordinary financial information, the corporate calendar, and corporate governance documentation are also available on the website (in both Italian and English). Shareholders can request general information or information on specific transactions by phone (toll free in Italy: 800-804027) or by e-mail (firstname.lastname@example.org and email@example.com).
Fiat General Meeting, during which every year Financial as well as Sustainability performances are presented to the public, represent an important and traditional occasion for communicating with shareholders.
Process to avoid conflict of interest
The Group is aware of the corrosive effects that corruption has on societies, and its impact undermining democracy and the rule of law.
All business relationships are expected to be established and maintained with integrity and loyalty and without any conflict of interest between business and personal affairs. The Fiat Group, its directors, officers, other employees and others to whom the Code is addressed are committed to the highest standards of integrity, honesty and fairness in all internal and external affairs, in compliance with national and international anti-corruption laws, with particular reference to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the OCSE Guidelines and Foreign Corrupt Practices Act (“FCPA”). The Group will not tolerate any kind of bribery (paying or offering to pay to obtain an improper business advantage) to public officials or representatives of international organizations or any other party connected with a public official and to private entities/individuals or which is otherwise prohibited by applicable laws.
To ensure the highest standards are met, principles of fairness, transparency and integrity have been included in detail in the relevant guidelines (Business Ethics and Anti-Corruption Guidelines and Conflict of Interest Guidelines) and, together with the requirements of local law, they are to be adhered to by all employees, agents, suppliers and other individuals and entities that have a business relationship with the Group.
The Fiat S.p.A. Guidelines specifically address:
- the prohibition of cash gifts to public officials, politicians or military personnel aimed at obtaining economic advantages for Group companies
- the need to include clauses in outsourcing and joint venture agreements that specify the consequences of violating anti-corruption laws
- the prohibition of gifts and benefits-in-kind for the purpose of gaining preferential treatment
- the possibility of donations for charitable purposes only and the requirement that contributions to political parties must be approved by top management
- full compliance with laws applicable to the export of goods and services.
For what concern the highest governance bodies highest standard of transparency and strict criteria are followed:
- as 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 cross-board membership are reported to the public in the Annual Report on Corporate Governance
- An adequate number of independent directors is an essential element in protecting the interests of shareholders, particularly minority shareholders, and third parties, assuring that potential conflicts between the interests of the Company and those of the controlling shareholder are assessed impartially. The contribution of independent directors is also fundamental to the composition and proper functioning of committees tasked with undertaking ex ante evaluations of risk and, where identified, formulating proposals to address that risk. Those committees represent one of the most effective means of managing potential conflicts of interest. The Board has entrusted the Nominating, Corporate Governance and Sustainability Committee with the duty of selecting and proposing, at the time of co-opting or renewal of mandates, nominees to the Board of Directors, in consideration of the number of positions they already hold, indicating the specific individual and/ or the qualifications required
- independent criteria: The Board of Directors is currently made up of nine members, four of whom are independent. On 4 April 2012, Shareholders elected a new Board of Directors with a significant representation of independent directors. In addition to the two independent directors required by law and in consideration of the recommendation of the Corporate Governance Code that at least one-third of directors be independent, Shareholders elected a total of four directors who met the requirements of independence adopted for previous elections
- related party disclosure: The Internal Control and Risk Committee is responsible for carrying out the functions of the committee for transactions with related parties, except where related to compensation.
With adoption of the procedures for transactions with related parties pursuant to Consob Regulation 17221 of 12 March 2010 (as amended) the Compensation Committee was assigned responsibility, for matters relating to compensation only, for reviewing transactions with related parties. Accordingly, the Committee is required to give an opinion on the substantial and procedural fairness of transactions with related parties of particular significance, as defined in those procedures. To enable it to perform that role, the Committee is provided timely and adequate information on transactions during the evaluation phase, and, for significant transactions, it has the authority to communicate its views to the individuals responsible for conducting negotiations. During the year, the Committee provides the Boards of Directors and Statutory Auditors a quarterly report on transactions with related parties.
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 58/98.
As established in the “Guidelines for Significant Transactions” (previously the “Guidelines for Significant Transactions and Transactions with Related Parties”), any transaction having a significant impact on the Company’s earnings and financial position is subject to the prior examination and approval of the Board.
Evaluation of the Board of Directors’ performance
The Committee also met on 26 February 2014 to examine the Corporate Governance and Sustainability Reports for 2013, as well as conducting the annual evaluation of the activities of the Board and its Committees for 2013 through a self-evaluation questionnaire. The positive results of that evaluation were reported to the Board during the meeting of 27 February 2014. All non-executive directors participated in the self-evaluation process, which examined the size, composition, mix of skills and experience, and functioning of the Board. There was also a comprehensive review of the various activities of the Committees.
The analysis focused on the most material aspects relating to the Board of Directors as a collective body, individual Directors and their performance and the Committees. In particular the analysis evaluated: (i) the structure, composition, role, functioning and responsibilities of the Board and each of its Committees; (ii) procedures for board and committee meetings, management of information and decision-making processes; (iii) the effectiveness, efficiency and completeness of the information provided to the Board on the work of the Committees; (iv) the relationship between the Board, the Committees and the Statutory Auditors; (v) an evaluation of the performance of the various boards and committees; and, (vi) the value of the self-evaluation process itself. Directors were also given the opportunity to comment on issues of a general nature. The overall conclusion of the evaluation process was very positive in terms of the e ffective and efficient functioning of the Board of Directors and its Committees. One of the most positive aspects to emerge from the self-evaluation process was the quality and depth of discussion, as well as the level of interaction and transparency. In particular, it was noted that the cohesive atmosphere between the executive and non-executive directors during meetings, as observed in previous self-assessments, was conducive to open and constructive debate, with due respect given to the contribution of each director leading to decisions typically being reached with a broad consensus.
The quality and completeness of documents and information provided to directors and the timeliness with which they were made available was considered more than satisfactory. Comparable results were found with reference to the work of the Committees with particular appreciation for the level of access to management made available to the directors. Identified areas for improvement related substantially to opportunities for more in-depth examination of issues relative to the competitive environment and, when possible, faster access to information.