Some aspects of the Group's Corporate Governance which are particularly relevant (material) to the reporting of sustainability in accordance with the GRI-4 guidelines are briefly illustrated below. For a more detailed and comprehensive description see the 2015 Report on Corporate Governance and Share Ownership, the Report on Remuneration, the Bylaws and the Group Governance Procedures, available at www.telecomitalia.com.
[G4-34], [G4-35], [G4-40] The Group's Board of Directors is appointed by the Shareholders' Meeting based on slates submitted by eligible voters who own a total of at least 0.5% of the ordinary share capital (or any other amount that may be required by the regulations issued by Consob). The existing Board of Directors was appointed by the Shareholders' Meeting on April 16, 2014. In December 2015, the number of Directors increased from 13 to 17 with the appointment of 4 Directors at the request of the reference shareholder Vivendi S.A.. [G4-38], [G4-40] The only stakeholders represented on the Board are therefore the shareholders. Directors' powers are granted (and revoked) by the Board of Directors, which determines the purpose, limits and methods by which they are exercised.
[G4-40] The Group's Bylaws require the least represented gender to account for at least one third of the total number of directors, rounded up to the next unit in the event of a fraction. The independence of a minimum number of directors is required by the law (Consolidated Law on Finance) based on the overall composition of the Board; the same law and the Corporate Governance Code of Borsa Italiana also define the criteria for the independence of directors. An amendment made to the Bylaws of Telecom Italia in May 2015 introduced the principle that at least half of the candidates and elected members from each slate must be independent when the Board of Directors is renewed. Reference is made either to the legal independence requirements or the Corporate Governance Code drawn up by the Corporate Governance Committee of Borsa Italiana, with which Telecom Italia complies.
[G4-40] In delivering its guidance to shareholders, with a view to the Shareholders' Meeting called to renew the Board of Directors on April 16, 2014, the outgoing Board of Directors expressed a few wishes regarding the new Board, including:
- the skills which were deemed to be necessary were a knowledge of the telecommunications and/or information technology sectors (including regulations) or associated areas of business, strategic guidance, finance, communication and organisation, risk management and internal control. In terms of professional background, people of managerial extraction were to be preferred (primarily: CEOs or CFOs of significantly large companies), but the contribution of academic experts in finance and taxation, risks, law or the technical sector in which the Group operates were also judged useful;
- international openness was desirable, with the inclusion in the slate of non-Italian candidates, i.e. individuals who had gained professional experience overseas;
- a balanced mix of the various components was required, as the coexistence of diverse skills and experience ensures the complementarity of professional profiles, promoting fruitful discussion and the efficient operation of the Board, in the knowledge that specialised skills can be contributed by internal structures or, if necessary, by external consultants, and that the complexity of the matters to be dealt with suggest that candidates with prior experience gained on the boards of listed companies would be appropriate (see Resolution Proposals - Shareholders' Meeting of April 16, 2014, available at www.telecomitalia.it)
The Board of Directors in office consists of 16 members, including 9 independents. 6 of the Board members are women and the female gender is the only social subgroup represented. Table 2 “Structure of the Board of Directors and Committees and other positions held" contained in the RCG, shows for each director their term of office, the committees to which they belong, the number and nature of other positions they hold, the slate to which they belong (indicating "LSGR" in the case of appointment with a slate vote and candidacy by the SGR and Institutional Investor Slate, indicating "LT" in the case of appointment with a slate vote and candidacy by the Telco Slate or "T" in the case of original candidacy in the Telco slate but appointment by the Shareholders' meeting by ordinary vote, indicating "V" in the case of appointment of candidates proposed by Vivendi S.A. during the Shareholders' meeting on December 15, 2015) whether they are independent, executive or non-executive. Each Director's CV can be viewed on the website www.telecomitalia.com The Group channel, Governance System/Corporate Bodies section. The Directors' skills in the field of economics range from university teaching to graduate and post-graduate studies, specific training in the field of mergers and acquisitions, and experience with stock market supervision authorities and at the top of big companies. One Director also declares that he/she has worked on sustainability-related projects. [G4-47] 13 meetings of the Board of Directors were held in 2015.
[G4-43] The Directors take part in specific meetings with the management or external consultants, aimed at providing adequate knowledge of the industry in which the Company operates, business dynamics and their evolution. Business lunches, workshops on new technologies and educational-informative meetings are held prior to strategic meetings. Updates regarding the relevant legislative framework are provided in specific briefing notes. During the year, the Directors attended a specific meeting on sustainability matters, which saw also the participation of an expert in this field from the KPMG Group and the Head of Corporate Shared Value department. As happened in 2015, specific meetings on sustainability are planned.
[G4-34], [G4-40] Currently the committees set up within the Board of Directors are the Control and Risk Committee and the Nomination and Remuneration Committee. Significant transactions with related parties are subject to scrutiny by the Control and Risk Committee, in the case of minor transactions, or by a Committee consisting of all the Independent Directors, in the case of more significant transactions. The process of selecting and appointing members of the Committee, and the independence and competence requirements are described in the Nomination and Remuneration Committee Regulations and in the Control and Risk Committee Regulations, both available on the www.telecomitalia.com.
[G4-44a] The self-assessment of the size, composition and operation of the Board and its Committees for 2015 was performed by means of a questionnaire consisting of five series of questions relative to (i) the composition of the Board and internal committees; (ii) the items discussed, as well as the frequency and method of preparation of the meeting; (iii) the investigative process and decision-making procedure; (iv) the induction and training initiatives offered to Directors; (v) the analysis of the progress made compared to the previous self-assessment. The board review has been carried out annually since 2005. For 2015, as there was no need to give the Shareholders guidance for the renewal, and in order to guarantee the independence of the assessment process, the self-assessment was carried out by the Directors by completing an online questionnaire (for remote access). The results of the board review where then discussed by the Nomination and Remuneration Committee and subsequently by the full board, commenting on the strengths and areas for improvement, with a view to achieving continuous improvement.
[G4-44b] Further information on the assessment methods and results are illustrated in the RGS. The 2015 self-assessment did not tackle issues of sustainability.
The Shareholders' Meeting of April 16, 2014 appointed Giuseppe Recchi as Chairman and the subsequent meeting of the Board of Directors of April 18 appointed Marco Patuano as CEO. Subsequently, on March 22, 2016, Marco Patuano resigned and, on March 30, 2016, the Board of Directors appointed director Flavio Cattaneo as CEO. The Board of Directors considers its current composition to be appropriate and, at the Shareholders' Meeting convened for May 25, 2016, it will propose to reduce the number of Directors from 17 to 16.
Also on March 30, 2016, the Board of Directors updated the proxies granted to the two Executive Directors.
The proxies and powers granted to the Chairman include:
- determining the guidelines for the development of the Group, in agreement with the CEO, with powers to identify and analyse extraordinary operations;
- supervising the strategic, industrial and financial planning process, the implementation of these plans and their development and monitoring the implementation of board resolutions;
- supervising the definition of organisational structures and the power to organise and determine the size of the workforce and resources required to exercise his functions, making direct use of the People Value department, which reports to the CEO;
- supervising the economic and financial performance of the companies and the Group;
- supervising the process of examining and devising the structure of the internal control system;
- supervising security and the Telecom Italia Sparkle company;
- representing the company and the Group in external relations with all Authorities, Italian and international Institutions and investors (on the understanding that Investor Relations department reports to the CEO);
- organisational responsibility for the following departments that report directly to him:
- Legal Affairs (save for the CEO's power to make use of the Legal Affairs Department for the operational management support required)
- Institutional Communication (save for the CEO's power to make use of the Press Office for the operational management support required in coordination with the Executive Chairman);
- Public Affairs;
- responsibility for the Brand Strategy and Media function;
- organisational responsibility for the Corporate Shared Value (CSV) department ([G4-48] including responsibility for drawing up the sustainability Report) and governance of the Fondazione Telecom Italia.
- responsibility for administration (which include drawing up the Financial Statements), ordinary and extraordinary finance, taxation activities, management control and Investor Relations;
- responsibility for devising, proposing to the Board of Directors and then implementing and developing strategic, industrial and financial plans;
- responsibility for defining organisational structures, personnel policies and relations with trade unions;
- all organisational responsibilities for managing and developing the business in Italy and South America;
- responsibility for market disclosure, with reference to the Company;
- "employer" responsibility for the health and safety of workers in the workplace, with reference to the Company;
- responsibility and powers regarding the handling and protection of personal data, with reference to the Company.
[G4-35], [G4-36] The system by which the Executive Directors (Chairman and CEO) delegate powers to the departments that report to them is the subject of a specific company procedure that establishes the methods by which this system must be implemented (Granting and Revocation of Powers). Powers are normally granted to those reporting directly to the executive directors and, in particular, for matters of an economic and financial nature, they are granted to those reporting to the CEO who deal with such matters, while for sustainability the powers are delegated to those in charge of the CSV department reporting to the Chairman. Those reporting directly can in turn assign specific powers to specific departments; [G4-37] in particular, powers are granted in this way to consult stakeholders (customers, suppliers, government local offices, employees etc., described in the Stakeholder Engagement paragraph of Corporate Shared Value chapter).
[G4-41] The company procedure for transactions with related parties1, drawn up in accordance with Consob Regulation no. 17221 of March 12, 2010, is systematically updated (the latest revision is dated March 17, 2016) and is illustrated in the Report on Corporate Governance and Share Ownership, see Directors' Interests and Transactions with Related Parties. The disclosure of any transactions with related parties during the relevant period is included in the "Transactions with related parties” chapter of the Annual Financial Report.
[G4-45], [G4-46], [G4-14] The internal control and risk management system consists of a set of rules, procedures and organisational structures intended to ensure the healthy and proper management of the Company, in a way that is consistent with the established goals, through an appropriate key risk identification, measurement, management and monitoring process. Being responsible for the internal control and risk management system the Board of Directors defines the system guidelines, verifying their adequacy, effectiveness and proper operation, so as to ensure that the main risks facing the Company (including operational, compliance, economic and financial risks) are correctly identified and managed over time.
The establishment and maintenance of the internal control system are entrusted to the Executive Directors, each in his/her own delegated area, and to the Executive responsible for preparing the Company's accounting documents in his/her area of responsibility, so as to ensure the overall adequacy of the system and its effectiveness, from a risk-based perspective, which is also considered when determining the agenda of Board meetings. Coordination between the parties involved in the internal control and risk management system is illustrated in the Report on Corporate Governance and Share Ownership.
The internal control system is contained in the so-called “Organisational Model 231”, i.e. an organisational and management model adopted pursuant to Legislative Decree 231/2001, aimed at preventing offences that may result in liability for the Company.
[G4-45], [G4-46], [G4-14] The Group has adopted an Enterprise Risk Management (hereinafter ERM) Model which allows risks to be identified, assessed and managed uniformly within Group companies, highlighting potential synergies between the parties involved in assessing the Internal Control System. Particular focus is placed on the relationship between the ERM process and the business planning process, particularly on determining the acceptable level of risk for the Group (Risk Appetite) and the acceptable degrees of deviation from the main business targets (Risk Tolerance).
The process is managed by the ERM Steering Committee, which is chaired and coordinated by the CFO. The Steering Committee ensures the governance of the Group's risk management, aimed at guaranteeing the operational continuity of the business, monitoring the effectiveness of countermeasures taken. The ERM process is designed to identify potential events that may influence the business activity, in order to manage risk within acceptable limits and provide a reasonable guarantee that business objectives will be achieved. For further details please read the Enterprise Risk Management system section in Being sustainable in Telecom Italia.
[G4-49], [G4-50], [G4-58] In November 2015, Telecom Italia implemented the new Whistleblowing procedure, which provides for the centralised management, by the Audit Department, of all whistleblowing reports - including those that are the responsibility of the Board of Statutory Auditors, particularly in its role as the 231 Supervisory Body - via a compute app which whistleblowers can use to access the Company intranet. Since February 2016 this reporting channel has also been accessible via the Group's website.
Reports may be made by any employee, collaborator, consultant, freelance worker, as well as third parties who have business relations with the Group. The system assigns each report a unique identification code which enables the whistleblower to check the processing status in anonymity. The overall oversight by the Audit Department Manager is intended to make an assessment of the Internal Control System's ability to contribute to the achievement of objectives assigned to the individual departments of the company (effectiveness profile), considering the rational use of resources for their achievement (efficiency profile) and in light of the risk factors (qualitative and quantitative) and the likelihood of them influencing the achievement of the said objectives.
[G4-57], [Dma labor practice Grievance mechanisms] As stated in article 4 of the Group Code of Ethics and Conduct, any requests for clarification regarding the appropriateness of one's own conduct or the conduct of other people, in order to ensure full compliance with the Code and the values set by the Code itself, must be addressed to the Head of the Audit Department of Telecom Italia S.p.A. or to the Head of the Audit Department of the Group's overseas company directly involved, in accordance with specific internal procedures. [G4-58] Using the Whistleblowing procedure, the same entities must be promptly informed of the following by the recipients of the Code and those who have undertaken to comply with it:
- any violations, requests or inducements to violate legal provisions or regulations, provisions of the Code and internal procedures with regard to the activities and services of interest to the Group;
- any irregularities or negligence in accounting procedures, keeping of relevant accounting documentation, fulfilling reporting obligations or internal management in Gro
There are no negative consequences for people who make reports in good faith.
The confidentiality of the identity of people making reports is in any case guaranteed by appropriate internal procedures, subject to legal requirements. No recipient of the Code, employee or third party having business relations with the Group can be subject to sanctions or otherwise discriminated against if he/she refuses to perform actions or adopt a conduct which are considered, in good faith, to infringe the Code, even if this refusal should result in a loss of business or other adverse consequence for the company's business and/or the Group. The Brazilian subsidiary TIM Participações also uses a report reception system based on a form, also accessible via the Company's website, that allows the report to be received at an email address, equipped with computer security systems, for its subsequent management.
[G4-50] In 2015, via the internal control reporting procedure, 156 reports were received from Italy and 343 from Brazil, most of them relating to alleged inefficiencies. The Human Rights section of the Being sustainable at Telecom Italia chapter and the Reports received via the internal control procedure of the Telecom Italia People chapter illustrate the reports received concerning alleged violations of human and employment rights2.
[G4-50] The Board of Statutory Auditors' Report states the number of reports received via the Board of Auditors' Reporting Procedure and provides summary of the investigations carried out by the Board itself with the support of the Group Compliance Officer, (see 2015 Annual Report). In 2015 the Supervisory Body received only one report which did not however relate to the Code of Ethics, Human Rights or 231 Organisational Model.
- [G4-53] the Shareholders' Meeting determines the total gross annual remuneration of the Board of Directors (and of the directors holding specific offices: Chairman and CEO); expresses an opinion on the first section of the Remuneration Report; passes resolutions regarding remuneration plans based on the allocation of financial instruments;
- the Board of Directors passes resolutions to determine how the remuneration set by the Shareholders' Meeting will be distributed (when it is established as a total amount for the Board in its entirety); determines the remuneration policy for Executive Directors and key managers with strategic responsibilities; determines the remuneration of Directors holding special offices.
The Board of Directors is also responsible for making proposals to the Shareholders' Meeting regarding remuneration plans based on the allocation of financial instruments for Directors and employees and for drawing up the Remuneration Report.
[G4-52] In order to ensure that the choices made regarding remuneration are appropriately investigated, in accordance with the rules on transparency and the strict regulations on potential conflicts of interest, the Board of Directors relies on the support of the Nomination and Remuneration Committee. In performing its duties, the Committee (the meetings of which are attended by the Chairman of the Board of Statutory Auditors or by another Auditor appointed by him/her, subject in any case to the freedom for other Auditors to attend the meeting) relies on the assistance provided by relevant departments of the Company and may also rely on the support of external consultants whose position does not compromise their independence of judgement. During 2015, the Committee once more availed itself of the assistance and support of Mercer Italia, which also analysed the application of clawback clauses (details available in the RR).
[G4-51] With the exception of the Chairman and the CEO, the Directors receive fixed remunerations only. Table 1 “Remuneration paid to members of the management and control body and Key Managers with Strategic Responsibilities” in the RR states all the types and amounts of remuneration received by each Director. Details of the fixed and variable remuneration components (including any stock option), benefits and severance pay attributed to the CEO, the Chairman and the key managers with strategic responsibilities (aggregated), as well as the targets for the variable component of the CEO's remuneration are illustrated in detail in the Remuneration Report. In particular, the targets assigned the CEO are primarily of a financial nature, while for the Chairman, in addition to the financial targets, there are targets associated with the image of the Company and the Group and an assessment by the Board of Directors of his effectiveness in managing the activities of the Board of Directors. The sustainability targets used to determine the management incentive system are stated in the Remuneration Policies section of the Telecom Italia people section of this report.
1 The terms “related party” and “related parties” of Telecom Italia are understood to refer to the parties defined as such in the Consob Regulation. Regardless of whether they can be defined as related parties according to accounting principles, the Procedure also applies to the parties to significant shareholders’ agreements, pursuant to article 122 of the Consolidated Law on Financial Intermediation, that govern candidacies for the position of Director of the Company, if it turns out that the majority of Directors appointed has been drawn from the slate presented by participants in shareholders’ agreements.
2 In particular, the Human Rights section contains a detailed description of the procedure and the types of reports made via the procedure.