PARMALAT • CORPORATE GOVERNANCE CODE autodisciplina _ENG... · 2 PARMALAT • CORPORATE...
Transcript of PARMALAT • CORPORATE GOVERNANCE CODE autodisciplina _ENG... · 2 PARMALAT • CORPORATE...
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Courtesy Translation
PARMALAT • CORPORATE GOVERNANCE CODE
Approved by the Board of Directors on March 6, 2015
CONTENTS
1. General Principles
2. Function of the Board of Directors
3. Power of the Board of Directors
4. Duties and Compensation of the Board of Directors
5. Composition of the Board of Directors
6. Chairman of the Board of Directors
7. Meetings of the Board of Directors
8. Delegation of Powers and Reporting
9. Reporting Procedures, Reporting Intervals and Content
10. Management of Confidential Information and Internal Dealing Code
11 Nominating and Compensation Committee
12. Internal Control and Risk Management System
13. Internal Control, Risk Management and Corporate Governance Committee
14. Internal Auditing Function
15. Guidance and Coordination
16. Relations with Institutional Investors and Shareholders
17. Shareholders’ Meetings
18. Board of Statutory Auditors
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PARMALAT • CORPORATE GOVERNANCE CODE
This Code supplements the framework of rules that govern the duties and activities of
Parmalat’s Board of Directors. All Directors are required to comply with the Code, it being
understood that the Code was adopted by the Board of Directors as a self-regulatory measure
and, consequently, can be amended at any time by a majority of Directors, so long as it is
compliant with the basic principles expressed in the Bylaws and prompt disclosure of such
changes is provided to the financial markets and the shareholders.
1. GENERAL PRINCIPLES
The Company and its corporate governance bodies, in the course of their activities, including
transactions with other Group companies, adhere to the principles of sound corporate and
entrepreneurial management, as well as to the corporate governance principles published by
Borsa Italiana S.p.A. and those set forth in the Group’s Code of Conduct.
2. FUNCTION OF THE BOARD OF DIRECTORS
The Board of Directors has the power and the obligation to manage the Company’s businesses,
with the primary objectives of creating value for the shareholders and carrying out the Group’s
mission. In pursuit of these goals, the Board exercises an oversight function that finds its
concrete expression not only in the meetings that the Board is required to hold on a regular
basis, but also in the personal contribution that each Director brings to each Board meeting and
to the meetings of any Committees that the Board may have established. The Board of
Directors shall make available to the Committees adequate financial resources to enable them
to discharge their duties, within the limits of the budget approved by the Board of Directors.
3. POWERS OF THE BOARD OF DIRECTORS
The Board of Directors has the general power to guide and control the Company’s operations
and the handling of its businesses. The specific areas over which the Board of Directors has
exclusive jurisdiction are reviewed below. The Board of Directors has all of the ordinary and
extraordinary powers needed to govern the Company.
The Board of Directors, specifying the scope of the powers it is conveying, may:
a. appoint some of its members to an Executive Committee, to which it may delegate
some of its attributions, except for those expressly reserve for the Board pursuant to law
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and the Bylaws, and determine the Committee’s composition, powers and rules of
operation;
b. delegate some of its attributions, specifying the limits of powers that are being
delegated, to one or more of its members who are entrusted with special assignments;
however, the same person may never serve concurrently as Chief Executive Officer and
Chairman of the Company;
c. establish Committees and Commissions and determine their composition and tasks.
The Board of Directors has exclusive responsibility for:
a) reviewing and approving the strategic, industrial and financial plans of the Company
and the Group and the corporate structure of the Group headed by the Company,
periodically monitoring their implementation, and defining the Company’s corporate
governance system and the Group’s structure;
b) adopting resolutions concerning transactions (including investments and divestitures)
that, because of their nature, strategic significance, amount or implied commitment,
could have a material effect on the Company’s operations, particularly when these
transactions are carried out with related parties;
c) verifying the effectiveness of the organizational, administrative and accounting
structure of the Company and its strategically significant subsidiaries, with special
emphasis on the internal control and risk management system;
d) drafting and adopting the rules that govern the Company and its Code of Conduct, and
define the applicable Group guidelines, while acting in a manner consistent with the
principles of the Bylaws;
e) establishing an Oversight Board, as required by Legislative Decree No. 231 of June 8,
2001;
f) granting and revoking powers to Directors and the Executive Committee, if one has
been established, defining the limits of these powers and the manner in which they
may be exercised, and determine at which intervals (normally not more than quarterly)
these parties are required to report to the Board of Directors on the exercise of the
powers granted them;
g) determining whether Directors meet and continue to satisfy independence
requirements;
h) determining the attributions and powers of any General Manager it may appoint;
i) designating candidates for the offices of Chairman (unless a Chairman has been
elected by the Shareholders’ Meeting), Chief Executive Officer and/or General
Manager of strategically relevant subsidiaries, except for the subsidiaries of publicly
traded subsidiaries;
j) after reviewing proposals from the appropriate Committee and taking into account the
input of the Board of Statutory Auditors, determining the compensation of Managing
Directors and dividing among its members and the members of the Committees the
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total compensation provided for the Board of Directors, unless such allocation has
already been performed by the Shareholders’ Meeting;
k) supervising the Company’s overall performance, with special emphasis on conflict of
interest situations, reviewing the information received from the Managing Directors,
the Executive Committee (if one has been established) and the Internal Control, Risk
Management and Corporate Governance Committee and comparing periodically
actual and planned results;
l) evaluating and approving the financial reports that must be published on a regular
basis in accordance with the applicable statutes.
The following actions also fall under the exclusive purview of the Board of Directors, with the
restrictions applicable pursuant to law: adoption of resolutions concerning the opening and
closing of secondary offices; designation of Directors who may represent the Company;
reduction of the Company’s share capital when shareholders exercise the right to have their
shares redeemed; adoption of amendments to the Bylaws to make them consistent with new
laws; transfer of the Company’s registered office anywhere in Italy; approval of mergers in the
cases covered by Articles 2505 and 2505 bis of the Italian Civil Code and the provisions of
Article 2506 ter of the Italian Civil Code that apply to demergers.
The Board of Directors, in order to clarify the manner in which the guidelines published by Borsa
Italiana S.p.A. should be implemented, specified that, concerning issues that are exclusively
under its jurisdiction, the Board of Directors, in discharging its obligations, substantively shall:
review and approve the strategic, industrial and financial plans of the Company and the
Group, and the corporate structure of the Group headed by the Company, periodically
monitoring their implementation;
define the Company’s corporate governance system and the Group’s structure;
assess the effectiveness of the organizational and administrative structure and accounting
system of the Company and its strategically significant subsidiaries, particularly with reference
to the internal control and risk management system;
monitor and assess the overall performance of the Group’s operations, based primarily on the
information provided by the Chief Executive Officer and the Internal Control, Risk
Management and Corporate Governance Committee, and compare on a regular basis
reported results against planned results;
review and approve in advance transactions executed by the Company and its subsidiaries
when these transactions have a material impact on the Company’s strategy, income
statement, balance sheet or financial position, paying special attention to situations in which
one or more Directors may have an interest directly or on behalf of third parties and, more
specifically, to transactions with related parties; In this area, the Board of Directors established
in the Corporate Governance Code general guidelines to identify highly material transactions.
define the types of risks and risk levels that are compatible with the Issuer’s strategic
objectives.
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Lastly, at the meeting of November 9, 2012, the Board of Directors agreed to adopt as a formal
rule of conduct until the expiration of its term of office the performance of the activities that have
been placed exclusively under its jurisdiction, as explained above.
4. DUTIES AND COMPENSATION OF THE BOARD OF DIRECTORS
1 Duties of the Board of Directors
Directors bring to the Company the unique professional skills they possess and must be aware
of the tasks and responsibilities entailed by their office. Directors must act and deliberate with
full understanding of the issues at hand and with full autonomy. Directors may accept their
appointment only when they believe that they will be able to devote sufficient time to the task of
diligently discharging their duties, based on the commitments entailed by their occupation and
professional activities and the number of Boards of Directors or Boards of Statutory Auditors of
companies with shares traded on regulated markets, in Italy or abroad, or Boards of financial,
banking, insurance or other large companies on which they may be serving. Directors shall treat
as confidential any information to which they may have access through the office they hold. The
Chairman and the Managing Directors, if appointed, shall inform the Board of Directors of new
legislative or regulatory developments that affect the Company or its corporate governance
bodies.
2 Compensation of the Board of Directors
Upon the expiration of the term of office and/or the termination of the relationship with an
executive Director or a general manager, after the internal processes required to allocate or
award indemnities and/or other benefits are completed, the Company shall disclose detailed
information in this regard by means of a press release communicated to the market. The market
communication referred to in Principle 6.P.5 of the Corporate Governance Code of Borsa
Italiana shall include the following:
a) adequate information about the indemnity and/or other benefits, including the amount
involved, the payout timing—listing separately the part paid immediately and the part subject
of deferral mechanisms and differentiating between the components awarded in connection
with the service as Director and any components stemming from an employment
relationship—and any clawback clauses specifically with regard to:
- indemnity payable at end of term of office or employee severance benefits, specifying
the reason for disbursement (e.g., for expiration of the term of office, revocation of
appointment or settlement agreement);
- retention of rights related to any monetary incentive plans or plans based on financial
instruments;
- monetary or fringe benefits subsequent to the end of term of office;
- non-compete agreements, with a description of the main terms;
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- any other compensation awarded for any reason or in any form;
b) information whether the indemnity and/or the other benefits are consistent with the
guidelines provided in the compensation policy, should they be even partially inconsistent
with the abovementioned policy guidelines, and information about the deliberative
procedures applied to implement the Consob regulations governing related-party
transactions;
c) information as to whether or not mechanisms have been adopted to restrict or correct the
disbursement of indemnities when the relationship is terminated due to the achievement of
patently inadequate results and about the filing of claims for refunds of disbursed
compensation;
d) information as to whether the replacement of the terminated executive Director or general
manager is governed by a succession plan adopted by the Company and, in any case,
information about any procedures that may have been or will be adopted when replacing a
Director or general manager.
In addition, the compensation policy for executive Directors or Directors who perform special
functions shall include contractual stipulations that empower the Company to demand a full or
partial refunding of disbursed variable compensation components (or to withhold deferred
compensation amounts) determined based on data that later proved to be demonstrably
incorrect.
5. COMPOSITION OF THE BOARD OF DIRECTORS
1. The Board of Directors is comprised of Directors with executive powers (i.e., the Managing
Director(s), if appointed, one of whom is the Chairman when he is granted special powers,
and Directors who perform management functions within the Company) and Directors
without executive powers. The following parties also qualify as Company Directors with
executive powers: the Managing Directors of strategically significant subsidiaries and the
Chairmen of those companies when they are individually delegated management authority
or play a specific function in the development of corporate strategies.
2. Those who are called upon to serve on the Board of Directors, in the manner required by
the Bylaws, are individuals who possess special skills and are able to contribute to the
process of making fully informed and properly motivated decisions. More specifically,
Directors without executive powers must always be of sufficient number and intellectual
authority to ensure that their judgment has a significant impact on the decisions adopted by
the Board. Directors without executive powers help the Board make decisions that are in
keeping with the Company’s interests.
3. Independent Directors shall ensure that the interest of all shareholders, including both
majority and minority shareholders, is properly balanced. The assessment of the
independence of the Board of Directors is aimed at verifying that the Directors are not
parties to relationships capable of effectively impairing their independence of judgment,
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without prejudice to the obligation to comply with the provisions of laws and regulations
applicable at any given time.
4. The Board of Directors, based on the information that the individual Directors are required to
provide, checks at least annually, at the time of appointment and in connection with events
that are relevant for independence purposes, whether each Director meets the independence
requirements, taking also into account the information that the individual interest parties are
required to provide, and communicates the finding to the financial markets and the
shareholders. The Board of Directors reviews the last three reporting years when considering
employment relationships and assignments requiring Directors to have executive powers,
and the last reporting year when other business relationships are involved.
If the Board of Directors determines that a Director is no longer independent, it adopts the
appropriate resolutions with a majority of two-thirds (2/3) of the Directors attending the
meeting. Directors who have been elected as independent Directors but no longer meet the
requirements of independence are deemed to have resigned automatically and the other
Directors are required to replace them promptly.
6. CHAIRMAN OF THE BOARD OF DIRECTORS
The general provisions of the Bylaws notwithstanding, the Chairman of the Board of Directors
shall:
a) convene meetings of the Board of Directors, determining the meeting’s Agenda and, in
preparation for the meetings, transmitting to the Directors, as expeditiously as
appropriate and in any event at least two days before the meeting, based on the
circumstances, the materials required to participate in the meeting with adequate
knowledge of the issues at hand; if, in particularly urgent cases, it should be impossible
to provide the necessary information in advance as stated above, the Chairman shall
ensure that an adequately detailed review is carried out during Board meetings and that
the Board of Directors is still in a position to adopt resolutions knowledgeably and
thoughtfully.
b) supervise the meeting and the voting process;
c) handle the preparation of Minutes of the meeting;
d) ensure that there is an adequate flow of information between the Company’s
management and the Board of Directors and, more specifically, ensure the
completeness of the information that the Board uses as a basis for making its decisions
and exercising its power to manage, guide and control the activities of the Company
and the Group;
e) ensure that the Board is informed on a regular basis, as required by Article 15 of the
Bylaws;
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f) in general, ensure that the Company is in compliance with the provisions of all laws and
regulations, and with the Bylaws and the corporate governance rules of the Company
and its subsidiaries; is responsive to the regulations and conduct guidelines issued by
the entity governing the regulated market where the Company’s shares are traded, and
adheres to best industry practices.
7. MEETINGS OF THE BOARD OF DIRECTORS
1. The Board of Directors meets on a regular basis, at least once every quarter and whenever
the Chairman believes that it may be in the Company’s interest.
2. The meetings of the Board of Directors are chaired by the Chairman or, if the Chairman is
absent or incapacitated, by the Deputy Chairman, if one has been appointed, with the
support of the Secretary to the Board of Directors.
3. Each Director has the right to add items to the Agenda of an upcoming Board Meeting, and
the Board will decide if and when the item in question will be brought up for consideration.
4. The Chairman, with the agreement of the other Board members in attendance, can invite
General Managers (and executives of the Issuer or of Group companies) and other
outsiders to attend a meeting of the Board of Directors.
8. DELEGATION OF POWERS AND REPORTING
1. The Board of Directors can delegate powers to one or more of its members, determining
the purpose and scope of the powers, and may revoke those powers at any time.
However, if a Chief Executive Officer is appointed, this post may never be held by a
Director who already serves as Chairman of the Board of Directors.
2. The Board of Directors may assign special tasks to its members, defining the purpose,
scope and duration of the assignment.
9. REPORTING PROCEDURES, REPORTING INTERVALS AND CONTENT
The Delegated Governance Bodies shall report quarterly about:
a) the work done;
b) highly material operating, financial and cash flow transactions;
c) transactions entailing a potential conflict of interest, including:
intercompany transactions;
transactions with related parties other than intercompany transactions;
d) atypical or unusual transactions or any other activity or transaction that requires
communication to the Board of Statutory Auditors;
e) significant issues, insofar as they are relevant to the Company and the Group.
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The information referred to above can also be provided in writing and must refer to activities and
transactions carried out during a period of time (maximum three months) following the period
(also not longer than three months) covered by the previous communication.
The abovementioned information is supplied to the Board of Directors and the Board of
Statutory Auditors.
If a Chief Executive Officer is not appointed, the abovementioned reporting requirements shall
also apply to the General Manager.
SPECIFIC REPORTING AREAS INCLUDE:
9.1 Work Performed
The information must detail the executive work performed and the progress of transactions
already approved by the Board of Directors, as well as the activities of the Committees (Internal
Control, Risk Management and Corporate Governance Committee, Nominating and
Compensation Committee and other internal Committees). Specific information must be
provided about the work performed by Directors with executive powers — with input that may be
provided by departmental staff of the Company and its subsidiaries — in the exercise of the
powers they have received, detailing the initiatives and projects undertaken.
9.2 Material Operating, Financial and Cash Flow Transactions
Information about material operating, financial and asset transactions must deal in detail with
strategic objectives, consistency with the budget and industrial plan, method of implementation
(including the financial terms and conditions involved) and development and the resulting impact
on and implications for the Parmalat Group. For the purposes of this Code, material operating,
financial and asset transactions include, in addition to those reserved for the Board of Directors
in accordance with Article 2381 of the Italian Civil Code and pursuant to the Bylaws, the
following transactions that may be executed by Parmalat or its subsidiaries:
1. placements of issues of financial instruments with a total value of more than 100 million
euros;
2. granting of loans and guarantees, investments in and disposals of assets (including real
estate) and acquisitions and divestitures of equity investments, companies, businesses,
assets and other property valued at more than 100 million euros;
3. mergers and demergers, when at least one of the parameters listed below, when
applicable, is equal to or greater than 15%:
a. total assets of the absorbed (merged) company or assets that are being
demerged/total assets of the Company (taken from the consolidated financial
statements, if available);
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b. income before taxes and extraordinary items of the absorbed (merged)
company or assets earmarked for demerger/income before taxes and
extraordinary items of the Company (taken from the consolidated financial
statements, if available);
c. total shareholders’ equity of the absorbed (merged) company or business
earmarked for demerger/total shareholders’ equity of the Company (taken
from the consolidated financial statements, if available).
4. For the purposes of this procedure, mergers of publicly traded companies and mergers
between a publicly traded company and a privately held company are always deemed
to be material operating, financial and asset transactions.
Information must also be provided about transactions that, while on their own involve amounts
lower than the threshold listed above or that trigger the exclusive jurisdiction of the Board of
Directors, are linked together in a strategic or executive project and taken together exceed the
materiality threshold.
9.3 Transactions Entailing a Potential Conflict of Interest:
a) Intercompany Transactions
Information about intercompany transactions must explain the underlying interest and the logic
justifying each transaction within the context of the Group, as well as the manner in which it is
being implemented (including terms and conditions, financial and otherwise), describing in detail
the valuation processes applied. Specific mention must be made of transactions valued at more
than 50 million euros and transactions executed on nonstandard terms, even if their value is less
than 50 million euros.1
Information must also be provided about transactions that, while on their own involve amounts
lower than the threshold listed above, are linked together in a strategic or executive project and
taken together exceed the materiality threshold.
For the purposes of this Code, intercompany transactions2 are transactions between Parmalat
or one of its subsidiaries and:
1) companies that, directly or indirectly (i.e., through nominees or intermediaries) control
Parmalat pursuant to Article 2359, Sections 1 and 2, of the Italian Civil Code and Article
93 of the Uniform Financial Code;
2) companies that, directly or indirectly (i.e., through nominees or intermediaries) are
controlled by Parmalat pursuant to Article 2359, Sections 1 and 2, of the Italian Civil
Code and Article 93 of the Uniform Financial Code;
1 For the purposes of this Code, transactions are deemed to have been executed on standard terms when the terms are the same as those that the Company applies to all other parties. 2 For the purposes of this Code, relevant acts of disposition include disposing, for or without consideration, of personal and real property and salable rights that convey economic benefits, providing goods and services, granting and receiving loans and guarantees, and entering into cooperation agreements for the exercise and expansion of the Company’s business.
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3) companies that, directly or indirectly (i.e., through nominees or intermediaries) are
controlled by the same companies that control Parmalat pursuant to Article 2359,
Sections 1 and 2, of the Italian Civil Code and Article 93 of the Uniform Financial Code;
4) companies affiliated with Parmalat pursuant to Article 2359, Section 3, of the Italian Civil
Code and companies that exercise a significant influence over Parmalat. There is no
linkage when the connection occurs with the affiliated company of an affiliated company.
b) Transactions with Related Parties
Information about transactions with related parties, other than intercompany transactions, must
disclose the interest underlying the transactions, the manner in which the transactions were
executed (including financial and other terms and conditions) and, in particular, the valuation
methods applied. On March 7, 2014 and May 7, the Company updated the Procedure
Governing Transactions With Related Parties to comply with the requirements of Consob
Communication No. DEM/10078683 of September 24, 2010. Please consult the
abovementioned Procedure for the relevant regulations. The Procedure is available on the
Company website at the following address: www.parmalat.com Corporate Governance.
Parmalat considers a party to be a related party if the party in question:
a) directly or indirectly, through subsidiaries, nominees, a third party or otherwise:
(i) controls Parmalat, is controlled by it or is under joint control;
(ii) holds an equity interest in Parmalat that makes it possible to exercise a
significant influence over Parmalat;
(iii) exercises control over Parmalat jointly with other parties;
b) is an affiliated company of Parmalat;
c) is a joint venture in which Parmalat is a venturer;
d) is one of Parmalat’s Directors or Statutory Auditors;
e) is one of Parmalat’s General Managers;
f) is an executive with strategic responsibilities of Parmalat or its controlling company;3
g) is a member of the immediate family of one of the parties listed in letters (a) or (d) or (e)
or (f);
h) is an entity over which one of the parties listed in letters (d) or (e) or (f) or (g) exercises
control, joint control or a significant influence or in which one of the abovementioned
parties holds a significant equity interest;
i) is a supplemental, collective or individual, Italian or foreign, pension fund established for
the benefit of Parmalat’s employees or employees of any other entity related to
Parmalat.4
3 An official communication by which the direct or indirect controlling company identifies its strategic executives shall be used for this
purpose.
4 Only funds established or promoted by the Company or funds over which the Company can exercise influence are relevant for the purposes of this Procedure.
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The expression transaction with a related party shall be understood to mean any transfer of
resources, services or obligation between related parties, whether consideration is stipulated or
not. More specifically, transactions with related parties include commercial transactions
involving the exchange both of goods and services, financial transactions and transactions
involving non-current assets.
Therefore, transactions with related parties include:
mergers, demergers through absorption or straight non-proportional demergers, when
executed with related parties
any decision involving the award of compensation and economic benefits, in any form,
to members of administration and control bodies and to executives with strategic
responsibilities;
any collateral or guarantees provided by Parmalat for the benefit of or in the interest of
related parties.
the assumption/conveyance of obligations and commitments.
c. Atypical or Unusual Transactions and Other Transactions
Information must be provided about atypical or unusual transactions and about any other type of
activity or transaction the disclosure of which appears to be appropriate, describing the interest
underlying the transactions, the manner in which the transactions were executed (including
financial and other terms and conditions) and, in particular, the valuation methods applied.
For the purposes of this Code, atypical or unusual transactions are those transactions the
purpose or nature of which is extraneous to the Company’s regular business operations or that
raise particular issues due to their characteristics or inherent risks, the nature of the counterpart
or their timing.5
10. MANAGEMENT OF CONFIDENTIAL INFORMATION AND INTERNAL DEALING
CODE
1. The management of confidential information is handled by the Reporting Officer
appointed by the Board of Directors, who is required to apply the procedures developed
to process information internally and release documents and information about the
Company to the public, particularly when the information involves price-sensitive data.
2. The Company has adopted a Code that governs information requirements and actions
concerning transactions in financial instruments by persons who, because of their position
at the Company, have access to insider information (the Internal Dealing Code). Insider
information is information about events that could have a material impact on the operating
5 Transactions executed immediately before the closing or the start of the reporting period.
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and financial outlook of the Company and the Group and which, when made public, could
have a material impact on the price of publicly traded Company securities.
A copy of the Internal Dealing Code is attached to this Code and is an integral and
substantive part of it.
11. NOMINATING AND COMPENSATION COMMITTEE
1. The Board of Directors shall establish internally a Nominating and Compensation
Committee and appoint its Chairman. This Committee, which must be comprised of
Directors that meet the independence requirements, including those of Article 37 of the
Regulations implementing Legislative Decree No. 58 of February 24, 1998 concerning
financial market issues. At least one Committee member must be drawn from a slate filed
by minority shareholders pursuant to the Bylaws. The Committee shall submit proposals
to the Board of Directors regarding the appointment of the Chief Executive Officer, the
General Manager and the Deputy Chairman, and the names of Directors that will be
coopted by the Board, should it be necessary to replace independent Directors, and the
names of Chief Executive Officers and Chairmen of the Group’s main subsidiaries. This
Committee also submits proposals to the Board of Directors regarding the appointment
and compensation of Directors who perform special functions and the General Manager.
A portion of the overall compensation paid to the abovementioned individuals may be tied
to the operating performance of the Company and the Group and may be based on the
achievement of specific predefined targets, determined consistent with the guidelines of
the Compensation Policy referred to in Item 2 below.
2. The Committee also submits proposals for determining the compensation policy
applicable to the Company’s Directors and executives with strategic responsibilities and
the adoption of stock option and share award plans or other financial instruments that can
be used to provide an incentive to and increase the loyalty of senior management.
3. The Committee also provides opinions to the Board of Directors regarding the Board’s
size and composition, submits recommendations about the professional competencies
that should be represented within the Board and the maximum number of Boards of
Directors and Boards of Statutory Auditors on which Company Directors and Statutory
Auditors may serve, and regarding waivers of the non-compete requirements pursuant to
Article 2390 of the Italian Civil Code.
4. The Committee shall perform preparatory work for the Board of Directors regarding a
succession plan for Directors with executive powers.
5. The Chairman of the Board of Statutory Auditors and the other Statutory Auditors shall
attend the meetings of the Committee.
12. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM
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1. The internal control and risk management system consists of a complex of rules,
procedures and organizational structures aimed at allowing the identification,
measurement, management and monitoring of the main risks. This system is integrated
into the most basic organizational and corporate governance structures adopted by the
Company and is fully consistent with the reference models and best practices that exist
nationally and internationally. It contributes to ensuring that the corporate assets are
protected, the corporate processes are efficient and effective, the financial information
is reliable and the laws, regulations, Bylaws and internal procedures are complied with.
2. The internal control and risk management system, as defined by the Board of Directors,
has the following defining general characteristics:
a) at the operating level, authority must be delegated in light of the nature, the
typical size and the risks involved for each class of transactions, and the
scope of authority must be consistent with the assigned tasks;
b) the organization must be structured to avoid function overlaps and
concentration under one person, without a proper authorization process, of
multiple activities with a high degree of danger or risk;
c) each process must conform with an appropriate set of parameters and
generate a regular flow of information that measures its efficiency and
effectiveness;
d) the professional skills and competencies available within the organization and
their congruity with the assigned tasks must be checked periodically;
e) the operating processes must be geared to produce adequate supporting
documents, so that their congruity, consistency and transparency may be
verified at all times;
f) the safety mechanisms must provide adequate protection of the Company’s
assets and ensure access to data when necessary to perform required
assignments;
g) the risks entailed by the pursuit of stated objectives must be identified and
adequately monitored and updated on a regular basis, and negative elements
that can threaten the organization’s operational continuity must be assessed
carefully and protections adjusted accordingly;
h) the internal control system must be supervised on an ongoing basis and
reviewed and updated periodically.
3. The Board of Directors, having heard the input of the Internal Control, Risk
Management and Corporate Governance Committee, shall:
a) define the guidelines of the internal control and risk management system,
ensuring that the main risks affecting the Company and its subsidiaries are
correctly identified and adequately measured, managed and monitored,
determining the degree to which these risks are compatible with a
management of the Company consistent with the adopted strategic objectives;
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b) assess, at least once a year, the adequacy of the internal control and risk
management system in view of the Company’s characteristics and adopted
risk profile, and the system’s effectiveness;
c) approve, at least once a year, the work plan prepared by the manager of the
Internal Auditing function with the input of the Board of Statutory Auditors and
the Director responsible for the internal control and risk management system;
d) describe in its Report on Corporate Governance the main features of the
internal control and risk management system and furnish its assessment of
the system’s adequacy;
e) evaluate, with the input of the Board of Statutory auditors, the findings
presented by the statutory Independent Auditors in their management letter, if
issued, and report concerning the main issues identified in the course of the
statutory independent audit.
4. The Internal Control, Risk Management and Corporate Governance Committee shall
provide support to the Board of Directors by:
a) assessing, together with the Corporate Accounting Documents Officer and with
the input of the Independent Auditors and the Statutory Auditors, the correct
adoption of the accounting principles their consistency of use in the preparation
of the consolidated financial statements;
b) rendering opinions concerning specific issues entailed by the mapping of the
main business risks;
c) reviewing periodic reports that assess the effectiveness of the internal control
and risk management system and the special reports prepared by the Internal
Auditing function;
d) monitoring the autonomy, adequacy, effectiveness and efficiency of the Internal
Auditing function;
e) asking the Internal Auditing function to perform audits of specific operational
areas, concurrently informing the Chairman of the Board of Statutory Auditors of
such requests.
5. The Board of Directors shall assign to one or more of its members responsibility for
instituting and maintaining an effective internal control and risk management system.
More specifically, the Director responsible for the internal control and risk management
system shall:
identify the main business risks, taking into account the characteristics of the
activities carried out by the Company and its subsidiaries, and submit them
periodically to the Board of Directors for review;
implement the guidelines defined by the Board of Directors, handling the
design, implementation and management of the internal control and risk
management system, and constantly verifying the system’s adequacy and
effectiveness;
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ensure that the system is updated in response to changes in the operating
environment and the legislative and regulatory framework;
ask the Internal Auditing function to perform audits of specific operational
areas and regarding compliance with internal regulations and procedures in
the execution of business transactions, concurrently informing the Chairman
of the Board of Directors, the Chairman of the Internal Control, Risk
Management and Corporate Governance Committee and the Chairman of the
Board of Statutory Auditors;
promptly report to the Internal Control, Risk Management and Corporate
Governance Committee (or the Board of Directors) any issues and problems
encountered in the performance of his activities or of which he has become
otherwise aware, so that the Committee (or the Board of Directors) may take
appropriate action.
13. INTERNAL CONTROL, RISK MANAGEMENT AND CORPORATE GOVERNANCE
COMMITTEE
The Board of Directors shall establish internally an Internal Control, Risk Management and
Corporate Governance Committee, which shall serve in a consulting and proposal-making
function, and shall appoint its Chairman. The Committee shall be tasked with supporting, with
an adequate preparatory activity, the assessments and decisions of the Board of Directors
regarding the internal control and risk management system, as well as those concerning the
approval of periodic financial reports.
The Committee shall be comprised exclusively of Independent Directors, with at least one of its
members drawn from a minority slate filed pursuant to the Bylaws. The Chairman of the
Company and the members of the Board of Statutory Auditors shall be invited to attend
Committee meetings. When appropriate in light of the items on the meeting’s agenda, the
Internal Control, Risk Management and Corporate Governance Committee and the Board of
Statutory auditors shall meet in joint session.
More specifically, the Internal Control, Risk Management and Corporate Governance
Committee:
a) shall verify the adequacy and correct implementation of the internal control system,
assist the Board of Directors in defining the guidelines of the internal control system and
support the Director responsible for the internal control and risk management system, if
one has been appointed, in defining the system’s tools and implementation procedures;
b) shall support the Board of Directors in performing the tasks described in Article 17,
Letters d) and k), of the Bylaws;
c) taking into account the provisions of Article 19 of Legislative Decree No. 39 or January
27, 2010 and with the input of the Board of Statutory Auditors, shall review the findings
presented by the Independent Auditors in their report and management letter in
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accordance with their function of providing consulting support and making
recommendations to the Board of Directors;
d) shall assess, together with the Company’s Corporate Accounting Documents Officer
and with the input of the statutory Independent Auditors and the Board of Statutory
Auditors, the correct use of the accounting principles and, in the case of groups, their
consistent use in the preparation of the consolidated financial statements;
e) shall render opinions about specific issued concerning the identification, assessment
and monitoring of the main business risks;
f) shall review the reports concerning the assessment of the internal control and risk
management system prepared by the Internal Auditing function;
g) shall monitor the autonomy, effectiveness and efficiency of the Internal Auditing function
and approve its annual plan;
h) at its discretion, may ask the Internal Auditing function to perform audits of specific
operational areas and concurrently communicate this information to the Chairman of the
Board of Statutory Auditors;
i) shall evaluate, with the input of the Chairman of the Board of Directors and the Board of
Statutory Auditors, recommendations for the appointment and dismissal of the Internal
Auditing manager submitted to the Board of Directors by the Director responsible for the
internal control and risk management system (if appointed), and shall render an opinion
about his compensation, consistent with Company policies;
j) shall report to the Board of Directors at least semiannually (in conjunction with the
approval of the annual and semiannual reports) on the work done and the adequacy of
the internal control and risk management system;
k) shall support the Board of Directors in its periodic assessment (at least once a year) of
the adequacy, effectiveness and actual implementation of the internal control system,
for reporting purposes in the annual Report on Corporate Governance, and of the key
elements of the internal control system, as well as for the purpose of providing an
overall assessment of the system;
l) shall perform the additional tasks assigned to it by the Board of Directors, specifically
with regard to relationships with the Independent Auditors;
m) shall perform the functions required by the provisions governing related-party transactions
and the corresponding procedure adopted by the Board of Directors (hereinafter referred
to as the Procedure), all of the above being cited here by reference;
n) shall render opinions regarding amendments to the Procedure and may submit to the
Board of Directors recommendations to amend or integrate the Procedure;
o) shall monitor compliance with and the periodic updating of the rules of corporate
governance, including those concerning guidance and coordination issues pursuant to
Article 2497 and following articles of the Italian Civil Code;
p) shall perform any other activity deemed useful for and consistent with the performance
of the tasks assigned to it.
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Lastly, the Internal Control, Risk Management and Corporate Governance Committee shall
perform the function of the Committee for Related-party Transactions, in accordance with the
corresponding Procedure.
14. INTERNAL AUDITING FUNCTION
The Board of Directors, acting upon a proposal by the Director responsible for the internal
control and risk management system and with the favorable opinion of Internal Control, Risk
Management and Corporate Governance Committee and the input of the Board of Statutory
Auditors, shall:
appoint, confirm and dismiss the Internal Auditing manager;
ensure that he is provided with sufficient resources to discharge his duties;
define his compensation, consistent with Company policies.
The manager of the Internal Auditing function is the party responsible for monitoring the internal
control and risk management system to verify if it is operational and adequate.
More specifically, the manager of the Internal Auditing function shall:
a) verify, both on an ongoing basis and in response to specific requirements, consistent
with international standards, the implementation and suitability of the internal control
and risk management system, through an audit plan approved by the Board of Directors
and based on a structured process to analyze and prioritize the main risks;
b) have no responsibility for any operational area, reporting directly to the Board of
Directors;
c) have access to any information that may be useful for discharging his duties;
d) prepare periodic reports containing adequate information about his activities, the
methods by which risks are being managed and compliance with plans defined to
contain risks; these periodic reports shall also provide an assessment of the suitability
of the internal control and risk management system;
e) promptly prepare reports concerning highly material events;
f) submit the reports referred to in letters d) and e) above to the Chairmen of the Board of
Statutory Auditors, the Internal Control, Risk Management and Corporate Governance
Committee and the Board of Directors, and to the Director responsible for the internal
control and risk management system;
g) within the scope of the audit plan, test the reliability of the information systems,
including the accounting systems.
Certain operational segment of the Internal Auditing function may be entrusted to a party
outside the Company, provided such party meets adequate professionalism, independence and
organization requirements.
15. GUIDANCE AND COORDINATION
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The Board of Directors, comforted by an authoritative legal opinion, verified that the fact of being
subject to another party’s guidance and coordination was compatible with the restrictions placed
on the Company by the Composition with Creditors.
In addition, based on the abovementioned legal opinion, the Board of Directors determined that
the existence of another party’s guidance and coordination must be verified based on the
concrete modalities by which the Company’s activities are carried out. In this respect, there are
basically three propositions accepted by the Board of Directors.
The first one is that the law, anticipating a responsibility for “abuse” of guidance and
coordination allows the power of interference by the controlling shareholder (and/or the
consolidating shareholder) also with regard to management activities—and not just at
Shareholders’ Meetings—of the subsidiary/consolidated company.
The second one is that the exercise of guidance and coordination activity can be inferred both
from the existence of a power-right stemming from the Bylaws or a contract and from its
concrete exercise, i.e., irrespective of whether or not there is a formal stipulation to that effect.
The third one is that the exercise of guidance and coordination activity cannot be inferred from
occasional or sporadic acts, requiring instead “the exercise of a systematic and constant
plurality of oversight acts capable of having an impact on a company’s management decisions.”
The Board of Directors, while taking into account that—specifically with regard to the
development of strategic planning guidelines—the Lactalis Group operates transversally vis-à-
vis the individual companies of which it is comprised, concluded that it was reasonable to
identify BSA S.A., which is the company at the apex of the Lactalis Group corporate pyramid, as
the entity formally exercising the guidance and coordination activity.
16. RELATIONS WITH INSTITUTIONAL INVESTORS AND SHAREHOLDERS
The Company’s stated objective is to maintain and develop a constructive dialog with its
shareholders and institutional investors based on an understanding of roles that each must play.
To achieve this objective, the Company has established a special Department charged with
handling relations with the Italian and international financial community on behalf of the entire
Group. This Department has been provided with adequate professional and technical resources.
Under no circumstances can a dialog with institutional investors occasion the disclosure of
material facts before they are communicated to the financial markets.
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17. SHAREHOLDERS’ MEETINGS
1. The Company shall encourage and facilitates the largest possible attendance by its
shareholders of Shareholders’ Meetings, providing shareholders with all of the
information and documents needed to attend the Meeting easily and with sufficient
knowledge.
2. The Board of Directors may ask the Shareholders’ Meeting to approve Regulations to
ensure the orderly and efficient progress of Ordinary and Extraordinary Shareholders’
Meetings and guarantee the right of each shareholder to request the floor and discuss
the items on the Agenda. The abovementioned Regulations may address such issues
as the maximum time allotted to each speaker, the order in which shareholders must
speak, the voting method used, the presentations of Directors and Statutory Auditors
and the powers of the Chairman, which include the power to settle or prevent the
occurrence of conflicts during the Meeting.
3. If there are significant changes in the value of the Company’s capital stock or its
shareholder base (i.e., the number of shareholders), the Board of Directors can submit
motions to amend those sections of the Bylaws that deal with the ownership
percentages needed to initiate certain actions or exercise the protective rights available
to minority shareholders.
4. Through the Notice of the Shareholders’ Meeting, the Directors may ask the
shareholders who control the Company to disclose to the public, sufficiently in advance,
any motions that they may be planning to submit to the Shareholders’ Meeting
regarding topics that are not the subject of a specific motion filed by the Board of
Directors.
18. BOARD OF STATUTORY AUDITORS
1) Statutory Auditors shall act autonomously and independently of everyone, including the
shareholders who elected them.
2) Statutory Auditors shall be selected among candidates who can qualify as independent
also based on the criteria set forth in this Code with regard to Directors. The Board of
Statutory Auditors shall verify compliance with said criteria after the election and
annually thereafter, listing the results of the verification process in the Report on
Corporate Governance with modalities consistent with those used for Directors.
3) Statutory Auditors shall accept their appointment if they believe they can devote
sufficient time to the diligent performance of their duties.
4) Any Statutory Auditor who, directly or on behalf of third parties, may have an interest in
a specific transaction executed by the issuer shall promptly and exhaustively inform the
other Statutory Auditors and the Chairman of the Board of Directors about the nature,
terms, origin and scope of his interest.
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5) Within the scope of their activities, Statutory Auditors may ask the Internal Auditing
function to perform audits of specific operational areas or Company transactions.
6) The Board of Statutory Auditors and the Internal Control, Risk Management and
Corporate Governance Committee shall exchange on a timely basis information
relevant to the performance of their duties.
7) Statutory Auditors are required to treat as confidential the documents and information
they receive in the performance of their duties and must comply with the procedures
adopted by the Company with regard to the release of documents and information.
8) As a rule, Statutory Auditors are responsible for monitoring the modalities applied to
actually implement the corporate governance rules of the codes of conduct adopted by
the Company.