THE FIAT GROUP IN

stockholder have been filed, together with their respective
curricula vitae, in accordance with the Code of Conduct.
Three new Directors were appointed at the Stockholders’
Meeting of May 14, 2001. The appointments of F. G. Rohatyn,
who had been coopted earlier, and V. Marrone were proposed
by the entire Board. The appointment of A. Benessia was
proposed by the Chairman acting at the behest of the Board.
This information was largely available in documents filed in
advance of the Stockholders’ Meeting and made available
to the stockholders.
The Board of Directors currently in office has not deemed it
necessary to create a special committee for the appointment
of Directors.
COMPENSATION OF DIRECTORS AND SENIOR
MANAGERS – COMPENSATION COMMITTEE
The Board of Directors established a Compensation
Committee consisting of four Directors, including two with
executive authority (Chairman Paolo Fresco, Paolo Cantarella,
Franzo Grande Stevens and John F. Welch).
The Compensation Committee has the task of developing
proposals to be submitted for approval to the Board of
Directors regarding:
❚ appointments to corporate posts at Group’s subsidiaries,
and the respective development and back-up plans;
❚ general and individual compensation packages for first
level Group managers and stock option plans;
❚ compensation to Directors with executive authority,
including stock option plans.
The Chief Executive Officer does not attend meetings where
his compensation is discussed and the Chairman and Chief
Executive Officer do not attend meetings where the
compensation of the Chairman is discussed.
In 2001, the Compensation Committee met four times to
discuss the submission to the Board of Directors of motions
concerning the definition of compensation and stock option
plans for the Group’s senior managers and new appointments
at the Group’s Parent Company and for the corporate posts
at the Sector lead companies.
The Board of Directors, with the favorable opinion of Statutory
Auditors, determines the compensation of those Directors who
are asked to perform special tasks. The entire compensation
payable to the Chairman is variable, while only a portion of
the compensation payable to the Chief Executive Officer is
variable. In both cases, as explained in a special schedule
included in the Notes to the Financial Statements, the variable
compensation is based on the average market price of Fiat
ordinary shares. These two Directors are also covered by
the stock option plan, which is reviewed in detail in the Notes
to the Financial Statements.
The compensation of first level managers includes a variable
component based on the results of the Sector where each
manager is employed and on his/her personal performance.
INTERNAL CONTROL SYSTEM AND AUDIT COMMITTEE
In May 1999, the Company, which had already published
a Code of Ethics several years earlier, adopted an Internal
Control System based on a model derived from the COSO
Report. The Board of Directors then decided to disseminate
an Internal Control Policy and establish an Audit Committee
that provides the Board with consulting and decision-making
support and performs functions that are consistent with the
guidelines of the Code of Conduct.
This Committee comprises four non-executive Directors and
is chaired by G. Galateri (the other members are A. Benessia,
L. von Boehm-Bezing and J. P. Elkann). It meets at least twice
a year, or whenever a meeting is requested by the Chairman
of the Board of Statutory Auditors or by one of the Supervisors
of the Internal Control System. The Meetings of the Audit
Committe are attended by the Chairman of the Board
of Statutory Auditors, and the Chairman of the Board
of Directors, the Chief Executive Officer and representatives
of the independent auditors are invited to participate.
The Board of Directors appoints the Supervisors of the
Internal Control System. While performing this task, they are
not under the jurisdiction of operations managers, but report
directly to the Audit Committee and to the Board of Statutory
Auditors. At present, the Supervisors of the Internal Control
System are the General Counsel and the Chief Administration
Officer. They rely on input from the Internal Audit function,
which is performed for the entire Group by Fiat Revi, a highly
skilled and capable consortium company.
The most important initiatives pursued in 2001 by the Committee
and the Supervisors included analyzing the procedures used
to assess the status of litigation and ascertain the adequacy
of the respective reserves, monitoring the effectiveness of the
Group’s accounting organization and systems, and formulating
suggestions for their improvement.
In response to a specific resolution of the Board of Directors
concerning the issues raised by Articles 5 and 6 of Legislative
Decree No. 231 of June 8, 2001 (Regulations Governing
the Administrative Liability of Legal Entities), with respect
to which the appropriate industry associations have not yet
produced final organizational models, all Group companies
Report on Operations – Corporate Governance
73