The Fiat Group in 1999 - Report on Operations - Fiat SpA

CORPORATE GOVERNANCE
In order to provide a reference po<strong>in</strong>t for an effective corporate
governance system, the <strong>Fiat</strong> <strong>Group</strong> adopted the Code of
Conduct for Listed Companies, the recent publication of
which represents the f<strong>in</strong>al element of the framework of
statutory provisions and <strong>in</strong>ternal regulations <strong>in</strong>troduced by
the Consolidated Law on F<strong>in</strong>ancial Intermediation.
<strong>Fiat</strong> has already amended its Articles of Association to comply
with the provisions of this law, <strong>in</strong>troduc<strong>in</strong>g rules that are more
mean<strong>in</strong>gful <strong>in</strong> terms of the <strong>in</strong>formation that executive Directors
are required to provide to the Board of Directors and the
Board of Statutory Auditors, and <strong>in</strong>serted a new provision
specifically designed to ensure the election of a Statutory
Auditor by m<strong>in</strong>ority stockholders.
<strong>The</strong> Company’s overall corporate governance system is largely
consistent with the recommendations and provisions of the
Code of Conduct, provid<strong>in</strong>g specific behavioral guidel<strong>in</strong>es,
the most important of which are listed below:
❚ As a general rule, the Board of Directors meets eight times
a year. On those occasions, it reviews the performance of
the operat<strong>in</strong>g Sectors, the Company’s quarterly reports,
strategic plans and organizational proposals, and all material
transactions proposed by executive Directors.
❚ In order to establish a more efficient management system,
the Board of Directors has traditionally favored a type of
organization based on the delegation of equal powers to
those corporate officers who, <strong>in</strong> accordance with Article
18 of the Articles of Association, have been authorized
to act severally as the Company’s legal representatives.
Consequently, on June 23, <strong>1999</strong>, the Board of Directors
gave the Chairman, Paolo Fresco, and the Chief Executive
Officer, Paolo Cantarella, broad operat<strong>in</strong>g powers,
authoriz<strong>in</strong>g them to perform all acts that are consistent
with the Company’s purpose. However, the Chairman
has <strong>in</strong>dicated that he <strong>in</strong>tends to primarily focus the exercise
of his functions, <strong>in</strong> close collaboration with the Chief
Excecutive Officer, on the <strong>Group</strong>’s strategy, its <strong>in</strong>ternational
relationships and negotiations, the development and
enhancement of its human resources and the optimization
of its f<strong>in</strong>ancial resources.
❚ Notwithstand<strong>in</strong>g the ample powers granted to them, the
Chairman and the Chief Executive Officer must regularly
submit for approval to the Board of Directors all transactions
that have a material impact on the Company’s profitability,
balance sheet and f<strong>in</strong>ancial position, and must provide
Directors and Statutory Auditors with adequate <strong>in</strong>formation
on any transaction performed by virtue of the powers
granted to them which may be atypical, unusual or <strong>in</strong>volve
related parties.
❚ <strong>The</strong> current Board of Directors, which will rema<strong>in</strong> <strong>in</strong> office
until a Stockholders’ Meet<strong>in</strong>g is convened to approve the
f<strong>in</strong>ancial statements at December 31, 2001, comprises 11
members, <strong>in</strong>clud<strong>in</strong>g the Chairman and the Chief Executive
Officer who have executive powers. Three other directors
(Gabriele Galateri, Chief Executive Officer of IFI, Virgilio
Marrone, Jo<strong>in</strong>t Chief Operat<strong>in</strong>g Officer of IFI, and John Philip
Elkann) are parties to transactions <strong>in</strong>volv<strong>in</strong>g the Company’s
controll<strong>in</strong>g stockholder.
❚ <strong>The</strong> Board of Directors established two <strong>in</strong>ternal committees:
the Audit Committee, which comprises four non-executive
Directors (Gabriele Galateri, who chairs the Committee,
John Philip Elkann, Gianfranco Gutty and Carl L. von
Boehm-Bez<strong>in</strong>g); and the Compensation Committee, which
comprises four Directors, two of whom have executive
authority (Paolo Fresco, who chairs the Committee, Paolo
Cantarella, Franzo Grande Stevens and John F. Welch).
❚ <strong>The</strong> Compensation Committee develops proposals, which
it submits for approval to the Board of Directors, <strong>in</strong> the
areas of:
- Appo<strong>in</strong>tments to corporate posts at the <strong>Group</strong>’s
subsidiaries and the respective development and backup
plans;
- General and <strong>in</strong>dividual compensation plans for “first level”
employees and stock option plans;
- Compensation for executive Directors which may <strong>in</strong>clude
stock options or appreciation rights.
<strong>The</strong> Committee will adopt resolutions <strong>in</strong> the absence of the
Chief Executive Officer whenever the CEO’s compensation
is discussed and <strong>in</strong> the absence of the Chairman and the
Chief Executive Officer whenever the Chairman’s
compensation is discussed.
❚ <strong>The</strong> Board of Directors, with the favorable op<strong>in</strong>ion of the
Board of Statutory Auditors, determ<strong>in</strong>es the compensation
of executive Directors. <strong>The</strong> entire compensation payable
to the Chairman is variable, while only a portion of the
compensation payable to the Chief Executive Officer is
variable. <strong>The</strong> amount of the abovementioned compensation
and the respective computation criteria are expla<strong>in</strong>ed <strong>in</strong>
schedule entitled “Fees paid to Directors and Statutory
Auditors,” which appears at the end of the Notes to the
Statutory F<strong>in</strong>ancial Statements.
❚ <strong>The</strong> Board of Directors recently approved a procedure for the
handl<strong>in</strong>g of confidential <strong>in</strong>formation, which def<strong>in</strong>es functions,
responsibilities and the procedures that must be followed <strong>in</strong>
communicat<strong>in</strong>g to the external and to the general public
<strong>in</strong>formation that may be considered “price sensitive.”
<strong>Report</strong> on Operations – Corporate Governance
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