2.4 Appointment, composition and term of office

Appointment

Article 13 of the Bylaws provides for a list voting mechanism for the appointment of the Board of Directors, which should be structured in such a way as to permit the presence on the Board of directors appointed by minority shareholders, as well as compliance with the criteria of gender representation, in accordance with the provisions of Article 147-ter of the TUF. Specifically, the Bylaws state, with greater strictness than is required by Article 147-ter, paragraph 4 of the TUF, that at least one director, if the Board is made up of no more than seven members, or at least three directors, if the Board is made up of more than seven members, must meet the independence criteria set forth in the TUF²⁷.

The list voting mechanism applies only for the replacement of the entire Board of Directors. Even during its term of office, the Shareholders’ Meeting may change the number of members on the Board of Directors, provided it is within the limit of a minimum of five and a maximum of nine, as set forth in the Bylaws, and makes the relevant appointments. The term of office of directors thus elected shall expire with those in office.

Candidates meeting the independence requirements must be specifically identified on the lists. All candidates must also meet the integrity requirements provided for by applicable legislation.

Lists may be presented by shareholders who, either alone or together with other shareholders, represent the minimum percentage calculated pursuant to the regulations in force (equivalent to 1% of the share capital, as provided for by Consob Resolution No. 19109 of 28 January 2015). Each shareholder may present or be involved in the presentation of only one list, and may vote for one list only.

Seven tenths of the directors to be elected shall be taken from the list receiving the majority of the shareholders’ votes in the consecutive order in which the candidates appear on the list, rounding down to the nearest whole number if the number is a decimal. The remaining directors shall be taken from the other lists, which may not be associated in any way, even indirectly, with shareholders who have submitted or voted for the list which came in first by number of votes.

Lists are filed at the registered office by the twenty-fifth (25th) day prior to the date of the Shareholders’ Meeting called to resolve on the appointment of the members of the Board of Directors and made available to the public by the methods provided for by law and by the Issuer Regulations at least twenty-one (21) days prior to the date of the Shareholders’ Meeting. In addition to the lists, the following documents must also be submitted:

• a CV for each candidate;
• statements from the candidates in which they accept their candidacy and declare, assuming full responsibility, that there are no grounds for ineligibility or incompatibility, and that they satisfy all applicable integrity and independence requirements. Appointed directors must inform the Company if they cease to meet the independence and integrity requirements or if any grounds for ineligibility or incompatibility arise.

List voting mechanism for the election of directors

Below is a description of the procedures for appointing members of the Board of Directors through the list voting mechanism pursuant to Article 13 of the Bylaws:

1. seven tenths of the directors to be elected are taken from the list receiving the majority of the shareholders’ votes in the consecutive order in which they appear on the list, rounding down to the nearest whole number, if the number is a decimal;
2. the remaining directors shall be taken from the other lists, which may not be associated in any way, even indirectly, with shareholders who have submitted or voted for the list which came in first in number of votes; for that purpose, the votes won by said lists shall be divided successively by one, two or three, depending on the consecutive number of directors to be elected. The quotients thus obtained shall be assigned progressively to candidates from each of these lists, according to the order shown in them. The quotients thus assigned to candidates from the different lists shall be arranged in a single decreasing gradation. Those obtaining the highest quotients shall be elected. If several candidates obtain the same quotient, the candidate from the list which has not yet elected any director or that has elected the smallest number of directors will be elected. If none of these lists has yet elected a director or if all have elected the same number of directors, the candidate from the list obtaining the greatest number of votes shall be elected. If the voting on lists is tied and the quotient is also tied, a new vote by the entire Shareholders’ Meeting shall be held, and the candidate winning a simple majority of votes shall be elected;
3. if, after following the procedure described above, the minimum number of independent directors required by the Bylaws is not elected, the quotient of votes to be attributed to each candidate taken from the lists is calculated by dividing the number of votes for each list by the order number of each of these candidates; non-independent candidates with the lowest quotients among the candidates taken from all the lists shall be replaced, starting from the very lowest, by the independent candidates taken from the same list as the candidate being replaced (following the order in which they are listed); otherwise, they shall be replaced by persons who meet the independence criteria and appointed in accordance with the procedure mentioned under e). If candidates taken from different lists have obtained the same quotient, the candidate from the list from which the highest number of directors has been taken shall be replaced, or, if these numbers of directors are the same, the candidate taken from the list with the fewest votes shall be replaced, or, if the number of votes is the same, the candidate who receives the fewest votes in a dedicated resolution by the Shareholders’ Meeting shall be replaced;
4. if the procedure described in letters a) and b) above does not allow for compliance with the law on gender representation, the quotient of votes to be attributed to each candidate taken from the lists shall be calculated by dividing the number of votes for each list by the order number of each of these candidates; the candidate of the most represented gender with the lowest quotient among the candidates taken from all the lists shall be replaced, notwithstanding the compliance with the minimum number of independent directors, by the candidate of the least represented gender (with the highest consecutive number) taken from the same list as the replaced candidate; otherwise, the candidate shall be replaced by the person appointed in accordance with the procedure mentioned under e). If candidates from different lists have obtained the same lowest quotient, the candidate from the list from which the greater number of directors has been taken shall be replaced, or, if these numbers of directors are the same, the candidate taken from the list with the fewest votes shall be replaced, or, if the number of votes is the same, the candidate who receives the fewest votes in a dedicated resolution by the Shareholders’ Meeting shall be replaced;
5. for the appointment of directors not appointed for any reason by the above procedures, the Shareholders’ Meeting shall decide by statutory majority so as to ensure that the composition of the Board of Directors is consistent both with the law and with the Bylaws.

Additional binding legal provisions, including regulatory rules, remain unchanged in any case.

Composition

The Shareholders’ Meeting held on 26 March 2013 set the number of directors at nine and their term of office at three financial years, terminating on the date of the Shareholders’ Meeting called to approve the financial statements as at 31 December 2015.

Two lists for the appointment of directors were submitted at the Shareholders’ Meeting of 26 March 2013: one by CDP RETI (six candidates) and one submitted jointly by minority shareholders - institutional investors (three candidates). All the proposed candidates were appointed. The share capital represented at the Shareholders’ Meeting, all holders of which voted on the appointment of directors, accounted for 50.68% of the Company’s share capital. The list submitted by CDP RETI was voted for by 31.17% of the shareholders present at the Meeting, while the list submitted jointly by minority shareholders received 19.13% of the votes.

During the appointment of the Board of Directors, the Board expressed the opinion to see the following aspects enhanced among its members: (i) strategic and market positioning, (ii) knowledge of the energy business, (iii) international scope.

The table below lists the current members of the Board of Directors, showing the lists from which they were elected and the directors who were expressly indicated on the list as meeting the independence requirements pursuant to the TUF and the Code of Corporate Governance.

The number of females currently on the Board is three (out of nine members), higher than the minimum number required by the regulations currently in force on gender representation, upon the first application of the regulations.

Further information on the lists of candidates submitted at the Shareholders’ Meeting of 26 March 2013 can be found on the Company’s website (http://www.snam.it/it/governance/organi-sociali/assemblea-azionisti/Verbali_documenti.html). For details on the appointment and term-end dates of the directors, see the table Annex 1 of the Section IV.

At its meeting on 26 March 2013, the Board of Directors confirmed Marco Reggiani, Snam’s Director of Legal & Corporate Affairs and Compliance, in the role of Secretary of the Board.

Term of office, termination and forfeiture

Pursuant to Article 13.2 of the Bylaws, directors may not be appointed for more than three financial years, which term expires on the date of the Shareholders’ Meeting called to approve the financial statements for the last year of their term of office; they may be re-elected.

Pursuant to Article 13.8 of the Bylaws, if, during the financial year, the office of one or more directors should be vacated, the provisions of law shall apply²⁸. If the majority of the directors should vacate their offices, the entire Board shall be understood to have resigned, and a Shareholders’ Meeting must be called without delay by the Board of Directors in order to replace it. Pursuant to Article 13.4 of the Bylaws, the Board shall evaluate, on an annual basis, the independence and integrity of the directors, as well as the lack of grounds for ineligibility or incompatibility²⁹. If one of the directors does not fulfil or no longer fulfils the established independence or integrity requirements imposed by law, or if there are grounds for ineligibility or incompatibility, the Board will dismiss the director and arrange for him/her to be replaced, or will ask that he/she either remove the grounds for incompatibility within an established period of time or forfeit the post.

At its meeting on 11 March 2015, the Board of Directors confirmed (i) that there are no grounds for ineligibility, forfeiture or incompatibility in relation to the directors, and that they meet the integrity requirements pursuant to the applicable regulations; and (ii) that, based on the declaration made by the Executive Responsible for preparing corporate accounting document, there are no grounds for the latter’s incompatibility pursuant to Article 16.4 of the Bylaws, and that the Executive Responsible for preparing corporate accounting document meets the integrity requirements set forth by the applicable regulations³⁰.

Independent directors

Except for the CEO, the Board of Directors is made up of non-executive members, a number of whom are independent, to ensure by both number and authority that their opinion can have a bearing on Board decisions. Of the nine directors, five are independent. The presence of independent directors on both the Board of Directors and its Committees ensures that the interests of all shareholders are adequately protected.

The Board meeting of 11 March 2015 also confirmed that non-executive directors Sabrina Bruno, Alberto Clô, Francesco Gori, Elisabetta Oliveri and Pia Saraceno meet the independence requirements set forth by the TUF and the Code of Corporate Governance. During the appointment of the Board of Directors and the meeting on 18 March 2014, the Board of Statutory Auditors, in relation to the checks performed in 2014, verified that the criteria and procedures adopted by the Board of Directors in order to determine whether the directors met the independence requirements were correctly applied. During the first half of 2015, the Board of Statutory Auditors will perform an annual verification as to whether the criteria and procedures adopted by the Board of Directors in order to determine whether the directors meet the independence requirements are correctly applied. The independent directors have planned to meet in the first half 2015, without the other directors.

Maximum accumulation of offices held at other companies

At its meeting of 11 March 2015, the Board of Directors, at the proposal of the Appointments Committee, issued the following directives and expressed the following position on the accumulation of offices held by directors:

• an executive director should not hold: (i) the office of executive director at another listed Italian or foreign company, or in a financial, banking, or insurance company or any other company with shareholders’ equity in excess of € 1 billion; (ii) the office of non-executive director or statutory auditor (or member of another control body) at more than three of the companies listed below (i). Furthermore, in the case of the CEO, he/she may not assume the office of director of another issuer not belonging to the same group whose CEO is a director of the Company;
• a non-executive director (including independent non-executive directors) should not, in addition to the position held at the Company, hold: (i) the office of executive director at more than two listed Italian or foreign companies, or financial, banking or insurance companies or any other companies with shareholders’ equity in excess of € 1 billion and the office of non-executive director or statutory auditor (or member of another control body) at more than five of the companies mentioned; or (ii) the office of non-executive director or statutory auditor (or member of another control body) at more than eight of the companies listed below (i).

For the purposes of calculating the maximum number of offices, positions held within Snam and its Subsidiaries and on Snam’s Committees are not relevant.

If the maximum limit on important positions held is exceeded, the directors must promptly inform the Board of Directors, which shall evaluate the situation in light of the Company’s interest and ask the director to comply with its decisions on the matter. Based on the declarations made by the directors, the following table lists the other important positions held by directors of the Company pursuant to the Code of Corporate Governance and the relevant recommendations issued by the Board of Directors.

At its meeting on 11 March 2015, the Board of Directors confirmed that (i) except for the CEO, the directors hold a non-executive role; (ii) the CEO holds no other positions outside of Snam and its Subsidiaries³¹; and (iii) the number of important positions held by the directors pursuant to the Code of Corporate Governance and the relevant recommendations issued by the Board is compatible with the effective performance of the role of director at Snam.

Lead independent director

Snam has not appointed a lead independent director due to the absence of the prerequisites set forth in application criterion 2.C.3 of the Code of Corporate Governance and considering that the Chairman of the Board of Directors does not hold the office of Chief Executive Officer and does not hold a controlling stake in the Company. Furthermore, the appointment of a lead independent director was not requested by the independent directors.