4. Snam’s corporate governance system

Since it was first listed on the MTA segment of Borsa Italiana in 2001, Snam has complied with the principles set out in the various versions of the Code of Corporate Governance. Compliance with the Code of Corporate Governance is voluntary and issuers may choose to disregard its recommendations, either in full or in part. However, pursuant to the comply-or-explain mechanism provided for by Article 123-bis of the TUF, issuers must justify their reasons for failing to apply the recommendations in their corporate governance report.

For references to the information contained in the Report pursuant to Snam’s application of the Code of Corporate Governance recommendations, please see Annex 3.

In July 2015, the Corporate Governance Committee amended the Code of Corporate Governance, inviting issuers to adopt the amendments by the end of the 2016 financial year, informing the market of this adoption through the report to be published during the 2017 financial year. However, with regard to the amendments made to Article 8, the Committee invited issuers to apply the update as of the first renewal of the Board of statutory auditors following the end of the 2015 financial year. For Snam, the update relating to Article 8 of the Code of Corporate Governance will be applied during 2016, upon the renewal of the Board of Statutory Auditors⁸.

Snam’s corporate governance system – a set of planning, management and control rules and methodologies necessary for the Company’s functioning – was identified by the Board of Directors:

• in compliance with the regulations to which the Company is subject as a listed issuer;
• in accordance with the Code of Corporate Governance; and
• in line with the national and international best practices against which the Company compares itself.

The corporate governance system also focuses on compliance with the Unbundling Regulation⁹, given the specific nature of the activities carried out by Snam and its Subsidiaries, which are subject to regulation by the AEEGSI.

This system is based on certain key principles, such as proper and transparent business management implemented through the identification of information flows between corporate bodies and an efficient definition of the internal control and risk management system, including through the adoption of an enterprise risk management (ERM) system. This consists of rules, procedures and organisational structures aimed at identifying, measuring, managing and monitoring the main risks that could affect the achievement of the Company’s strategic objectives

Snam uses a traditional management and control system. The Bylaws set out the duties and activities of the following corporate bodies:

• Shareholders’ Meeting;
• Board of Directors;
• Board of Statutory Auditors.

4.1 Shareholders’ Meeting

The Shareholders’ Meeting is a decision-making body through which shareholders appoint the Board of Directors and the Board of Statutory Auditors. Pursuant to Article 12 of the Bylaws, in addition to the matters irrevocably assigned by law, the Shareholders’ Meeting is exclusively responsible for passing resolutions concerning the sale, transfer, lease, usufruct or any other act of disposition, including within the scope of joint ventures, or subjection to restrictions of the Company or of business units of strategic importance in relation to gas transportation and dispatching activities¹⁰.

4.2 Board of Directors

The Board is vested with the broadest powers for ordinary and extraordinary administration of the Company, and may execute any act deemed necessary for the achievement of the corporate objective. The Board of Directors appoints the Chairman, if the Shareholders’ Meeting has not already done so, delegates its powers to one or more of its members and may set up Committees. Specifically, the Board of Directors has created the following Committees, in compliance with the Code of Corporate Governance and the Bylaws¹¹:

• Compensation Committee;
• Appointments Committee;
• Control and Risk Committee.

4.3 Board of Statutory Auditors

The Board of Statutory Auditors oversees compliance with the law and with the deed of incorporation, as well as respect for the principles of proper administration in the performance of company activities. It also evaluates the adequacy of the organisational, administrative and accounting structure adopted by the Company, and how it functions in practice. Pursuant to Legislative Decree No. 39 of 27 January 2010, the Board of Statutory Auditors also performs supervisory activities in its role as the “Internal Control and Audit Committee”¹².