6.6 Model 231, Watch Structure and Code of Ethics Supervisor

(i) Model 231

The Board of Directors has adopted its own organisation, management and control model pursuant to Legislative Decree 231/2001 (Model 231) to prevent crimes mentioned in the legislation on corporate administrative responsibility for crimes committed in the interest or to the advantage of the Company, and it has set up a Watch Structure equipped with autonomous powers of initiative and control, in compliance with the law.

Model 231 is an organic set of principles, rules and provisions concerning, inter alia, the management and control of each corporate process. Its aim is to protect the Company from any conduct that may incur its administrative responsibility, pursuant to Legislative Decree 231/2001, in relation to crimes or attempted crimes committed in the interest or to the advantage of the Company by persons holding a “senior” position within the entity or by those who are subject to the oversight and control of such persons.

Most recently on 30 July 2013, the Board of Directors approved the new Model 231, which was updated with regard to the new crimes of “private corruption”, “undue inducement to give or promise benefits” and “employment of third-country citizens whose stay is illegal”, and to the changes to Snam’s organisational and ownership structure⁵⁴ . Lastly, Model 231 was further updated in the light of the issuance of regulations that introduced additional offences, such as those mentioned under Law 186/2014 concerning “Provisions on money laundering”, Law 68/2015 concerning “Provisions on crimes against the environment”, and Law 69/2015 concerning “Provisions on crimes against government authorities, involving criminal organisations and involving falsified financial statements”.

The analysis of corporate processes and the comparative analysis of the existing control environment and the oversight measures are carried out based on the COSO Framework, which is the international benchmark model for the establishment, updating, analysis and assessment of internal control systems (the “COSO Framework”, published most recently in May 2013⁵⁵).

A multi-functional “Team 231” was formed to identify and carry out the activities necessary for updating the Company and Subsidiaries’ Model 231 by incorporating new legislative developments within the scope of application of Legislative Decree 231/2001.

The Subsidiaries have also adopted a Model 231 commensurate with their own specific nature, appointing their own Watch Structure to monitor the implementation and effective application of the model.

(ii) Training and encouraging participation

With a view to the continual improvement of the control system, and in the light of the importance of making those inside and outside the Company aware of the content of Model 231, Snam has developed a specific training programme for all its employees in order to ensure that Model 231 is applied effectively. As well as being an important tool for making management and other employees aware about corporate ethics, prevention of the crimes mentioned in Legislative Decree 231/2001 and anti-corruption, this training activity encourages all staff members to play an active role in Snam’s system of ethics and values.

(iii) Watch Structure and Code of Ethics Supervisor

On 30 July 2013, the Board of Directors strengthened the Watch Structure by increasing the number of external members, partly to ensure sufficient separation of duties and partly to ensure the presence of members with specific areas of expertise, thereby enabling the body to perform its duties effectively.

The Watch Structure comprises the Internal Auditor, the Head of Technical Administration and Watch Structure Relations, and three external members, one of whom chairs the body, who are experts in legal and corporate affairs as well as in business organisation and economics. The table below shows the members of this body:

Among other things, the Watch Structure oversees the effectiveness of Model 231 and the monitoring of how it is implemented and updated. It examines Model 231’s suitability in terms of preventing unlawful conduct and manages the relevant information flows with the various corporate departments and the watch structures of the Subsidiaries. The Watch Structure also acts as the Code of Ethics Supervisor.

In performing its tasks, the Watch Structure has unlimited access to corporate information for investigation, analysis and control activities. Any Company department, employee and/or member of Company bodies is subject to a disclosure obligation in the event of any request by the Watch Structure, or in the event of significant events or circumstances, for the performance of the activities falling within the field of competence of the Watch Structure.

If any problems emerge, the Watch Structure publishes the results of its activities.

The Watch Structure provides the following information flows:

• ongoing, with the CEO, who reports to the Board of Directors during his activity of reporting on the performance of his duties;
• half-yearly to the Control and Risk Committee and the Board of Statutory Auditors; to this end, a half-yearly report is prepared regarding the activity performed, noting the outcome of controls and any legislative developments relating to the administrative responsibility of entities. On this occasion, dedicated meetings are organised with the Control and Risk Committee and the Board of Statutory Auditors; the half-yearly report is also sent to the Chairman and the CEO, and the Board of Directors is informed about it;
• immediate, in the case of ascertained facts of special importance and significance, to the Control and Risk Committee and the Board of Statutory Auditors, after informing the Chairman and the CEO.

“Dedicated information channels” are established to facilitate the flow of communications and information.

In 2015, the Watch Structure met 11 times, with the attendance of 98.18% of its members.