2.3 Role of the Board of Directors
The Board of Directors plays a central role in the Company’s corporate governance structure, and has powers relating to the orientation of the Company and the Subsidiaries in terms of strategy, organisation and control. The table below sets out the duties assigned to the Board of Directors pursuant to the BoD resolution of 27 April 2016.
Examination and approval of strategic, business and financial plans
- Defines the strategic guidelines and the objectives of the Company and the Group, including the sustainability policies
- Examines and approves the strategic, business and financial plans of the Company and the Group, monitoring their implementation annually, as well as the Company’s strategic agreements and its annual and multi-year infrastructure plan
- Examines and approves the budget of the Company and of the Group, the half-year report and interim management statements of the Company and of the Group, the Sustainability Report and the Report on Corporate Governance and Ownership Structure
Definition of corporate governance and Group structure
- Adopts rules that ensure the transparency and correctness of transactions with related parties and transactions in which directors and statutory auditors have an interest, after consulting the Control, Risk and the Related-Party Transactions Committee
- Adopts a procedure for the management and communication of corporate information, with a specific focus on inside information
- Establishes internal Committees that provide recommendations and advice and half-yearly reports
- Appoints and revokes the General Managers and the Executive Responsible For Preparing Corporate Accounting Documents and resolves upon the exercise of voting rights at the Shareholders’ Meetings of the Subsidiaries, at the recommendation of the Chief Executive Officer
- Resolves, at the proposal of the Appointments Committee, on the appointments of the members of the corporate bodies of Subsidiaries included in the consolidation and of strategic foreign investee companies
Assessment of the adequacy of the organisational, administrative and accounting structure
- Defines the basic guidelines for the organisational, administrative and accounting structure of the Company and its Subsidiaries and evaluates its adequacy annually, with particular focus on the internal control and risk management system
- Defines, after consulting the Control, Risk and Related-Party Transactions Committee, guidelines for the internal control and risk management system, to ensure the identification, measurement, management and monitoring of key risks, and also determines how compatible these risks are with management of the Company and the Group consistently with the strategic objectives identified, assessing their adequacy and effectiveness
- Assesses, after consulting the Control, Risk and Related-Party Transactions Committee and the Board of Statutory Auditors, the results presented by the external auditors in any management letter and in the report on the fundamental questions arising from the audit
- Appoints and revokes the Internal Auditor, setting the remuneration in line with the Company’s remuneration policies, and ensures that he/she has adequate resources to carry out his/her duties
Continuous assessment of general operational performance and relations with the delegated bodies
- Assesses the general performance of operations, with regard to the information received from the delegated bodies, paying particular attention to conflicts of interest and periodically comparing the results achieved, as reported in the financial statements and the interim accounts, with those of the budget
- Confers powers on members of the Board of Directors and revokes them, sets the limits of the powers, the ways to exercise them and the associated remuneration, who report at least every quarter to the Board itself and the Board of Statutory Auditors on the exercise of the powers, the transactions with the greatest impact on the financial statements carried out by the Company and the Subsidiaries, and transactions with related parties23
- Is authorised to issue directives to the delegated bodies and perform operations covered by the powers conferred
Approval of the significant transactions of Snam and the Subsidiaries
- Resolves, at the CEO’s recommendation, upon the transactions of the Company and its Subsidiaries, in the context of exercising management and coordination activities that are of significant strategic, economic, capital or financial importance for the Company and the Group. This is without prejudice, in any case, to compliance with the confidentiality obligations relating to the commercial relations between the Company and the Subsidiaries and/or third parties.
The following transaction types are considered of strategic importance or to have a significant impact on the financial statements:
- acquisitions, disposals, sales, closures, contributions of companies or business units (including rent and usufruct), real estate and/or investments for over Euro 100 million
- contracts for the sale of goods and/or services relating to the commercial activities of the Company and its Subsidiaries, worth over Euro 1 billion and/or with a duration of over 15 years
- contracts relating directly to the activities indicated in the corporate objective and/or relating to the day-to-day management of corporate activities worth over Euro 100 million and/or for a duration of over 15 years
- the stipulation, modification and termination of credit contracts for over Euro 2 billion and/or for a duration of over 15 years
- sureties, and other forms of personal guarantee, and letters of patronage in relation to commitments assumed or to be assumed by companies in which the Company directly or indirectly holds an equity investment, for over Euro 100 million and in any event if the amount is not proportional to the investment
- sureties guaranteeing obligations assumed or to be assumed by the Company with third parties, worth over Euro 100 million
- the Company’s brokerage contracts
Assessment of the size, composition and functioning of the Board of Directors and the Committees
- Assesses, annually, the composition and functioning of the Board and the Board Committees, assisted by an external advisor. The aspects assessed include: (i) the role of the Board of Directors in the strategic planning process, (ii) interaction between the Board and the Committees, (iii) the quality of Board information and debate, and (iv) the qualitative and quantitative composition of the Board and the Committees, referring in particular to the relationship between the executive, non-executive and independent directors and their individual expertise and experience
Definition of remuneration policy
- Defines the remuneration policy for directors, general managers and executives with strategic responsibility of the Company and its Subsidiaries, as well as the related remuneration systems
- Implements the remuneration plans based on shares and/or financial instruments resolved upon by the Shareholders’ Meeting
- Approves the Remuneration Report
In its assessment of the size, composition and functioning of the Board and the Committees conducted at its meeting of 6 March 2017, the Board decided to engage an external consultant, Spencer Stuart Italia S.r.l., a company that has provided other professional personnel selection services to Snam and has broad and long-standing experience in Board Evaluation. The evaluation of Snam’s Board of Directors and its internal Committees was carried out by three senior partners at Spencer Stuart, by means of structured interviews conducted in January 2017. Prior to conducting the interviews, the experts involved carefully read the documentation and meeting minutes pertaining to the Board and the Committees, and met with the members of the Appointments Committee, the Chairperson and the CEO and, as observers, the Chairperson of the Board of Statutory Auditors and the Board Secretary.
The interviews with Snam’s directors addressed various aspects relating to the composition, size and functioning of the Board and the Committees.
A comparison was also made between the best practices of Italian and international listed companies and the practices adopted by Snam’s Board; for this purpose, the international study entitled “Boardroom Best Practice”, recently completed by Spencer Stuart was used.
Following the interviews, the consultants were invited to attend a Board meeting as observers.
Overall, the directors interviewed were positive about the Board’s methods of operation, in view of the following strong points:
- the Board of Directors works well, with debate that is oriented towards open and constructive discussion;
- they were very satisfied with the Board’s role in strategic guidance, due to its involvement in the Strategic Plan;
- the Board’s knowledge of the Snam Group’s business is steadily increasing. The induction and updating plan is generally seen as effective by the majority of directors;
- the following were also remarked upon: (i) the balanced and effective way in which the Chairperson and CEO work together, respecting their remits; (ii) the ability and intelligence shown by the Chairperson in shifting from steering the business to a non-executive role; and (iii) the CEO’s management ability and expertise, and appreciation of the adequate information on the performance of company operations provided to the Board;
- the Company’s Corporate Governance and Internal Control System is regarded as efficiently overseen by the Board;
- the Directors appreciate the work of the Committees;
- the Board’s agenda items are clear, partly due to the prior provision to directors of an “outline for discussion” prepared by the Board Secretary;
- the documentation drawn up by the corporate functions involved, depending on the matter under discussion, is clear and accessible;
- Board meetings are outstanding in terms of the quality of minuting and due to the constant support and high quality of work of the Board Secretary.
Some areas for improvement were also identified during the interviews. In particular, the opportunity has arisen to: (i) foster stronger interpersonal relations and cohesion among directors, particularly those in their first term of office on the Company’s Board; (ii) further improve information flows from the Board Committees regarding the work carried out by the Committees and any aspects that should be brought to the attention of the management body; (iii) assess the possibility of distancing the meetings of the Committees from those of the Board, to enable the Chairs of the Committees to prepare and share reports and information for the management body with the members of the respective Committees; and (iv) promptly update the Board on the succession process for key managers, with the related development pathways.
With regard to these areas for improvement, the Board also shared the actions proposed by the consultant, which will form the basis for next year’s Board Evaluation.
23 Information must be made available promptly when the directors have a direct interest in the transaction, when third parties are involved or when the transaction could be influenced by any entity that carries out management and coordination activities. This information is generally expected to be provided at each Board meeting.