The Group’s remuneration policy is aimed at ensuring the company remains competitive in the labour market, and at achieving the Company’s strategic objectives by pursuing sustainable long-term results in line with TIM’s business risk management policy.
The primary purpose of TIM’s remuneration structure is to balance fixed and variable remuneration and enhance the benefit and welfare system, with the aim of increasing recipients’ satisfaction at a sustainable cost.
The components of individual remuneration are:
- fixed remuneration
- short-term variable remuneration
- long-term variable remuneration
- benefit and welfare.
The fixed component takes into account the breadth and strategic nature of the position held and is dictated by performance in the reference markets.
Periodic comparisons of internal remunerations and external market remuneration practices allow the establishment of the remuneration strategy to be adopted; TIM’s comparative remuneration market is Italian companies of comparable size and/or market capitalization, and international telecoms and media companies.
Given the need to be selective when making changes to remuneration, especially the fixed component, this will concern cases of high quality staff where there is strong misalignment with the reference market average.
In addition to changes to fixed remuneration, during salary reviews, other variable remuneration instruments (Lump Sum bonus) can be put in place - excluding Senior Management with Strategic Responsibilities - to reward outstanding performance or particularly good results during extraordinary initiatives not part of normal activities.
The short-term variable remuneration (MBO) on the other hand aims to establish a transparent link between pay and the degree of fulfilment of annual targets. To this end, the targets were fixed according to quantitative indicators that represent and are consistent with the strategic priorities and business plan, measured according to pre-established and objective criteria.
Long-term variable remuneration is aimed at promoting consistency between the interests of management and those of shareholders, through sharing of the business risk.
In 2018, the Board of Directors approved the 2018-2020 LTI Plan and Performance Share plan, with a three-year vesting period and a two-year lock-up. This Plan is reserved to the Chief Executive Officer and owners of managerial positions with a major impact on company results. The Plan is subject to the achievement of the performance condition linked to the increase in both the share value and economic and financial indicators.
For both the MBO system and 2018-2020 LTI Plan, a contractual claw-back mechanism is in force, which allows for retrieval of the variable remuneration paid out to Executive Directors and managers with strategic responsibilities starting from 2016. As defined in the policy, the claw-back clause can be triggered in the three years following payment of the sums.
The main changes with respect to the 2019 remuneration policy, reported in TIM 2019 Sustainability Report (Chapter “TIM People”, paragraph “ Remuneration Policy”, page 99), are related to the incentive systems, short and long term:
- MBO 2020: the introduction of an ESG target, consisting of the Customer Satisfaction Index (weight 10%) and the Employee Engagement improvement (weight 10%), which refers to two essential stakeholders for the Company, external customers and internal employees; on the one hand, therefore, in support of the business and the 2020-2022 Corporate Strategic Plan, and in line with the need to favor a “customer-centric” approach, a Customer Satisfaction indicator has been confirmed and, on the other hand, an objective has been set that takes into account staff engagement in achieving business objectives.
- LTI PLAN 2020-2022: approved by the Shareholder’s Meeting on April 23, 2020, the plan is consistent with strategic planning cycles and with corporate sustainability, equity-based and rolling policies.
Each of the three plan cycles is divided into two parts, Performance Shares and Attraction/Retention component. The Performance Share includes an access gate (equity linked) and two performance conditions (relative share value and economic and financial indicators). For both components, the overall payout will be corrected by a bonus/malus mechanism of 4% linked, in equal measure, to the growth in the use of renewable energy as a % of total energy and the reduction of CO2 indirect emissions.
The condition for the allocation of the new Plan for those who have had access to the 2018-2020 LTI Plan will be the waiver of its third and final year.
This Plan is subject to a clawback clause for all recipients (around 26% of employees below senior management).
Benefits and welfare constitute non-monetary elements of remuneration.
- benefits are assets made available to beneficiaries, depending on their role and are aimed at improving their well-being; these services generate an economic value separate from both fixed salary and other forms of variable remuneration;
- welfare is the package of non-monetary services available to the entire corporate population regardless of role, aimed at increasing individual and family well-being of all employees.