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Remuneration policy of Senior Executives and key managers with strategic responsibilities

03/27/2019 - 02:00 PM

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Executive Directors - Chairman

Below please find  the description of the Chairman’s compensation package decided by the Board of Directors on July 24, 2018 and on February 20,2019:

  • Fixed component
    The remuneration for acting as Chairman is set at the gross sum of 600,000 euros per annum. The Chairman does not receive any remuneration for the office of Director nor for his membership of the Strategy Committee (Art. 2389(1) of the Italian Civil Code).
  • Variable component (MBO)
    The Chairman is awarded an end-of-mandate bonus, amounting to  400,000 euros gross. This is conditional by efficacy office evaluation  and on the Board Review resulting in a positive score of at least 4 out of 5 for each of the years  2019 and 2020. This remuneration is not linked to the Company’s financial results and is not subject to clawback. The Chairman is not included in the share bonus plans. 
  • Severance
    No specific severance treatment has been agreed.
  • Benefit
    The Chairman does not access the benefits applicable to the rest of the Company’s top management; he will only be reimbursed with the expenses incurred in performing his duties, in accordance with the Bylaws.

Executive Directors - Chief Executive Officer

Here below is a description of the compensation package established by the Board of Directors (with a proposal and compliant opinion of the Remuneration Committee) on 18 November 2018, when hired as General Manager and the attribution of assignment as Chief Executive Officer to Mr Luigi Gubitosi:

  • Fixed component

Gross annual fixed remuneration

An annual gross sum of €1,000,000 euros has been set for the management employment, with the duties of General Manager.

Fixed remuneration (pursuant to article 2389 subsection I of the Italian Civil Code)

The remuneration for acting as Chief Executive Officer is set at the gross sum of 400,000 euros per annum. The Chief Executive Officer does not receive remuneration for the office of Director or for his membership of the Strategy Committee (pursuant to Art. 2389, subsection 1 of the Italian Civil Code).

  • Short term variable component

    For each year of service, the CEO is paid a short-term variable component, which correlates to fulfillment of the targets annually by the Board of Directors, at the target amount (100%) of 1,400,000 euros gross; a parameterized scale is applied, whereby a bonus of 50% of the target amount is paid if the minimum level is achieved, up to a bonus equal to 150% of the target amount if the maximum level is achieved.

 

On February 21, 2019 the Board of Directors decided on the following incentive targets for the 2019 MBO, as proposed by the Nomination and Remuneration Committee and in line with the overall architecture (of the plan):

Objectives

Weight Min (% of tgt) Tgt

Max (% of tgt)

TIM Group EBITDA (GATE)

30% 95% Bdg 105%
TIM GROUP Operating Free Cash Flow 30% -12% Bdg +12%

TIM Group Services Revenues

15% -2% Bdg

+2%

TIM Group Net Financial Position Adj.

15% +2,5% Bdg -2,5%

Project to maximize the value of the TIM’s fixed network infrastructure

10%

Evaluation of the project's progress milestones by the Board of Directors

For 2019, the TIM Group EBITDA gate objective is confirmed. Achievement of this objective at the minimum level constitutes the condition to access all the bonus objectives, with the consequence that non-achievement would mean that the bonus could not be paid. The minimum gate objective for the CEO is 95% of the target value.

The clause to clawback the sums paid out may be activated in the three years following payment of the bonus, as set out in the policy.

  • Long term variable component

The CEO was awarded the 2018-2020 Long-term Plan for the two-year period 2019-2020. The annual Plan participation target is 200% of the fixed component; depending on the degree to which the performance targets are met, the bonus may be as high as 350% of the fixed component for each year of participation in the Plan.

Payment of this form of remuneration is subject to a deferral period of two-year (lock up) after the shares have been allocated. Share allocation is based on fulfillment of performance criteria.

The 2018-2020 Long-term Plan is subject to a clawback clause.

For more details on the LTI Plan 2018-2020, please refer to the information document at www.telecomitalia.com.

  • Severance

As per policy, in the event of termination of the office of Director without just cause, compensation is provided equal to the remuneration due up to the natural expiry of the mandate, with a maximum of 24 months. In addition to the prior notice, the same limit applies to the termination of the employment contract.

  • Benefits

In relation to the managerial role, the Chief Executive Officer enjoys the benefits specified for the management of the Company (health insurance cover through the Telecom Italia Group Executive supplementary healthcare assistance; supplementary pension cover through membership of the Telecom Italia Group Executive complementary pension fund; work-related and non-work-related accident, life and invalidity due to illness insurance cover; company car for mixed use; checkups). The Company is also covered by a "professional risks policy” for all Directors & Officers.

Key Managers with Strategic Responsibilities, namely those persons having authority and responsibility for planning, directing and controlling the activities of the Telecom Italia Group, directly or indirectly, including directors, are at February 21, 2019 identified as follows:

Amministratori:

Luigi Gubitosi Managing Director and Chief Executive Officer of Telecom Italia S.p.A. (1)
General Manager (1)

Dirigenti:

Sami Foguel

Chief Executive Officer Tim Brasil

Mario Di Mauro

Head of Innovation & Customer Experience (2)

Lorenzo Forina

Chief Revenue Office (3)

Carlo Nardello Chief Strategic Development & Transformation Office (4)
Agostino Nuzzolo Head of Legal and Tax (5)

Piergiorgio Peluso

Head of Administration, Finance and Control

Elisabetta Romano

Chief Technology Office (6)

Luciano Sale

Head of Human Resources & Organizational Development (7)

Stefano Siragusa

Chief Wholesale Infrastructures Network & Systems Office (8)

Anna Spinelli

Head of Procurement Unit & Real Estate (9)

[1]From November 18, 2018

2 From January 7, 2019; Until January 6, Head of Strategy, Innovation & Quality

3 From January 18 2019, date on which the pre-existing functions Chief Business & Top Clients Office – assigned to Lorenzo Forina - and Chief Consumer Office – assigned to Stefano Azzi – were superseeded.

4 From February 20, 2019

5From January 7, 2019; Until January 6 Head of Legal, Regulatory & Tax

6 From July 1, 2018

7 From February 5, 2019 previously function responsibility was attributed to Riccardo Meloni

8From April 12, 2018; Until April 11, Chief TIM Infrastructures Office

9 From September 3, 2018

The compensation package structure for 2019 for Key Managers with Strategic Responsibilities, excluding the Chairman and the Chief Executive Officer, is described below:

 

  • Fixed component

The strategy for 2019 is to maintain remuneration in line with the market, while providing for selective criteria for alignment of the fixed remuneration.

  • Short Term Variable Remuneration component (MBO)

The 2019 incentive plan is linked to the achievement of a combination of predefined targets:

a)    Company targets of an economic and financial nature

b)    Strategic objectives linked to the Industrial Plan.

 

The distribution of objectives is described in the following table:

Targets Weight
TIM GROUP EBITDA (GATE)

30%

TIM GROUP SERVICES REVENUES

 

TIM GROUP OPERATING FREE CASH FLOW

 

TIM GROUP NET FINANCIAL POSITION

20%

 

 

20%

 

10%

1 STRATEGIC OBJECTIVE 20%

For 2019 there will again be a gate objective that constitutes the minimum condition for accessing the entire bonus system. For Directors with Strategic Responsibilities, the minimum gate objective is 95% of the target value.

A parameterized scale is applied, whereby a bonus of 50% of the target amount is paid if the minimum level is achieved, up to a bonus equal to 150% of the target amount if the maximum level is achieved.

Each target is measured individually, so different combinations of the levels of achievement of the targets are possible; the linear interpolation mechanism will be used to assess these levels.

The MBO system for Key Managers with Strategic Responsibilities provides an annual target bonus of up to a maximum of 50% of the fixed remuneration.

The clause to clawback the sums paid out may be activated in the three years following payment, as set out in the specific company Regulations.

  •  Long-term variable component

The Directors with Strategic Responsibilities have been allocated the 2018-2020 Long-term Plan, described on page 9, with an annual participation target of 75% of the fixed component; depending on the degree to which the performance targets are met, the bonus may be as high as 112.5% of the fixed component for each year of participation in the Plan.

Payment of this form of remuneration is subject to a deferral period of two-year (lock up) after the shares have been allocated. Share allocation is based on fulfillment of performance criteria.

The 2018-2020 Long-term Plan is subject to a clawback clause.

  • Special Award

The 2016-2019 Special Award was exceeded in 2017.

Several Directors with Strategic Responsibilities have received the Special Award and will receive the bonus accruing in 2016 following approval of the 2019 financial statements.

The Special Award is subject to a clawback clause.

  • Severance

Settlements applicable by virtue of legal provisions, national collective labor agreements and supplementary individual agreements, are specified (always excluding cases of dismissal with just cause). Including any payment in lieu of notice, these payments may be equivalent to no more than 36 months of Total Remuneration (Gross Annual Remuneration + MBO).

The CEO is responsible for identifying individuals whose strategic importance and profile may qualify them for severance pay. This may be linked to a non-competition agreement.

  • Benefits

Benefits are granted similar to those provided for all other company managers: company car for mixed use, insurance policies (workplace accidents, life and infirmity caused by illness), complementary health insurance cover, complementary pension fund and checkups. The Company is also covered by a "professional risks policy” for all Directors & Officers.