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Remuneration Policies

04/17/2019 - 11:45 AM

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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 comparable by size and/or market capitalisation.

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 - normally 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. In 2018, as in 2017, the management incentives structure was simplified by reducing the number of objectives.

The MBO 2018 system provides for a “gate” objective made up of the company indicator (Group EBITDA), a bonus access condition linked to all the incentive objectives and applied indiscriminately to all participants in the plan. The gate target for 2018 was not achieved.

For those who report directly to Executive Directors, the bonus target values ​​are set in continuity with 2017 and are up to 50% of the fixed component. For the remaining incentivised staff, the target values ​​are set - based on the role complexity - at up to 30% of the fixed component.

There are Group, departmental and individual objectives. For 2018, the performance management weighting was reduced from 30% to 10% to give greater importance to departmental objectives. The Performance Management objective for all MBO recipients (with the exception of the Executive Directors) will continue to be fuelled by the overall assessment result, which takes into account both individual objectives and skills to the same degree.

The accrued bonus is fully liquidated in cash form, at the time that the results achieved are confirmed.

A contractual clawback mechanism is in force, which allows retrieval of the variable remuneration paid out to Executive Directors and managers with strategic responsibilities starting from 2016. As defined in the policy, the clawback clause can be triggered in the three years following payment of the sums.

 

 

Long-term variable remuneration is aimed at promoting consistency between the interests of management and those of shareholders, through sharing of the business risk.

On 24 July 2018, the Board of Directors approved the 2018-2020 LTI Plan, Performance Share plan, with a three-year vesting period, and a 2-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. The LTI Plan is also subject to the claw back clause for the Chief Executive Officer and senior management with strategic responsibilities.

The benefits and welfare area constitutes the non-monetary element of remuneration; the Company also confirmed a substantial investment in terms of dedicated economic resources in 2018.

In particular:

  • 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. Consistent with this approach, from 2018 recipients of the performance bonus (the collective incentive system aimed at the entire non-director population and not involved in individual incentive instruments) can choose to convert the monetary premium into welfare services, thus benefiting from associated tax relief.

 

The following are the main objective types linked to sustainability in the company MBO system.

 

Reference stakeholders Targets subject to incentives % of managers
(to whom the target applies)
Customers Customer satisfaction 52%
Quality of the service delivered 85%
Quality of the service perceived by consumer and business customers 27%
Quality of the service perceived by other national fixed and mobile telephony operators 18%
Transformation Project 95%

This year the objectives for Human Resources, Environment, Shareholders, Institutions and Community stakeholders have merged in the new Transformation Project corporate objective and apply to 95% of managers, with a total 10% weighting on the overall objective.