Remuneration Committee

Functions of the Remuneration Committee

As of 2004, within the Board of Directors a Remuneration Committee was set up, responsible for making proposals to the Board (i) for the remuneration of the CEO and of other Directors covering particular offices monitoring the implementation of the Board’s resolutions, and (ii) for determining the remuneration criteria of the top management of the Company and its subsidiaries, periodically evaluating its criteria on the basis of indications provided by the CEO and submitting general recommendations to the Board on the matter.

Following the renewal of the Board of Directors during the meeting held on May 13, 2011, the Remuneration Committee was also renewed as well as its members.
Upon the renewal, the Committee’s tasks were reconfirmed as already identified by the Board within “Terna S.p.A.’s Organizational Rules for the Remuneration Committee” which was approved with resolution dated January 24, 2007.
Subsequently, on November 9, 2011, the Board of Directors approved amendments to “Terna S.p.A.’s Organizational Rules for the Remuneration Committee” adopted in order to ensure full consistency with the new indications of Article 7 of the Governance Code. Furthermore, the provisions pertaining to the composition and the competencies of the Remuneration Committee were updated, with particular regard to: (i) the competencies of the Committee concerning the general policy adopted for remuneration and (ii) concerning proposals for remuneration of executive Directors and other Directors covering particular offices, as well as (iii) setting performance objectives connected to the variable component of said remuneration, (iv) monitoring the application of decisions made by the Board and (v) verification of the actual achievement of performance objectives.

Moreover, it is also required that the Committee Coordinator, or another member of the Committee, inform the shareholders concerning the methods of the exercising of their functions and that, to this end, the Coordinator or another member of the Committee be present at the annual Shareholders’ Meeting.
No Director takes part in Remuneration Committee meetings where proposals intended for the Board are formulated on matters concerning its own remuneration, unless proposals are presented that regard general Committee members as established within the Board.

The Remuneration Committee is currently composed of Salvatore Machì (as Coordinator), Romano Minozzi and Paolo Dal Pino, all non-executive independent Directors; at least one member possesses adequate experience in financial matters.
In 2011, the Remuneration Committee held five meetings, with the regular participation of all members. The meetings lasted an average of forty-five minutes each. None of the Directors participated in the Committee meetings in which proposals regarding their remuneration were submitted to the Board of Directors. As a result of the renewal of the Board of Directors and the new composition of the Committee with other members (May 13, 2011), the first two meetings were held by outgoing members and subsequent meetings were held by newly appointed members.
In 2012, the Committee will hold as many meetings as are sufficient for carrying out the duties assigned.

During the current year, up to the date of approval of this Report, the Committee has held one meeting.
As part of its duties, and with respect to the remuneration of the CEO and other Directors covering particular offices, during 2011 the Remuneration Committee made specific proposals to the Board of Directors, with the support of a consultancy company that set the remuneration benchmark, that provided for a portion of the Executive Director’s compensation to be based on the Company’s results and the achievement of specific objectives indicated in advance by the Board. Moreover, by collaborating with a consultancy company, it formulated a special proposal for the “Remuneration Policy” adopted by Terna for the remuneration of executive Directors, other Directors covering particular offices, Auditors, the General Directors and Executives with strategic responsibilities for the fiscal year 2011, pursuant to Article 7 of the Governance Code. In addition, during the meetings held in 2011, the Remuneration Committee examined the incentive plans for the Company’s top management. In 2012, the Committee also formulated proposals for the “Remuneration Policy” for the fiscal year 2012 approved by the Board and submitted to the shareholders pursuant to Article 123 ter, paragraph 6 of the Consolidated Law on Finance.

During the meeting of March 20, 2012, the Board of Directors evaluated the duties and performance of the Committee.

The altogether positive evaluation on the size, composition and operation of the Committee was confirmed by the Board of Directors, within the yearly review of the Board and the Committees.
The Committee has been granted adequate financial resources.