Iren Shareholders’ Meeting decides, upon appointment and for the entire duration of the office, the total annual remuneration of the members of the Board of Directors and the maximum total amount for the remuneration of the Directors holding specific office provided for in the Articles of Association.
The BoD defines, upon proposal of the RAC and having consulted the Board of Statutory Auditors, the structure and the remuneration for the Directors holding specific offices (Chairperson, Deputy Chairperson and CEO) and the remuneration for the participation of Board Directors, as well as the policy for the remuneration of the BoD and of the Senior Managers with strategic responsibilities, subject to the RAC assessment, carried out in agreement with the Control, Risk and Sustainability Committee, with regard to the risk and sustainability profiles. The BoD, subject to the RAC assessment, also defines the objectives that determine the variable annual shortand long-term component of the remuneration of the Chief Executive Officer and General Manager.
Considering the provisions of the remuneration policy, the Chief Executive Officer determines the remuneration of Senior Managers with strategic responsibilities and defines the objectives to which the short- and long-term annual variable component of the same is related, involving the RAC in the process, in order to obtain the relevant opinion in advance.
The remuneration of Non-Executive Directors is not linked to the results achieved, but it is commensurate with the commitment required of each of them, bearing in mind their potential participation in one or more of the Committees within the Board of Directors.
For the Chairperson and Deputy Chairperson, a fixed remuneration has been established, and no performance bonus is envisaged. The Chief Executive Officer participates in the short- and long-term incentives system, as described in the Remuneration Report approved by the Shareholders’ Meeting.
Generally, without prejudice to compliance with the regulations in force, no indemnity is provided for directorship severance for Iren Directors. For the Chief Executive Officer and General Manager, compensation is envisaged in the event that the mandate is withdrawn without a legitimate cause or not renewed and, in view of the fixed-term management contract held with Iren, the treatment and severance indemnity established by law and the national collective labour agreement of reference apply.
For the Chief Executive Officer and General Manager (CEO/GM) as well as for Senior Managers with strategic responsibilities (SESR) the variable portion of the remuneration is divided into two parts, the shortterm and the long-term.
The short-term variable remuneration – which reaches an average of 37.5% of the fixed remuneration upon achievement of all objectives – is based on an MbO (management by objectives) system, which takes into consideration the main objectives for the Group relating to economic, financial and operating performance, the main strategic projects and ESG objectives through the introduction – for all Senior Managers with strategic responsibilities – of a performance indicator relating to the relationship with stakeholders and ESG objectives (such as, for example, improvement of environmental performance, reduction of accident frequency index, development of gender diversity, etc.), which impacts by 20% the total variable remuneration. The system provides, with the aim of avoiding the disbursement of incentives for decidedly unsatisfactory results, a “gate“ condition linked to the maintenance of the rating on investment grade by a leading rating agency. To make the incentives scheme more challenging in the short-term, for each performance indicator there is a fixed threshold of 70% of the objective with a target of 100% of the objective. Also in 2021, at Group level (or at the Networks Business Unit, in line with the functional unbundling forecasts), a corrective factor of individual results was maintained to take into account and incentivise the creation of value by the Group with respect to planned targets. EBITDA and Operating Cash Flow levered (OCF levered) have been selected as the economic/financial indicators which best represent the correlation between development and creation of value. The corrective factor (multiplier or demultiplier of the percentage value obtained for the individual objective sections) is the weighted average of the two indicators, with weights and metrics defined in advance. Thus, the maximum amount attainable as short-term variable compensation can be up to 120% of the target amount.
The objectives for Senior Managers, which are always defined in line with horizontal and vertical consistency at a Group level and within individual Business Units, also form the foundation of the MbO system used for managers and junior managers, to whom they are assigned via cascading.
Long-term variable compensation (introduced in 2015) is cash-based, with amounts on an annual basis of up to 25% of fixed compensation upon achievement of all objectives. The objectives of the Long-Term Incentive (LTI) Plan, which expires on 31 December 2021, are linked to the achievement of three economic objectives (EBITDA, Operating Cash Flow – OCF-levered and cumulative capital expenditure) set out in the Group’s Business Plan for the period 2019-2021, at the end of which disbursement may take place. The LTI Plan also envisages an incremental mechanism in the event of significant exceedance of the OCF target and a sustainability correction, linked to any failure to achieve ESG objectives, which may produce a decrease of up to 10% on the bonus accrued. The ESG objectives, calculated in an on/off logic, considered are:
- gender diversity (a compound indicator that includes the percentage of women out of total employees, the percentage of women hires out of total hires, the percentage of women managers and junior managers out of the total managers and junior managers and the percentage of women participating in training courses out of the total of the participants);
- circular economy (recoverable waste processed in Group plants);
- water resources (water network leaks);
- resilient cities (district heated volumes).
The indicators are identified in agreement with the Corporate Social Responsibility and Local Committees Department from among those set by the Board of Directors in the Business Plan.
Given the expiry of the LTI Plan at the end of 2021, a new long-term incentive plan is expected to be defined shortly.
Malus and clawback clauses are provided for in the regulations of both systems (MbO and LTI).
Iren Group does not use specific bonuses or incentives at the time of appointment/assumption of the role, except to offset amounts that are lost as a result of hiring from the external market. The severance indemnity and supplementary pensions for Senior Managers with strategic responsibilities are established by law and by the national collective labour agreement.