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Corporate GovernanceAssessment
o Lucas Antonioo Can Erkirtayo Kian Ansario Francesca Pedicini
MSc International Business Program Corporate Governance Module - Dr. György Gonda
Budapest, April - 2012
Agenda
Company Overview
Board of Directors and Management
Committees
Codes, Reports and Italy CG
History and Important Facts – 1899 / 1970
1899: the deed of incorporation is signed giving birth to Società Anonima Fabbrica Italiana di Automobili Torino – F.I.A.T. The first car built is the 4 HP.
1902: Giovanni Agnelli becomes Managing Director.
1903: the company is listed on the stock exchange.
1920: Giovanni Agnelli becomes Chairman of Fiat.
1945: Senator Agnelli dies and Vittorio Valletta becomes chairman - Large scale production of cars resumes.
1966: Giovanni Agnelli, grandson of the founder, becomes Chairman.
1967: Vittorio Valletta dies. Production begins at the Rivalta plant. Fiat takes a majority stake in Magneti Marelli.
1969: the company acquires Lancia and purchases 50% of Ferrari.
History and Important Facts – 1970 / 2011
1971: Abarth becomes part of the Group.
1984: Alfa Romeo becomes part of the Group.
1993: Maserati becomes part of the Group.
2003: Giovanni Agnelli dies and his brother Umberto takes over as Chairman.
2004: Luca Cordero di Montezemolo as Chairman, John Elkann as Vice Chairman and Sergio Marchionne as Chief Executive Officer.
2009: on June 10th, Fiat Group and Chrysler Group LLC announce that they have signed a global strategic alliance.
2010: John Elkann becomes Chairman of Fiat.
2011: the demerger takes effect on January 1st. Under the new structure, Fiat consists of FGA, Ferrari, Maserati, Magneti Marelli, Teksid, Comau and Fiat Powertrain Technologies.
Ownership Structure
100%
100% 100%
100%
100%
58.5%
90%
84.8%
Shareholder Structure
Shareholder OwnershipGiovanni Agnelli & C. S.a.p.A 30.47%
BlackRock Inc. 3.10%
Institutional investors within the euro zone 26.70%
Institutional investors outside the euro zone 11.63%
Other investors 24.90%
Fiat S.p.A. 3.20%
Revenues by Market
Main Competitors
FORD
French Manufacturers
Competition is mainly related to
the CATEGORY
FIAT at a Glance
(€ million)
FIAT
Chrysler
FIAT FIAT
with excluding 2010
Chrysler (2011) Chrysler
REVENUES 59,559 23,609 37,382 35,880
TRADING PROFIT 2,392 1,345 1,047 1,112
NET PROFIT 1,651 645 1,006 222
NET INDUSTRIAL DEBT 5,529 3,080 2,449 542
AVAILABLE LIQUIDITY 20,680 8,425 12,255 12,152
FIAT Shares
Total issued shares: 1,275,885,720;o Ordinary, Preference and Savings.
Price per Share: EUR 3.50 – Nov/2011 Assembly;
Fiat has approximately 250,000 shareholders;
Italy, Paris and Frankfurt stock exchanges, also tradable over the counter in the USA (ADR) - Deutsche Bank Trust Company Americas;
25% of Net Profit to be distributed as Dividends pay out – 20/04/2012;
Today’s Price = EUR 4.092
Corporate Governance Structure
Board of Directors
Group Executive Council (GEC)
Nominating, CG and Sustainability Committee
Compensation Committee
Internal Control Committee
Board of Statutory Auditors
Shareholder’s Assembly
Board of Directors
ChairmanJohn Elkann
CEOSergio Marchionne
5 Executive Directors
8 Independent Members 1 Secretary
Total of 16 Members.
Board of Statutory Auditors
ChairmanRiccardo Perotta
Regular AuditorGiuseppe Camosci
Total of 6 Members.
Regular AuditorPiero Locatelli
Alternate AuditorLucio Pasquini
Alternate AuditorFabrizio Mosca
Alternate AuditorStefano Orlando
Group Executive Council (GEC)
CEO
NAFTA
Europe, Middle East and Africa
LatAm
APAC
Components
Systems and Casting
FIAT
Commercial Vehicles
Alfa, Abarthand Maserati
Lancia and Chrysler
Jeep
Dodge
Parts and Services
CTO
CMO
Design
Purchasing
Quality
Powertrain Coordinator
Product Manager
CFO
CHRO
Services and HoldingBusiness
DevelopmentChie
f Ope
ratin
g O
ffice
rs
Bran
d Le
ader
s
Indu
stria
l Pro
cess
es L
eade
rs
Supp
ort P
roce
sses
Lea
ders
Total of 25 Members.
Committees
Internal Control
3 Members
All Independent
Compensation
3 Members
All advisory members within the Company
Nominating, CG and Sustainability
3 Members
All advisory members within the Company
Nominating, CG and Sustainability
To select and propose nominees to the BoD, indicating their names and the necessary qualifications;
To formulate opinions regarding the size and composition of the Board;
To evaluate BoD and Committees activities;
To examine proposals from CEO regarding appointment and succession plans for members of the GEC and executives with strategic responsibilities;
To periodically update the Board of Directors on new corporate governance regulations and recommend changes, if any;
To evaluate proposals relating to sustainability related issues, presenting opinions and reviewing the annual Sustainability Report.
Compensation
To make proposals to the BoD related to individual compensation plans for the Chairman, CEO and Directors;
To examine proposals from CEO regarding compensation and performance evaluation for members of the Group Executive Council and executives with strategic responsibilities;
To examine proposals from CEO concerning performance evaluation criteria and general policies for fixed and variable compensation.
Internal Control
Assist the Board of Directors with internal control systems;
Assess the work plan prepared by the Compliance Officer;
Report to the BoD the adequacy of the internal control system;
Assess the adequacy of accounting principles adopted in relation to preparation of the consolidated financial statements;
Assess proposals presented by candidates for the position of independent auditor;
Assess the audit work plan and the results included in the audit report;
Assess the organizational placement, structure and work plan of Internal Audit.
Italian Corporate Governance
SOME FACTS:
Italian family capitalism: more than 90% of the Italian registered companies are family-owned;
Italian C.G. is classified as: relationship-based corporate system which adopts the Latin Approach.
The Italian system is a little influenced by institutional investors (such as in the Anglo-American system) or by banks (such as in Germany and in Japan).
Limited degree of separation between ownership and control. Control is achieved mainly by using pyramidal groups.
Weak managers, strong blockholders and unprotected minority shareholders.
Italian Governance Models
MODELS OF C.G. COMPANY ORGANS APPOINTED MECHANISM
TRADITIONAL (or DUALISTIC HORIZONTAL)
• Shareholders meeting• Board of Directors• Board of Auditors
• The assembly appoints the BoD and the BoA.
DUALISTIC VERTICAL (TWO-TIER SYSTEM)
• Shareholders meetings• Supervisory committee• Management committee
• The assembly appoints the Supervisory Committee which appoints the Management Committee
MONISTIC (ONE-TIER SYSTEM)
• Shareholders meeting• BoD• Internal committees
• The assembly appoints the BoD which apoints its committee among its members.
Codes and Principles
Italian corporate governance practices are principally governed by the Italian Corporate Governance Code (Codice di Autodisciplina, revised in 2011);
In the wake of other corporate governance codes inspired by the Cadbury in 1992, Italy launched 2 codes:
o The Draghi Reform (1998): “Audit committees”.
Objective: to strenght investors’s protection and minority shareholders.
o The Preda Code (2002): “Freedom with accountability”.
Main Focus: issues relating to the board of directors.
Code’s Standards
Role and Composition of the Board of Directors:o Executive directors account for 31% of BoD seats; the remaining 69% are
non-executive directors. Independent directors are 35% of BoD seats.o Directors are proposed by the chairperson or blockholder and appointed by
the shareholders’ meeting.o Adequate number of independent non-executive directors necessary.
Shareholder’s Meetingo The codes recognize the importance of shareholders’ meeting and believes
that directors should encourage as broad a participation in the meetings as possible.
Internal Control and Audito Italy has a multiple level of internal control: an internal Board of Auditors,
Internal Audit Committee, a dedicated top manager, Internal Audit team, etc.
Thank You!
o Lucas Antonio: [email protected]
o Can Erkirtay: [email protected]
o Kian Ansari: [email protected]
o Francesca Pedicini: [email protected]
