Meetings and activities of the Control and Risk Committee in 2016
In 2016, the Committee met 13 times, with 100% of its members attending. The average duration of the meetings was 3 hours and 34 minutes.
The following provides a summary of the main issues tackled during the 2016, with the Board of Statutory Auditors in attendance:
1) In assisting the Board of Directors, in order to oversee the activities of the Internal Audit unit, monitoring its work for independence and ensuring that it is performed with the required level of objectivity, competence and professional diligence, in accordance with the Eni Code of Ethics and international standards for the professional practice of internal auditing, among other things, the Committee reviewed:
- the Integrated Audit Plan and the Budget for Eni’s Internal Audit unit for 2017, expressing its opinion thereon to the Board of Directors;
- the results of scheduled and non-scheduled internal audits, the results of monitoring the status of corrective actions planned by the operational units to tackle issues that emerged during the audits, the results of audits carried out by Eni’s Internal Audit unit in response to specific requests from the Control and Supervisory bodies, as well as the status of other activities conducted by the Internal Audit unit (such as reports of problems, independent monitoring);
- the Internal Audit Reports of December 31, 2015 and June 30, 2016 on the primary results of internal audits performed and on the assessment of the suitability of the Internal Control and Risk Management System for achieving an acceptable overall risk profile, as well as the continued compliance with independence requirements for the Head of the Internal Audit unit. It also examined the results of the Internal Quality Review.
- the reports of the CFO/FRO on: i) Eni’s administrative and accounting structure at December 31, 2015 and at June 30, 2016, on the basis of which it expressed its favourable opinion to the Board on the appropriateness of the powers and resources assigned to the FRO; ii) on the internal control system as applied to financial reporting at December 31, 2015 and at June 30, 2016, on the basis of which it expressed its favourable opinion to the Board concerning actual compliance with administrative and accounting procedures;
- the key aspects of the individual and consolidated financial statements at December 31, 2015 of Eni and its subsidiaries Eni Trading & Shipping (ETS) and Syndial and Eni’s half-year consolidated financial report at June 30, 2016. Before the topic was submitted to the Board of Directors, it examined impairment test methodology and findings as well as the major issues related to the application of the accounting principles in preparation for the drafting of the 2016 Annual Report;
- the main aspects of the Annual Report on Form 20-F 2015;
- the reports of the audit firm on the 2015 financial statements, the content of the management letter and the statement of the audit firm on the status of the audit pursuant to SOA 404; the report on key issues that arose during the statutory audit and the planning of 2016 auditing activities;
3) In supporting the Board of Directors in conducting the assessments and making decisions concerning risk management, including with regard to potentially prejudicial situations, the Committee conducted an in-depth analysis of specific situations at the request of the Board. Among other things, in the context of its periodic meetings with the Legal Affairs Department, the Committee closely examined the main legal issues and received updates on developments in the major pending legal proceedings, particularly as concerns the possible accounting repercussions, for the purpose of performing its duties as they pertain to the process of preparing the annual and half-year financial reports. It also examined the periodic reports prepared by the Anti-Corruption Compliance Unit regarding the various support activities provided to Eni and subsidiary company structures regarding anti-corruption issues, particularly as regards training programmes. It was also notified of the issuance/updating of anti-corruption regulatory instruments;
4)The Committee received periodic reports of the status of the updates to the New Regulatory System and examined the proposed changes to the "Regulatory System” MSG and, in view of the subsequent submission to the Board, provided its favourable opinion on the changes to the “Regulatory System Guidelines";
5) With regard to “Transactions involving the interests of Directors and Statutory Auditors and transactions with related parties” the Committee:
- issued a favourable opinion on the proposal to not make changes to the relevant regulations as no modifications were deemed necessary;
- examined a number of minor transactions on which it expressed a favourable opinion.
Specifically, the Committee:
- met on several occasions with the Integrated Risk Management unit, focusing in particular on the evolution of Eni’s main risks and on the progress made in the related treatment actions;
- met with the Finance Department to examine the periodic reports on the management and control of financial risks;
- met with the Integrated Compliance Department for a presentation of the activities and objectives for the 2016-2017 period;
- met with “midstream” units to examine developments in trading activities;
- met with the Health, Safety, Environment & Quality Department for explanation of the system for managing and controlling HSE risks, particularly as they relate to the results of the Eni HSE Review 2015;
- met with the Security unit for further examination of the strategic guidelines for security;
- met with the units headed by the Chief Services & Stakeholder Relations Officer to gather more information on the project for improving ICRMS operational equipment;
- reviewed the periodic reports on disciplinary action taken against employees for illegal conduct;
Meetings and activities of the Compensation Committee in 2016
In 2016, the Compensation Committee met 9 times, with an average participation rate of 94.4%. The average duration of the meetings was of 3 hours and 13 minutes.
At least one member of the Board of Statutory Auditors participated in each meeting.
The following were issues addressed in the first half of the year:
- the periodic review of the remuneration policy implemented in 2015 in order to prepare the
proposed policy guidelines for 2016;
- the review of Eni’s results for 2015 in order to implement the short-term and long-term incentive
plans using a method for the analysis of deviations specified and approved by the Committee in order to neutralize the effects, either positive or negative, of exogenous factors and to make it possible to objectively assess performance;
- the establishment of Eni’s performance targets for 2016 for the variable incentive plans including the introduction, among the targets for the annual incentive plan, of a parameter reflecting the leveraging of exploration resources, deemed a key asset for the future sustainability of the Company’s results;
- the formulation of proposals for implementing the Deferred Monetary Incentive Plan for the CEO and General Manager and other management personnel;
- the examination of the 2016 Eni Remuneration Report;
- the examination of the results of the first cycle of the engagement process conducted with
the main institutional investors in order to maximise shareholder consensus on the 2016 Remuneration Policy and the relative voting projections arrived at with the assistance of an international consulting firm.
During the second part of the year, the Committee first examined the results of the 2016 shareholders’ meetings, with regard to the Eni Remuneration Report, of the major Italian and European listed companies as well as Eni’s peer group, verifying the Company’s excellent position, including in relation to the consensus expressed by the minority shareholders.
With regard to other main activities, the Committee:
- finalised the proposal concerning the fulfilment (“2016 attribution”) of the Long-Term Monetary
Incentive Plan for the CEO and General Manager and critical management personnel;
- began an examination of the 2017 Remuneration Policy Guidelines, developing over the course of several meetings a proposal for revising the variable incentive system for the CEO and General Manager and managers holding positions of strategic responsibility, with the goal of better aligning management’s actions with shareholder interests;
- approved the annual engagement plan prepared by the competent Company functions and was informed of the outcome of the first cycle of meetings conducted with the leading proxy advisors, in implementation of the 2017 engagement plan.
Meetings and activities of the Nomination Committee in 2016
In 2016, the Nomination Committee met 10 times, with a participation rate of 100%. The average duration of the meetings was of 1 hour and 5 minutes.
More specifically, in 2016, the Committee:
- conducted the enquiry into whether Directors satisfy the integrity requirements and the absence of circumstances that would render them ineligible or incompatible, in accordance with the Board’s policy on the maximum number of positions that can be held by Directors and as to whether the Directors satisfy the independence requirements;
- expressed its assessment of the manner in which the Board Review was conducted for 2016 and conducted preparatory work for the selection of the external advisor, formulating a proposal for the engagement for the Board;
- examined proposed changes to Eni SpA’s Model 231, specifically the composition of the Watch Structure, and provided its opinion on expanding it;
- examined the issue of the appointment of members of the Company bodies and boards of strategically important subsidiaries, providing the Board with its assessment with regard to the issue of the appointment of members of the Eni Watch Structure, board of directors and board of statutory auditors of Versalis and the members of the board of directors of Eni International BV;
- completed an examination of the instruments created to attract Eni’s “critical” human resources, with a view to increasing understanding of the entire process and the tools that contribute to the structured management of Eni resources, in particular those supporting succession processes.
- expressed its opinion on the proposed changes to the Committee Rules, specifically adapting them to the new Corporate Governance Code recommendations and aligning the Rules with the Board’s operating procedures.
Meetings and activities of the Sustainability and Scenarios Committee in 2016
In 2016, the Committee met 10 times, with an average participation rate of 100% of its members. The average duration of the meetings was of 2 hours.
During these meetings, the Committee discussed the following issues: the LNG scenario; developments in the crude oil market and the main market drivers; the impact of Brexit; the price scenario for 2017-2020 and for the long term; the Total Strategy presentation in September 2016; alternative scenarios: IEA 450 and Greenpeace Energy Revolution-Goldman Sachs; tight oil: comparing Eni’s assumptions and those of analysts and progressive updates; the latest information on the Financial Stability Board’s task force on climate-related financial disclosures; Eni’s ranking in sustainability indexes and ratings; partnership agreements in the renewable energy area; and the new sustainability indicators project.