Meetings and activities of the Control and Risk Committee in 2018
In 2018 the Committee met 16 times, with an average participation rate of 98.4%. The average duration of the meetings was 3 hours and 13 minutes. So far in 2019, the Committee has met 4 times as of March 14, 2019, and is scheduled to meet another 10 times before the end of the year.
The following provides a summary of the main issues tackled during 2018.
1) In assisting the Board of Directors, in order to oversee the activities of the Internal Audit Department, 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 Department for 2019, 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 Department in response to specific requests from the control and supervisory bodies, as well as the status of other activities conducted by the Internal Audit Department (such as reports of problems, independent monitoring);
- the Internal Audit Reports of December 31, 2017 and June 30, 2018 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 satisfaction of independence requirement of the Head of the Internal Audit Department;
- the proposed amendments to the Management System Guideline “Internal Audit” as well as the changes made to the Internal Audit Charter, and with reference to this last document, expressed a favorable opinion on approval by the Board of Directors.
2) In performing its duties with respect to the internal control system as applied to the financial reporting model, during periodic meetings with the Chief Financial Officer (CFO), also in his capacity as the officer in charge of preparing financial reports (the “Financial Reporting Officer” or “FRO”) and the Company’s administrative structures, and the audit firm in attendance, the Committee reviewed:
- the reports of the CFO/FRO on: (i) Eni’s administrative and accounting structure at December 31, 2017 and at June 30, 2018; (ii) on the internal control system as applied to financial reporting at December 31, 2017 and June 30, 2018, 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 and on the actual compliance with administrative and accounting procedures for the purposes of the Board’s supervisory function;
- the key aspects of the individual and consolidated financial statements at December 31, 2017 of Eni and Eni’s half-year consolidated financial report at June 30, 2018. 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 2018 Annual Report;
- the main aspects of the Annual Report on Form 20-F 2017;
- the content of the 2017 management letter of the audit firm, giving its favourable opinion prior to subsequent examination by the Board and the statement on the status of the audit pursuant to SOA 404 and the planning of 2018 auditing activities;
- the main contents of the Report of the Board of Statutory Auditors on the results of the audit of the 2017 Annual Financial Report and on the contents of the Auditor’s Additional Report.
Moreover, the Committee examined: (i) the contents of Eni Consolidated Non-Financial Information 2017, included in the Management Report; (ii) the “Consolidated Report on Payments to Governments” for 2017 by Eni SpA, its consolidated subsidiaries and companies consolidated proportionately (EU Accounting Directive 2013); (iii) the Tax Strategy Guidelines adopted by Eni, in view of their subsequent approval by the Board of Directors; (iv) the “Country by Country report” for 2017.
The Committee was also informed by the Board of Statutory Auditors of the outcome of the tender for the assignment of the legal audit of the financial statements, the review of the internal control system pursuant to the SOX regulation (Sarbanes Oxley Act) and additional tasks by the Eni group for the nine-year period 2019-2027.
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.
4) The Committee held several meetings with the Integrated Compliance Department during which it (i) examined the periodic reports of Anti-Corruption Compliance on the support provided to the units of Eni and the subsidiaries in the areas for which it is responsible, with a specific focus on the training and business assistance activities performed; (ii) received an update on the Integrated Compliance process, in particular on the main phases that characterize the Compliance Model; (iii) examined the outcomes of the project to revise the 231 framework of foreign subsidiaries and (iv) was informed about the changes made to the document “Sensitive activities and specific control standards of the 231 Model” of Eni SpA.
5) The Committee was periodically informed of the status of the updating of the New Regulatory System and, meeting with the corporate units responsible for the project, examined the proposed revisions of the following Management System Guidelines (MSG) expressing a favorable opinion to the Board approval: “Privacy and Data Protection” and “Market Information Abuse (Issuers)”; it also examined the MSG “Internal Control and Risk Management System” presenting the Board with a proposal to modify the ICRMS guidelines it contained.
The Committee also examined the proposal to extend the scope of application of the Eni Regulatory System to include the Italian subsidiaries pursuant to the Civil Code not classified as subsidiaries in the financial statements, expressing its favorable opinion in view of the subsequent examination by the Board of Directors.
6) 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 guidance not to propose modifications to the MSG “Transactions involving interests of Directors and Statutory Auditors and transactions with related parties”;
- examined a number of transactions of lesser importance on which it expressed a favorable opinion on the interest of the Company in the transactions and the appropriateness of the associated terms and conditions.
7) The Committee thoroughly examined specific internal control and risk management issues, including during special meetings with members of Eni’s top management. Specifically, the Committee:
- examined the extract from the Eni Organizational Structure Report with focus on the Eni Regulatory System and the ICRMS;
- met on several occasions with the Integrated Risk Management unit, focusing among other things on the evolution of the assessments of Eni’s main risks and the related treatment actions;
- met with the Finance Department to examine the periodic reports on the management and control of financial risks and also exploring some strategic liquidity issues;
- in the presence of the Sustainability and Scenarios Committee, he carried out in-depth studies on the management of relations with stakeholders in areas with a high risk profile;
- met competent corporate functions for in-depth analysis on HSE issues and cyber security;
- reviewed the reports on disciplinary action taken against employees for illegal conduct.
8) As envisaged in Eni’s Model 231, the Committee met with the members of Eni SpA Watch Structure to review the Watch Structure’s semi-annual report on its activities, including in its role as Guarantor of the Code of Ethics, and to take a closer look at certain issues of common interest with regard to the activities performed.
Meetings and activities of the Remuneration Committee in 2018
In 2018, the Remuneration Committee met 8 times, with an average participation rate of 100% and an average duration of 2 hours and 30 minutes. At least one member of the Board of Statutory Auditors participated in each meeting, with constant participation of the Chairman of the Board of Statutory Auditors. At the invitation of the Chairman of the Committee, Company Executives and advisors also took part in specific meetings to provide information and clarifications considered necessary by the Committee to perform its enquiries.
The following were issues addressed in the first half of 2018:
- the periodic review of the remuneration policy implemented in 2017 in order to prepare the proposed policy guidelines for 2018, providing for keeping the structure and criteria of remuneration of the Directors and Executives with strategic responsibilities defined in 2017 for the entire term, as regards in particular the simplified variable incentive system, as discussed in greater detail in the 2017 Remuneration Report;
- the review of Eni’s results for 2017 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 definition of 2018 Eni’s performance targets relevant to the variable incentive plans;
- the finalisation of proposals for the annual variable incentive system for the CEO and General Manager;
- the examination of the 2018 Eni Remuneration Report;
- the examination of the outcome of engagement activities held with leading institutional investors and proxy advisors in view of the general meeting, in order to maximise shareholder consensus on the 2018 Remuneration Policy; the Chairman of the Committee also took part in the aforementioned meetings, bearing witness to the importance given by the Committee to dialogue with shareholders;
- risk assessment and scenario analysis, and related voting projections arrived at with the assistance of primary consulting firm;
- examination of the voting recommendations issued by the main proxy advisors and, following the findings, start of a further intense engagement activity with a large number of investors, to with dispatch of a letter explaining the reasons and the rationale for the choices made.
During the second part of the year, the Committee first examined the results of the 2018 shareholders’ meetings, with regard to the Eni Remuneration Report, of the major Italian and European listed companies as well as Eni’s Peer Group.
With regard to other main activities, the Committee:
- finalised the proposal concerning the fulfilment (“2018 attribution”) of the 2017-2019 Long-Term Equity-based Incentive Plan for the CEO and General Manager and critical management personnel for business;
- examined the general criteria for defining the 2019 Engagement Plan, through the performance of preliminary analysis and segmentation activities of institutional investors at the 2018 Shareholders’ Meeting;
- carried out a periodic monitoring of developments in the legislative and regulatory environment and in market standards for the representation of information on remuneration issues, with a specific focus, for 2019, on contents of the EU Directive 828/2017 (“SHRD II Directive”);
- started the review of 2019 Remuneration Report Policy Guidelines, with the support of the competent Company functions.
Meetings and activities of the Nomination Committee in 2018
In 2018, the Nomination Committee met 10 times, with an average participation rate of 92.5%; the average duration of the meetings was about 1 hour and 20 minutes. In 2019, as of March 14, 2019, the Committee met 3 time and it is expected to have 3 more meetings by the end of the first half of the year.
More specifically, in 2018, the Committee:
- conducted on behalf of the Board the enquiry into whether Directors satisfy the independence and integrity requirements and the absence of circumstances that would render them ineligible, incompatible or at risk of forfeiture, as well as the respect of the Board’s policy on the maximum number of positions that can be held by Directors;
- expressed its assessment of the manner in which the Board Review was conducted for 2018;
- examined the issue of the appointment of members of the boards of strategically important subsidiaries and of companies on which the Board has competence, providing the Board with its assessment with regard to the issue of the appointment of the members of the Board of Directors of Saipem SpA, Versalis SpA and Eni International BV;
- examined the managerial profile for the new Digital Department;
- examined: (i) the process and methodology used for the succession plans of positions of strategic importance; (ii) the key elements characterizing the overall succession plan with reference to key company positions; (iii) the criteria underlying succession plans and the related risk assessment of the following positions reporting directly to the Chief Executive Officer or relevant: Chief Refining & Marketing Officer, Chief Exploration Officer, Chief Upstream Officer, CEO of Versalis SpA, Chief Gas & LNG Marketing and Power Officer, CEO of Eni gas e luce SpA, SEVP Internal Audit, SEVP Legal affairs, Chief Financial Officer, Chief Services & Stakeholder Relations Officer, Chief Development, Operations & Technology Officer, CEO Syndial SpA, EVP Energy Solutions.
Meetings and activities of the Sustainability and Scenarios Committee in 2018
In 2018, the Committee met 12 times. The meetings lasted an average of 2 hours and 52 minutes, with an average participation rate of 96%. In 2019, as of March 14, 2019, the Committee met 2 times and is expected to hold 8 more meetings by the end of the year.
During these meetings, the Committee discussed the following issues: review of 2018-2021 and Long-Term Scenario, Statement on Biodiversity and water-arctic policy, IEA WEO Outlook 2017, 2018 calendar analysis and program, meeting with the competent structures for further information on managing relations with stakeholders in areas with a high risk profile, US Tight Oil performance and criticality, update of Tight Oil Scenario, focus on National Energy Strategy, italian Legislative Decree No. 254/2016 – Non-Financial Information, analysis of strategic presentations of Major, Eni For 2017 and Eni For Addendum – Decarbonisation path, 2018 non-profit budget, 2018-2021 and LT price scenario with in-depth analysis of the gas market, scope 1, 2 and 3 issues, evolution of Eni’s R&D, sustainability scenarios and issues, Statement on the Modern Slavery Act 2017, decarbonisation strategy and circular economy, IEA scenario: World Energy Outlook, scenario comparison IEA vs. Eni, climate resolutions and disclosure on meeting, Review of prices 2018-2021 and LT, global trends of discoveries and FID/start-up of Oil & Gas fields, update of R&D projects and analysis of decarbonisation strategies of peers, new Long Term Positioning Initiatives Coordination structure, the renewables market, the lithium and metals market for batteries, update of the TCFD working group, Eni shareholder orientations on climate change and decarbonisation strategy, the energy transition, the electricity market, the Eni model of domestic gas, OGCI update, Oil & Gas market update, the WEF initiative “Climate Governance”, Eni in sustainability indices and ratings, Eni Statement on Human Rights, Eni technologies on asset integrity, definition of SSC agenda for 2019.