Corporate Governance

Directors' remuneration is determined, for each financial year, by the Ordinary General Shareholders'Meeting called to approve year-end financial statements. The Shareholders' Meeting also determines the fee for the independent directors called to serve on the Nominations and Remuneration Committee or of the Control and Risk Committee.

Fixed Remuneration Enhances the responsibilities, the skills and the contribution demanded by the position. Ensures attraction and retention through continuous market benchmarking. Remunerates the activity carried out in the event that the variable component is not paid out.
Executive Deputy Chairman	Chief Financial Officer
Both roles receive an annual compensation, as members of the Board of Directors, and an annual remuneration for their role as Executive Directors. The amount of remuneration is determined through a benchmark of the posts held by them within a peer group consisting of FTSE MIB and MID CAP companies in the industrial sector comparable to ERG in terms of capitalisation, shareholder structure, distribution of powers and complexity.
General Manager	Other Executives with Strategic Responsibilities
Annual earnings, from employment. The benchmark is carried out on the basis of a sample made up of companies that operate on the Italian market in non-financial markets.	Annual earnings, from employment. The benchmark is carried out on the basis of salary surveys for executive roles in companies that operate on the Italian market.

Short-term variable remuneration (MBO) Aimed at the achievement of economic, financial and strategic targets, predetermined, measurable and in line with the budget.
Executive Deputy Chairman	Chief Executive Officer
Not envisaged	Not envisaged
General Manager	Other Executives with Strategic Responsibilities
MBO System: 100% cash Sustainability Clause2: ON/OFF Company target Clawback Clause: exercisabile within 3 years Company Target 30% EBT Target score <50% nothing is owed Target score >150% 150% of the target bonus is owed Personal Target 70% targets (Economic, Operational, Financial, Business development and/or specific projects) Target score <80% nothing is owed Target score >120% 120% of the target bonus is owed	MBO System: 100% cash Sustainability Clause2: ON/OFF Company target Clawback Clause: exercisabile within 3 years Company Target 30% EBT Target score <50% nothing is owed Target score >150% 150% of the target bonus is owed Personal Target 70% targets (Economic, Operational, Financial, Business development and/or specific projects) Target score <80% nothing is owed Target score >120% 120% of the target bonus is owed

Long-Term Variable Remuneration (LTI) Aimed at aligning the interests of the beneficiaries with the pursuit of the priority objective of the creation of sustainable value for the shareholders over the medium/long term. Contributes to the strategy of ensuring the Company's sustainability over time, incentivising management to achieve strategic results, consistent with the specific objectives of the 2018-2022 Business Plan, with the prospect of sustainable success.
Executive Deputy Chairman3	Chief Executive Officer3	General Manager	Other Executives with strategic responsibilities
2018–2020 Performance Share System Performance indicator ON/OFF: 90% expected cumulated EBITDA for three-year period 2018-20204 Clawback clause: exercisable within 3 years Single awarding at plan inception, with three-year vesting. At the end of the plan p/sh ERG < EUR 16 p/sh ("Target Price"): Shares assigned = 100% Shares allocated p/sh ERG > EUR 21 p/sh ("Cap Price"): Shares assigned = 200% Shares allocated p/sh ERG <> between Target Price and Cap Price: Shares allocated following a linear incentive strategy.

Non-monetary benefits In a Total Reward approach, the compensation package is integrated with benefits, mainly in the form of pension and social security.
Executive Deputy Chairman	Chief Executive Officer	General Manager	Other Executives with strategic responsibilities
Medical assistance and insurance coverage against the risk of death and disability (which are subtracted from the annual compensation) Company car for mixed use		Medical assistance Insurance policies for the risk of death and disability Company car for mixed use

SUSTAINABILITY INDICATORS
ERG believes that the full compatibility of its activities with the health and safety of the workers and the safeguard of communities, natural resources and the environment is an essential requirement to make its plants and operations acceptable and to achieve its growth objectives.

Therefore, ERG is committed to ensuring that all Companies of the ERG Group operate with the highest respect for the health and safety of employees and third parties, as well as for the environment, defined in its broadest sense⁶.
Consistently with the provisions of the Code of Ethics of the ERG Group, a sustainability clause based on workplace accidents has been added to the MBO System.

Sustainability clause

In the MBO System, the variable remuneration referred to the company target will not be paid out, for the reference year, regardless of the corporate performance recorded, if there is a fatal accident involving a Group employee or an accident causing a level of permanent disability greater or equal to 46%.

2019: ON
The accidents occurred in 2019 resulted in a residual disability level equal to or less than 3%.


 

PAY FOR PERFORMANCE

In the last two years, ERG has rewarded its shareholders with total dividends of approximately EUR 284 million (including a non-recurring component of approx. EUR 60 million) and a share performance of 27.5%, almost 22 points higher than the FTSE All Share average.