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GOVERNANCE
IS TRANSPARENCY
IS TRANSPARENCY
Consistent with its status as a company under Italian law with shares traded on a stock exchange that follows the guidelines of the Code of Conduct, Edison’s corporate governance structure includes:
- A Shareholders’ Meeting;
- A 12-member Board of Directors, with two independent Directors;
- A Chairman and a Chief Executive Officer;
- An Audit Committee;
- A Compensation Committee;
- A Strategy Committee;
- A Board of Statutory Auditors;
- Independent Auditors.
Since 2002, the Company has provided the Board of Directors with the support of internal committees. These committees are:
- The Audit Committee, which makes proposals and provides advice, assisting the Board of Directors in discharging its duties with regard to the System of Internal Controls, including evaluating the adequacy and the operating effectiveness of the System of Internal Controls and of the process used to prepare the financial statements;
- The Compensation Committee, which makes proposals regarding the compensation of Directors who perform special functions, the compensation policies applicable to senior executives and long-
term compensation plans;
- The Strategy Committee, which is responsible for developing, assessing and submitting to the Board of Directors strategic options for the Company.
Given Edison’s current shareholder base and the corporate governance system that is has adopted, the establishment of a nominating committee did not appear to be necessary. Edison's corporate governance structure also includes procedures for allocating and delegating authority, a system of internal controls, a 231 Organizational Model (approved in 2004) and the Code of Ethics (approved in 2003). The Company has been using for some time a procedure for the internal management and external communication of documents and information concerning its status as an issuer of securities, with special emphasis on insider information. This procedure, which is an integral part of the 231 Model, was revised in 2006 by the Board of Directors, acting upon a proposal by the Oversight Board and based on the findings of a preliminary review by the Audit Committee, in order to make it more responsive to changes in statutory requirements introduced by the inclusion in the Italian legal system of EU regulations on market abuse. The Board of Directors also approved an Antitrust Code – Conduct Manual for the Edison Group for the Protection of Competition. This document is a follow up on the section of the Code of Ethics entitled “Ethics in
Structure of the Board of Directors and the Board Committees
| Board of Directors | |||||||
| Name of | Board meeting | No. of other | Audit | Compensation | Strategy | ||
| Post held | member | attendance (%) | posts held (4) | Committee (3) | Committee | Committee | |
| DIRECTORS IN OFFICE SINCE OCTOBER 28, 2005 | |||||||
| Chairman | Giuliano Zuccoli | 100 | 6 | X | |||
| Chief Executive Officer | Umberto Quadrino (2) | 100 | 3 | X | |||
| Director | Marc Boudier | 100 | 7 | X | X | ||
| Director | Daniel Camus | 87.50 | 4 | X | |||
| Director | Giovanni De Censi (1) | 100 | 4 | X | |||
| Director | Pierre Gadonneix | 62.50 | 3 | ||||
| Director | Gian Maria Gros-Pietro (1) | 87.50 | 5 | X | X | ||
| Director | Mario Mauri | 87.50 | 6 | X | X | ||
| Director | Renato Ravanelli(2) | 100 | 2 | ||||
| Director | Ivan Strozzi(3) | 100 | 3 | X | |||
| Director | Klaus Stocker | 100 | 4 | X | |||
| Director | Gerard Wolf | 87.50 | 1 | ||||
| DIRECTORS OUT OF OFFICE | |||||||
| Director | Uris Cantarelli | 85.71 | 2 | X | |||
| (1) | Independent Director. | ||||||
| (2) | Executive Director. | ||||||
| (3) | Appointed on December 6, 2006. | ||||||
| (4) | Number of other companies with shares traded in regulated markets in Italy or abroad, including financial, banking or insurance companies or companies of significant | ||||||
| size of which the party in question is a Director or Statutory Auditor. Details about the different posts held are provided in the Corporate Governance Report. | |||||||
Managing the Company’s Businesses and Activities.” The following documents are available on Edison’s website (www.edison.it): the Bylaws, the Code of Ethics and the Annual Corporate Governance Report.
The Governance Agreements set at 12 the number of Edison Directors, including 10 representing TdE (of which five designated by EdF and WGRM and five designated by Delmi) and two independent Directors designated one each by EdF/WGRM and Delmi. For additional information about independent Directors, please consult the Corporate Governance Report. The Board of Directors has launched a self assessment process. This process has been entrusted to the independent Directors, who are working with the support of the Secretary to the Board of Directors and expect to complete it early in 2007. Even though the professional expertise of the members of the current Board of Directors has made them fully capable of understanding the obligations and responsibilities inherent in the office they hold, the Directors receive regular updates about changes in the regulatory framework and their obligations.
In 2006, the average attendance of Directors at Board meetings was 91.67%. The average attendance of Statutory Auditors at Board meetings was 87.50%.
The Governance Agreements set at 12 the number of Edison Directors, including 10 representing TdE (of which five designated by EdF and WGRM and five designated by Delmi) and two independent Directors designated one each by EdF/WGRM and Delmi. For additional information about independent Directors, please consult the Corporate Governance Report. The Board of Directors has launched a self assessment process. This process has been entrusted to the independent Directors, who are working with the support of the Secretary to the Board of Directors and expect to complete it early in 2007. Even though the professional expertise of the members of the current Board of Directors has made them fully capable of understanding the obligations and responsibilities inherent in the office they hold, the Directors receive regular updates about changes in the regulatory framework and their obligations.
In 2006, the average attendance of Directors at Board meetings was 91.67%. The average attendance of Statutory Auditors at Board meetings was 87.50%.
System of Internal Controls
Edison’s System of Internal Controls is a structured and organic set of rules, procedures and organizational structures designed to prevent or minimize the impact of unexpected results and allow the achievement of the Company’s objectives in terms of strategy, operations (effectiveness and efficiency in conducting its operations and protecting corporate assets), compliance with applicable laws and regulations, and accurate and transparent internal and market communications (reporting). This System permeates every aspect of the Company’s operations and involves different parties who perform specific functions and discharge specific responsibilities. Responsibility for the effectiveness of the system of internal controls rests with the Board of Directors, which sets the system’s guidelines and periodically evaluates its effectiveness and operating performance, relying, if appropriate, on the input of its Audit Committee and that of the Directors with executive powers. The Internal Control Officer reports to the Directors with executive authority, the Audit Committee and the Board of Statutory Auditors. The Internal Controls Department is responsible for performing the Internal Auditing function, which involves assessing the effectiveness of the system of internal controls and monitoring risks and controls at the line level.
Edison’s System of Internal Controls is a structured and organic set of rules, procedures and organizational structures designed to prevent or minimize the impact of unexpected results and allow the achievement of the Company’s objectives in terms of strategy, operations (effectiveness and efficiency in conducting its operations and protecting corporate assets), compliance with applicable laws and regulations, and accurate and transparent internal and market communications (reporting). This System permeates every aspect of the Company’s operations and involves different parties who perform specific functions and discharge specific responsibilities. Responsibility for the effectiveness of the system of internal controls rests with the Board of Directors, which sets the system’s guidelines and periodically evaluates its effectiveness and operating performance, relying, if appropriate, on the input of its Audit Committee and that of the Directors with executive powers. The Internal Control Officer reports to the Directors with executive authority, the Audit Committee and the Board of Statutory Auditors. The Internal Controls Department is responsible for performing the Internal Auditing function, which involves assessing the effectiveness of the system of internal controls and monitoring risks and controls at the line level.
Board of Statutory Auditors
The Board of Statutory Auditors monitors the Company’s compliance with the applicable statutes and its Bylaws and has a supervisory function with regard to the actions of management. Pursuant to law, it is not responsible for accounting oversight, which is entrusted to independent auditors selected by the Shareholders’ Meeting from those listed in a special register maintained by the Consob.
The Statutory Auditors currently in office meet statutory independence requirements, as well as the Code’s independence requirements for Directors. The Board of Statutory Auditors verified that these requirements were being met on the occasion of the meeting during which it reviewed the Company’s corporate governance system.
The Board of Statutory Auditors provided an opinion on the assignments that the Board of Directors awarded to the independent auditors and to other entities belonging to the same network in 2006, verifying that the abovementioned assignments were within the statutory limitations of exercisable activities and ascertained the auditors’ independence.
The Board of Statutory Auditors monitors the Company’s compliance with the applicable statutes and its Bylaws and has a supervisory function with regard to the actions of management. Pursuant to law, it is not responsible for accounting oversight, which is entrusted to independent auditors selected by the Shareholders’ Meeting from those listed in a special register maintained by the Consob.
The Statutory Auditors currently in office meet statutory independence requirements, as well as the Code’s independence requirements for Directors. The Board of Statutory Auditors verified that these requirements were being met on the occasion of the meeting during which it reviewed the Company’s corporate governance system.
The Board of Statutory Auditors provided an opinion on the assignments that the Board of Directors awarded to the independent auditors and to other entities belonging to the same network in 2006, verifying that the abovementioned assignments were within the statutory limitations of exercisable activities and ascertained the auditors’ independence.
Risk Management
The purpose of the Group’s risk management activities is to stabilize the cash flow generated by its portfolio of assets and existing contracts. Edison uses strategic guidelines to contain risk (strategic hedging) and to protect its operating results (at the EBITDA level) from fluctuations caused by the impact of price risk and foreign exchange risk on commodities, while at the same time safeguarding the value of its assets from any impairment that may result from market price volatility.
The purpose of the Group’s risk management activities is to stabilize the cash flow generated by its portfolio of assets and existing contracts. Edison uses strategic guidelines to contain risk (strategic hedging) and to protect its operating results (at the EBITDA level) from fluctuations caused by the impact of price risk and foreign exchange risk on commodities, while at the same time safeguarding the value of its assets from any impairment that may result from market price volatility.
Edison’s policy is to minimize the use of the financial markets for hedging purposes, relying instead on leveraging the benefits of the vertical and horizontal integration of its different businesses. The use of financial instrument for strictly speculative purposes is not allowed, as it would increase the Group’s overall risk profile.
The Risk Committee (see Governance Structure) meets at least once a month to review the Group’s overall level of exposure, which is the aggregate of the risk exposure of the operating companies.
This level is compared with the risk ceiling approved by the Board of Directors and the Committee decides which corrective action should be taken whenever the ceiling is exceeded.
The Group’s risk management objectives and guidelines are set forth in the Energy Risk Policy approved by the Audit Committee.
The Risk Committee (see Governance Structure) meets at least once a month to review the Group’s overall level of exposure, which is the aggregate of the risk exposure of the operating companies.
This level is compared with the risk ceiling approved by the Board of Directors and the Committee decides which corrective action should be taken whenever the ceiling is exceeded.
The Group’s risk management objectives and guidelines are set forth in the Energy Risk Policy approved by the Audit Committee.
Number of Meetings Held in 2006
| Board of Directors | 8 |
| Audit Committee | 5 |
| Compensation Committee | 4 |
| Strategy Committee | 5 |
| Statutory Auditors | Number of meetings | Percentage |
| attended in 2006 | ||
| Sergio Pivato | 6 | 100% |
| Salvatore Spiniello | 5 | 83% |
| Ferdinando Superti Furga | 6 | 100% |
