Chrysler 2006 Annual Report Download - page 28

or presumed violations of the code of conduct, financial and/or
accounting fraud against the company, oppressive behaviour
towards employees or third parties, and complaints regarding
bookkeeping, internal audits, and independent audits.
The Procedure for the Engagement of Auditing Firms regulates
the engagement of Group external auditors by Fiat S.p.A. and its
subsidiaries, as well as the commissioning of the companies and
professional firms that maintain an ongoing relationship with
those external auditors (so-called network) in order to ensure the
mandatory independence of the auditing firm.
Documents and financial information regarding the Company,
including those posted on the Group website, are disclosed
in compliance with the “Disclosure Controls & Procedures”
adopted in conformity with the Securities Exchange Act of
1934 and the Sarbanes Oxley Act of 2002.
Board of Statutory Auditors
The Board of Statutory Auditors is comprised of three
Statutory Auditors and three Alternates, all of whom,
as required by Article 17 of the By-laws, must be entered in
the Auditors’ Register and have at least three years’ experience
as chartered accountants. Furthermore, they may not hold
the position of statutory auditor in more than five other listed
companies, with the exception of the controlling companies
and subsidiaries of Fiat S.p.A.
Pursuant to the resolutions approved by the Stockholders
Meeting held May 3, 2006, the following individuals belong to the
Board of Statutory Auditors, which also performs the role of the
audit committee as envisaged by US-law, but within the limits
imposed by Italian law: Carlo Pasteris, Chairman, and Giuseppe
Camosci and Cesare Ferrero, Statutory Auditors. Their term
expires on the date of the stockholders meeting that approves
the 2008 financial statements. Carlo Pasteris holds the position of
Chairman of the Board of Statutory Auditors of Toro
Assicurazioni S.p.A. Cesare Ferrero, in addition to the positions
held as Chairman of the Board of Statutory Auditors of IFIL
Investments S.p.A. and Giovanni Agnelli & C. S.a.p.A., also holds
the position of statutory auditor at Toro Assicurazioni S.p.A. and
of director at Autostrada Torino Milano S.p.A. and Davide
Campari Milano S.p.A. Giuseppe Camosci does not hold other
positions in listed companies.
Thus far, the Board has approved Stock Option Plans offered to
about 900 managers of the Group’s Italian and foreign companies
who are qualified as “Direttore” or have been included in the
Management Development Program for high-potential managers.
Plan regulations share these common features:
■Options are granted to individual managers on the basis
of objective parameters that take into account the level
of responsibility assigned to each person and his or her
performance;
■If employment is terminated or an employee’s relationship
with the Group is otherwise severed, options that are not
exercisable become null and void. However,vested options
may be exercised within 30 days from the date of termination,
with certain exceptions;
■The options exercise price, which is determined on the basis
of the average stock market price for the month preceding the
option grant, can vary as a result of transactions affecting the
Company’scapital stock. It must be paid in cash upon
the purchase of the underlying shares;
■Consistently with tax regulations on the issue, the options
are normally exercisable starting three years after they are
granted and for the following six years. Nevertheless,
the totality of the options granted becomes exercisable only
four years after the grant date.
In consideration of the options that have been exercised and
of those that have expired upon termination of employment,
atotal of 5,433,900 option rights corresponding to the same
number of shares represent treasury stock to be assigned to
the holders of options pursuant to the conditions envisaged
in the specific Regulations.
Report on Operations Stock Options Plans 5352
In accordance with Article 17 of the Company’s By-laws
and as envisaged under the Consolidated Law on Financial
Intermediation, properly organised minority groups may
appoint one Statutory Auditor. The minimum equity interest
needed to submit a slate of candidates is equal to 1% of the
ordinary capital. Furthermore, in accordance with the By-laws,
the slates of candidates must be deposited at the registered
office of the company at least ten days before the scheduled
date of the Stockholders Meeting on its first call and be
accompanied by statements certifying satisfaction of the
requirements prescribed by law and the By-laws and that they
are not ineligible or incompatible, on penalty of rejection of
those slates. Slates representing minority stockholders were
presented for the first time ever at the May 3, 2006
Stockholders Meeting. This led to the appointment
of Professor Pasteris, who became the Chairman of the Board
of Statutory Auditors in accordance with the law.
Stock Option Plans
In 2004 the Board of Directors granted Mr. Sergio Marchionne,
as a portion of his variable compensation as Chief Executive
Officer, options for the purchase of 10,670,000 Fiat ordinary
shares at the price of 6.583 euros per share, exercisable from
June 1, 2008 to January 1, 2011. In each of the first three years
since the grant, he accrues the right to purchase, from June 1,
2008, a maximum of 2,370,000 per year and on June 1, 2008
he accrues the right to purchase, effective that date, the
residual portion amounting 3,560,000 shares. The right to
exercise the options related to this last portion of shares
is subject to certain predetermined profitability targets that
should be reached during the reference period.
Ferrari S.p.A. had granted its Chairman, Luca Cordero di
Montezemolo, options for the purchase of 184,000 Ferrari
shares, 80,000 of which exercisable upon placement of Ferrari
shares on the stock market, at a price of 175 euros per share
and exercisable until December 31, 2010. At the beginning of
2006, Mr.Montezemolo exercised the 104,000 options whose
exercise was not subject to the abovementioned condition
through the subscription of an equal number of newly-issued
Ferrari S.p.A. shares. Fiat S.p.A. purchased from Luca
Cordero di Montezemolo a total of 93,600 Ferrari shares at a
unit price of 285 euros per share (for a total investment of 26.6
million euros), equal to the price agreed upon by Mediobanca
S.p.A. and Mubadala Development Company PJSC on the
occasion of the sale of 5% of the capital stock of Ferrari S.p.A.
in August 2005.
Options granted as part of Stock Option Plans on Fiat shares
and outstanding at December 31, 2006 are shown below.
Options granted to Board Members are instead shown in a
specific table in the Notes to the Financial Statements.
Report on Operations Corporate Governance
2006 2005
Number of Average Market Number of Average Market
shares exercise price (*) price shares exercise price (*) price
Options outstanding on 1/1 7,749,500 17.51 7.37 10,502,543 16.38 5.9
Options granted during the year – – – – – –
Options exercised during the year 558,250 10.4 13.74 – – –
Expired options 1,757,350 – – 2,753,043 – –
Options outstanding on 12/31 5,433,900 16.93 14.42 7,749,500 17.51 7.37
Options exercisable on 12/31 5,433,900 16.93 14.42 6,987,875 18.28 7.37
(*) Following the capital increases in January 2002 and July 2003 the exercise prices were adjusted by applying the factors calculated by Borsa Italiana, in the amount of 0.98543607 and
0.93167321. The capital increase of September 2005, factor equal to 1, did not give rise to adjustments.