LensCrafters 2003 Annual Report Download - page 37

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and Development) should report to the Vice Chairman regarding Product/Design, Quality Control and Research and
Development and to the Managing Director regarding Production, Purchasing, Logistics and Planning;
- and, finally, the Market Area, which includes Wholesale, Retail and Marketing, should report to the Chairman.
The directors Enrico Cavatorta and Sabina Grossi have also received responsibilities delegated by the Chairman,
limited in their scope, regarding the ordinary business of, respectively, Administration, Finance and Control of
Management and Investor Relations/Communication.
Appointment and Remuneration of Directors
Although Luxottica Group’s By-Laws do not lay down rules regarding the composition of the Board of Directors
nor set special requirements regarding respectability and professionalism, the Board of Directors itself examines the
composition of the Board of Directors to propose to the Shareholders’ Meeting, taking into account the number of
executive, non-executive and independent directors, and defines the personal and professional profile of the
candidates. In assessing the independence of directors, the Board follows criteria laid down by the corporate
governance Code of Listed Companies issued by Borsa Italiana.
The Group has therefore has not considered it necessary to appoint a committee to propose candidates, as all
executive and non-executive directors have the possibility to nominate candidates to the Board of Directors for its
review. In practice, and detailed information on the personal background and professional qualifications of candidates
has always been provided to the Shareholders' Meeting. Luxottica Group does not intend to change this procedure.
Luxottica Group’s By-Laws do not provide for the appointment of the Board on the basis of lists.
The task of periodically reviewing the remuneration of the executive directors who are employees of the Group and
of the main senior managers of the Group is devolved to the Executive Committee. When examining and approving
remuneration that concerns members of the Board of Directors, the Executive Committee takes its decision on each
occasion with the abstention of the director concerned. The remuneration of the top managers is linked to a
significant degree to the Group’s results. There is in fact a bonus system, the payment of which depends on meeting
specific goals set by the Executive Committee on the basis of the responsibilities carried out by the senior manager. In
arranging the bonus system, the Executive Committee consults the administrative bodies of the subsidiaries where the
senior managers concerned are employed, and the Internal Control Committee.
The overall compensation of the Board of Directors and Executive Committee are set annually by the
Shareholders’ Meeting. The Board of Directors undertakes, with the abstention of those concerned, the allocation of
the overall compensation set by the Shareholders’ Meeting between the members of the Board, taking into account
the office they hold and the responsibilities delegated to them.
The Executive Committee examines and proposes to the Board of Directors the implementation of stock option
grants according to the guidelines set by the Shareholders' Meeting.
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THE INTERNAL CONTROL SYSTEM
Luxottica Group has long been working in setting up an internal control system to ensure correct and efficient
management of risks of a financial and operational nature and to prevent fraud or harm to the Group and its
subsidiaries. In 2003 and in early 2004 the Group implemented a series of measures that represent a major step
toward achieving the above-mentioned goal.
The Group's internal control system consists of a series of internal procedures, specific to each area of the
business, that have been codified in a Manual of Internal Control that has been issued to the central services of the
Group and to its subsidiaries.
The Group makes sure that the Manual of Internal Control is updated as new procedures are introduced, its
validity is constantly monitored and that the procedures that it sets forth are applied. For that purpose, in 2003 the
Group created an Internal Auditing Department. On January 29, 2004, a new executive was appointed to the position
of Internal Control Supervisor, with the responsibilities attributed to this function in the above-mentioned Corporate
Governance Code of Listed Companies.
The Internal Control Supervisor is not placed hierarchically under any manager of an operational area. In
organizational terms, such function reports to the Managing Director and in functional terms to the Internal Control
Committee. It also reports to the Board of Statutory Auditors. The Board of Directors has the right to call upon the
Internal Control Supervisor function to report on its activities.
The Internal Control Supervisor has the task of assisting the Managing Director in identifying the main risks for the
Group and in monitoring the management of the Internal Control System. This function has also been allocated the
task of assisting the Internal Control Committee in carrying out its advisory functions and of making proposals, as
specified in the next paragraph.
Internal Control Committee
Constituted within the Board of Directors, the Internal Control Committee has an advisory function and of making
proposals to the Board itself. A majority of its members are non-executive and independent directors, in line with the
recommendation of the above-mentioned Corporate Governance Code of Listed Companies. As of the date of this
report, the Internal Control Committee consisted of Lucio Rondelli (non-executive and independent director), serving
as Chairman of the Committee, Leonardo Del Vecchio (Chairman of the Board of Directors) and Tancredi Bianchi (non-
executive and independent director). The Internal Control Committee was constituted on July 28, 2003.
The Internal Control Committee, which normally meets at least twice a year, has an advisory function and of
making proposals regarding the adequacy of the Internal Control System and reports periodically to the Board of
Directors. Meetings of the Internal Control Committee are attended by the Internal Control Supervisor (Manager of the