Italian government assigns Camfin to nominate Pirelli’s CEO candidates

Milan, Italy – A recent decision by the Italian government will see major Pirelli shareholder Sinochem stripped off its power to nominate candidates for the chief executive officer position of the tire maker, Pirelli has announced.

The 15 June ‘golden power’ ruling, which allows the Italian government to protect businesses that it deems strategically important to the country, designated another key shareholder Camfin to nominate candidates for the CEO position.

With a 14.10% share in Pirelli, Camfin is controlled by Pirelli's current CEO and executive vice chairman Marco Tronchetti Provera.

The Italian government triggered the ‘golden power’ procedure in April after a Sinochem notification of plans to renew Pirelli's year-old shareholder agreement.

Under that agreement, Marco Tronchetti Provera would have continued as executive vice chairman of Pirelli until spring 2026, while co-CEO Giorgio Luca Bruno was indicated as the next CEO, to assume the position after the company's board renewal in spring 2023.

The new government ruling requires Pirelli to incorporate a series of ‘limitations’ on Sinochem-owned China National Tire & Rubber Corp. (CNRC).

These, said Pirelli 18 June, are intended to ‘guarantee’ that there are no “organisational-functional links” between the Milan-based tire maker and the Chinese entity.

As such, CNRC shall not exercise “activities of direction or coordination in Pirelli”, including but not limited to managing relationships with clients and suppliers.

Pirelli bylaws should also guarantee that the tire maker “autonomously prepares” strategic, industrial, financial plans and/or the budget for the company and the group; and that Pirelli “is not subject to instructions on the part of the Sinochem Group.”

To this end, the tire maker may not adopt acts, decisions or communication "that could make it seem that the decisions of Pirelli are the consequence of the impositions and imperatives of CNRC.”

The measures also make it clear that there should not be centralised treasury services or other functions of financial assistance or coordination such as cash pooling between Pirelli and CNRC.

This also applies to other technical functions such as the integration of Pirelli’s information systems with those of Sinochem, including those of Pirelli's Chinese subsidiaries.

CNCR is also not to “issue directives or instructions, and in any case not coordinate initiatives, concerning decisions in financial and credit matters and in matters of Pirelli’s research and development.”

The Chinese company shall not adopt “determining decisions” with regard to the operational strategies of Pirelli nor formulate strategic directives for the group.

In terms of governance, the ruling determined that Camfin will maintain its four directors on Pirelli’s board, as per the shareholder agreement signe in 2019.

The new agreement, signed in May 2022, would have reduced Camfin's directors to three. 

Furthermore, Pirelli will – similar to the shareholder agreement signed in 2019 – introduce the role of general manager, who will have the power to implement the business plan, budget and ordinary management of the company.

The power of nomination and revocation of directors and deputy directors will be deferred to the executive vice chairman or the chief executive.

In addition, a 'network of measures' in Pirelli’s bylaws shall enable the tire maker to refuse “any request that goes beyond the normal exercise of the prerogatives of shareholders.”

Consequently, the tire maker shall refuse to activate “any managerial or organisation initiative that may come from subjects traceable to the Chinese state-owned Assets Supervision and Administration Commission of the State Council (SASAC).”

This particularly applies to sharing of information on “technologies covered by private industry rights, intellectual property rights or, any information connected to the know-how linked to these technologies, also in the development phase.”

The tire maker shall also refuse a “centralised treasury mechanism” managed by Sinochem, and not allow “direct access” to managerial or administrative information systems.

This includes the enterprise resource planning (ERP) platform of Pirelli and of the companies controlled by the tire maker, including its Chinese subsidiaries.

The ruling also bars the transfer to or sharing of any data gathered by or processed through Pirelli's cyber technology "with subjects traceable to the Chinese government".

Pirelli’s next board of directors meeting will review the restrictions called for by the government and will call a new shareholders meeting for the renewal of its leadership structure and preparations for the changes to the bylaws required.