Preliminary The Nomination Committee: origin and evolution, regulations and composition

Transcription

1 Report on the Proceedings and Activities Report of the Nomination Committee FY2016

2 Index 1. Preliminary The Nomination Committee: origin and evolution, regulations and composition... 3 a. Origin and evolution... 3 b. Regulations... 3 c. Composition... 5 d. Proceedings Proceedings of the Nomination Committee: meetings held, business transacted, reports and attendees Main action lines... 4 A. Appointment... 4 B. Evaluation of the proceedings of the Board of Directors, the Directors, the Nomination Committee and the performance of its members, and of the Executive Chairman... 4 C. Report on its activities Main relationships of the Nomination Committee... 3 A. With the Board of Directors... 3 B. With the advisory Committees of the Board of Directors... 3 C. With the Executive Chairman and with Senior Executives... 3 D. With the Lead Independent Director... 3 E. With the Human Resources Department... 3 F. With the external advisors... 3 Page 1

3 1. Preliminary The Board of Directors of INDUSTRIA DE DISEÑO TEXTIL, S.A. (INDITEX, S.A.) (hereinafter, Inditex or the Company ) has been amending its rules on corporate governance in line with the most demanding trends on the subject and in accordance with the good governance codes and regulations approved. The latest amendment in this area took place during FY2015 and further to the passing of Act 31/2014, of 3 December, amending the Spanish Companies Act for the improvement of corporate governance (hereinafter, Act 31/2014 ), and to the release of the new Good Governance Code of Listed Companies, approved further to a resolution of the Board of Directors of Comisión Nacional del Mercado de Valores [Spanish SEC] dated 18 February 2015 (hereinafter, CBG (Spanish acronym), Inditex has carried out a review of its internal regulations, updating them to meet the latest regulatory requirements, the latest recommendations in the area of good governance and the latest trends in the field of corporate governance. Following recommendation 48 of CGB, it was resolved by the Board of Directors in the meeting held on 9 June 2015 that the Nomination and Remuneration Committee should split into two separate Committees: the Nomination Committee and the Remuneration Committee. Such resolution would become effective upon the approval of the Annual General Meeting. This document, drawn up by the Nomination Committee in the meeting held on 12 June 2016, represents the annual activities and proceedings report of such Committee, drafted following recommendation 6 of CBG. This report has been issued on an annual basis since 2005 with regard to the former Nomination and Remuneration Committee. Further to the split thereof into two Committees, and to the assumption by the Nomination Committee of part of its duties, the report that strictly addresses the proceedings of such Committee was issued for the first time during FY2016. Page 2

4 2. The Nomination Committee: origin and evolution, regulations and composition a. Origin and evolution The Board of Directors resolved in the meeting held on 9 June 2015, following recommendation 48 of CBG, to split the Nomination and Remuneration Committee into two new committees: the Nomination Committee and the Remuneration Committee. Such split was conditional upon the approval by the Annual General Meeting of the amendment of the Articles of Association. Subsequently, the Annual General Meeting held on 14 July 2015 approved the amendment of the Articles of Association in order to meet the latest regulatory development and to follow the recommendations of CBG, and consequently (i) the split of the Nomination and Remuneration Committee into two separate committees: the Nomination Committee and the Remuneration Committee; (ii) the composition of such new committees; and (iii) the regulations of each of them, were finally approved. b. Regulations The regulation of the Nomination Committee is provided in in article 29 of the Articles of Association, section 16 of the Board of Directors Regulations and more specifically, in the Nomination Committee s Regulations. Namely, section 5 of this last set of rules explains the mission of the Nomination Committee: Without prejudice to other tasks it may be entrusted by the Board of Directors, and to other powers it may be reserved by these Regulations, the Nomination Committee shall have the following basic responsibilities: (a) To evaluate the responsibilities, knowledge and experience required on the Board of Directors. For such purposes, it shall define the functions and qualifications required of candidates who must fill each vacancy, and evaluate the time and contribution required for them to effectively discharge their duties; (b) To set a representation target for the least represented gender on the Board of Directors and to provide guidance on how to reach such target; (c) To ensure that upon filling new vacancies or appointing new directors, selection procedures ensure the nonexistence of any manner of discrimination; (d) To table to the Board of Directors the motions on the election of independent directors to be appointed through the co-option procedure, or to be submitted to the General Meeting of Shareholders, as well as the motion for the re-election or removal of said directors by the General Meeting of Shareholders; (e) To issue a report regarding the motions to elect the remaining directors prior to their appointment through the co-option procedure or to be submitted to the General Meeting of Shareholders, as well as the motions for their re-election or removal by the General Meeting of Shareholder; (f) To issue a report regarding the motions to appoint and to remove senior executives; (g) Without prejudice to the responsibilities of the Lead Independent Director, should there be any, to review and arrange for the succession of the Chairman of the Board of Directors and of the chief executive of the Company and, where appropriate, to raise motions to the Board of Directors in order for such succession to take place in an orderly and planned manner. Page 3

5 Meanwhile, section 6 describes the powers of the Nomination Committee regarding selection of prospective directors: With regard to the selection of directors, the Committee shall have the following main duties: (a) To issue a report on the directors selection policy approved by the Board of Directors and verify on an annual basis compliance thereof; (b) To set up and review the criteria that must be adhered to regarding the composition of the Board or Directors and to select the prospective candidates. For such purposes, the Committee shall define the duties and qualifications required of candidates that must fill each vacancy, based upon the requirements of the Board of Directors and the areas that need to be reinforced; (c) To ensure that, upon filling new vacancies or appointing new directors, selection procedures shall ensure the absence of any manner of discrimination. Namely, to set a representation target for the least represented gender on the Board of Directors and to provide guidance on how to reach such target; (d) To select the prospective candidates to be appointed, where appropriate, directors of the Company, assessing their required ability, qualifications, knowledge and experience and establishing the absence of any disqualifications or prohibitions and the circumstances required for them to qualify as a given class of directors and submit, therefore, its motions or reports, where appropriate, to the Board of Directors for their appointment through the co-option method or to be submitted to the decision of the General Meeting of shareholders; (e) To issue a report on the motions that corporate directors may submit regarding the appointment of their representatives natural persons; (f) To report on the appointment of internal offices of the Board of Directors and its Committees (Chairman, Deputy Chairman/Chairmen, Chief Executive Officer, Lead Independent Director, Secretary and Deputy-Secretary(ies)); (g) To propose to the Board of Directors such members that must sit on each Committee; (h) To verify, where appropriate, the information provided in the Annual Corporate Governance Report about the reasons why certain proprietary directors may have been appointed, at the behest of any shareholders whose stake is lesser to the minimum stake that qualifies as significant under the prevailing regulations in force or why certain formal requests of presence in the Board of Directors made by shareholders whose stake is the same or higher than others at whose request proprietary directors may have been appointed, have not been attended; and (i) Without prejudice to the responsibilities of the Lead Independent Director, should there be any, to review and arrange for the succession of the Chairman of the Board of Directors and of the chief executive of the Company and, to table, where appropriate, proposals to the Board of Directors for such succession to take place in an orderly and planned manner. The powers regarding assessment and re-election of directors are included in section 7: With regard to the assessment and re-election of directors, the Committee shall have the following main duties: (a) To establish and oversee an annual program for evaluating the performance of the Board of Directors, its Chairman, its delegated bodies and its supervisory and control committees. For such purposes, the Committee may gather such information and/or documentation as it may deem necessary or expedient; Page 4

6 (b) To take part in the annual process of evaluation of performance of the Chairman of the Board of Directors pursuant to the provisions of the Company s corporate governance system; (c) To report on an annual basis to the Board of Directors on the evaluation of the Board of Directors itself, the Committee, the directors, and of the performance of the chief executive of the Company; (d) To verify, where appropriate, the independence of the advisor which assists the Board of Directors with the evaluation process; (e) To examine, prior to the end of the term for which a director has been appointed, the advisability of the director s re-election, as well as the director s continuance, if applicable, on the committees of the Board of Directors of which such director is a member; (f) To verify that the director to be re-elected continues to comply with the general requirements applicable to all directors of the Company pursuant to law and the Company s corporate governance rules, as well as assess the quality of work, the dedication to office and the availability of the director in question during the preceding term of office; and (g) To submit to the Board of Directors its motion (in the case of independent directors) or report (in the case of the remaining directors) regarding the reelection of director s by the General Meeting of Shareholders. Section 8 of the Regulations refers to the powers regarding removal and dismissal of directors: With regard to the removal and dismissal of directors, the Committee shall have the main duties of submitting to the Board of Directors the motion regarding the removal or, where appropriate, issuing a report on the motion of removal of directors by the General Meeting of Shareholders on account of the existence of grounds for resignation or dismissal pursuant to Statue or the corporate governance rules of the Company. Finally, section 9 addresses other powers entrusted to the Nomination Committee: Additionally, the Committee shall have the following main duties: (a) To issue a report on the appointment and removal of the Internal Audit Director, after report of the Audit and Control Committee; (b) To issue a report on the motions to appoint and remove senior executives; (c) To issue such reports and carry out such proceedings that fall within its remit, pursuant to the corporate governance system of the Company, or which are required by the Board of Directors or its Chairman; and; (d) To issue a report before the authorization or release by the Board of Directors of the obligations arising from the duty of loyalty of directors, when this does not fall within the remit of the General Meeting of shareholders. c. Composition Pursuant to its Regulations, the Nomination Committee shall be made up of a number of non-executive directors no lesser than three nor higher than seven, the majority of whom shall be independent. Members of the Nomination Committee, and namely its Chair, shall have the appropriate expertise, qualifications and experience to discharge the duties they are called upon to perform. Page 5

7 The Annual General Meeting held on 19 July 2016 approved the appointment of Ms Denise Patricia Kingsmill to the Board of Directors as non-executive independent director, on the motion of the Nomination Committee that the Board of Directors tabled to the Annual General Meeting. Likewise, the Board of Directors resolved on 19 July 2016, following report of the Nomination Committee, to appoint Ms Denise Patricia Kingsmill (non-executive independent director) as member of the Nomination Committee. As at 31 January 2017, the Nomination Committee was made up of the following members: Chair: Ordinary members: Secretary (non-member): Mr Emilio Saracho Rodríguez de Torres Ms Denise Patricia Kingsmill Mr José Arnau Sierra Mr José Luis Durán Schulz Mr Rodrigo Echenique Gordillo Mr Carlos Espinosa de los Monteros Bernaldo de Quirós Mr Antonio Abril Abadín Four of the members sitting on the Nomination Committee are non-executive independent directors. The CV of all Committee members is available on the corporate website: ( Detailed information on the Nomination Committee is provided in section A.2 of the Annual Report on Remuneration of Directors, available on d. Proceedings The Committee shall meet, at least once a year and every time its Chair calls it. The Chair of the Nomination Committee shall call a meeting thereof whenever the Board of Directors or the Chairman thereof would request the issue of a report be issued or the passing of motions, and, at any rate, whenever it is appropriate for the successful performance of its functions. Ordinary meetings shall be called by letter, fax, telegram or and the notice shall be signed by the Chair or the Secretary. A quorum for Committee meetings shall be declared when at least half plus one of its members, present or represented are in attendance. Likewise, The Committee may also pass resolutions in writing, without holding a meeting pursuant to the provisions of statute. Page 6

8 3. Proceedings of the Nomination Committee: meetings held, business transacted, reports and attendees During financial year 2016, the Nomination Committee has met four times, all its members being in attendance. The main proceedings of the Nomination Committee during FY2016 are summarized below: DATE OF MEETING MAIN BUSINESS TRANSACTED 13/06/2016 Report in support of the prior analysis of the needs of the Board of Directors for the purposes of re-election or appointment of directors. Motion to appoint Ms Denise Patricia Kingsmill as independent director [and as member of the Executive Committee, the Audit and Control Committee, the Nomination Committee and the Remuneration Committee]. Report on the ratification and appointment of Pontegadea Inversiones, S.L. as proprietary director and of Ms Flora Pérez Marcote as its legal representative. Annual Report on the Proceedings of the Nomination Committee. 18/07/2016 Acknowledgement of removal of a director upon expiry of his term of office. Report on the appointment of members of the Audit and Control Committee, the Nomination Committee and the Remuneration Committee. Acknowledgement of removal and report on the appointment of a new Chair of the Audit and Control Committee. 20/09/2016 Supervision of the annual programme for the evaluation of the performance of the Board of Directors and its Chairman, the Directors and its advisory and control committees REPORTS AND MOTIONS SUBMITTED TO THE BOARD OF DIRECTORS Report in support of the prior analysis of the needs of the Board of Directors for the purposes of re-election or appointment of directors. Motion to appoint Ms Denise Patricia Kingsmill as independent director [and as member of the Executive Committee, the Audit and Control Committee, the Nomination Committee and the Remuneration Committee]. Report on the ratification and appointment of Pontegadea Inversiones, S.L. as proprietary director and of Ms Flora Pérez Marcote as its legal representative. Annual Report on the Proceedings of the Nomination Committee. Report on the appointment of members of the Audit and Control Committee, the Nomination Committee and the Remuneration Committee. Report on the proposed election of Mr José Luis Durán Schulz as Chair of the Audit and Control Committee. Annual programme for the evaluation of the performance of the Board of Directors and its Chairman, the Directors and its advisory and control INDITEX S ATTENDEES Mr Antonio Abril Abadín, General Counsel and Secretary of the Board Mr Antonio Abril Abadín, General Counsel and Secretary of the Board Mr Antonio Abril Abadín, General Counsel and Secretary of Page 7

9 13/12/2016 Report on the evaluation of the proceedings of the Board of Directors, the performance of directors, the proceedings of the Nomination Committee and the performance of the Executive Chairman. Acknowledgement of resignation of a member of the Social Advisory Board. committees Report on the evaluation of the proceedings of the Board of Directors, the performance of directors, the proceedings of the Nomination Committee and the performance of the Executive Chairman. the Board. Mr Antonio Abril Abadín, General Counsel and Secretary of the Board 4. Main action lines As for the lines of action of the Nomination Committee during FY2016, they have revolved around the following aspects: A. Appointment In the meeting held on 13 June 2016, the Committee gave a favourable report to the motion raised by the Board of Directors on the ratification and appointment of Pontegadea Inversiones, S.L., as non-executive proprietary director, and of Ms Flora Pérez Marcote as legal representative of Pontegadea Inversiones, S.L. on the Board of Directors. Likewise, during that same meeting, the Nomination Committee drafted the motion to appoint Ms Denise Patricia Kingsmill as non-executive independent director, to be tabled to the Annual General Meeting by the Board of Directors. The relevant reports of the Nomination Committee were made available to the shareholders on the corporate website ( from the date of the notice calling the Annual General Meeting. Prior to such appointments, the Nomination Committee had approved an explanatory report on the prior analysis of board needs for the purpose or re-electing or appointing Directors. In the meeting held on 18 July 2016, the Nomination Committee acknowledged the removal of Ms Irene R. Miller, non-executive independent director who stepped down from the Board on account of expiry of her term of office. During that same meeting, the Committee gave a favourable report to the appointment of Mr José Luis Durán Schulz as Chair of the Audit and Control Committee. Finally, the Nomination Committee acknowledged on 12 December 2016 the resignation of Mr Alfred Vernis Domenech from Inditex s Social Advisory Board. B. Evaluation of the proceedings of the Board of Directors, the Directors, the Nomination Committee and the performance of its members, and of the Executive Chairman Pursuant to the provisions of the Board of Directors Regulations and the Nomination Committee s Regulations, and in line with the recommendations of CGG, the Nomination Committee proposed in the meeting held on 20 September 2016 to submit to the Board of Directors the supervision efforts of the Programme for evaluating the performance of the Board of Directors, the Directors, the Committees and the Executive Chairman. Such programme covers the establishment and annual supervision of the evaluation of the performance of the delegated bodies and the supervision and control committees of the Board of Directors. Page 8

10 Likewise, in accordance with Inditex s internal regulations and with best practices in the field of corporate governance, the Nomination Committee approved in the meeting of 13 December 2016 the report on the evaluation of the proceedings of the Board of Directors, the Directors, the Nomination Committee and of the performance of its members and the Executive Chairman. This report went on to be approved by the Board of Directors in the meeting held on 13 December 2016 The outcome of the evaluation conducted during FY2016 has been very positive as regards the issues assessed, including the qualification and structure, the duties, the effectiveness and the proceedings, planning and organization of the meetings of the Board of Directors, the Audit and Control Committee, the Nomination Committee, the Remuneration Committee, as well as the contributions and performance of Independent Directors and of the Executive Chairman. C. Report on its activities The Nomination Committee issued the annual report on its activities on 13 June It was published in the 2015 Annual Report and it is available on 5. Main relationships of the Nomination Committee A. With the Board of Directors At the beginning of each meeting of the Board of Directors, the Chair of the Nomination Committee reports on the main business transacted in the last meeting of the Committee. B. With the advisory Committees of the Board of Directors Directors sitting on the Nomination Committee also sit on the Audit and Control Committee and on the Remuneration Committee. C. With the Executive Chairman and with Senior Executives For the purposes of allowing the Nomination Committee to be directly apprised of the major business concerns, the Committee encourages the presence in its meetings of the Executive Chairman and of the different officers and supervisors of the business areas of the Company, so that they would explain their view on certain issues directly linked with the remit of the Committee and which are recurrent in its meetings. D. With the Lead Independent Director Mr Rodrigo Echenique Gordillo, Lead Independent Director, is a member of the Nomination Committee. E. With the Human Resources Department In order to keep the Nomination Committee duly and permanently informed, the Human Resources Department regularly apprises the Committee of the changes, if any, in the global talent management and career development programs, and of the succession plans. F. With the external advisors In order to receive assistance in the performance of their duties, non-executive directors may request that legal, accounting, financial or other experts be engaged at the Page 9

11 Company s expenses. The assignment entrusted to such external advisors must necessarily address specific issues of certain weight and complexity that the above referred directors might face in the discharge of their duties. During FY2016, the Committee has been advised by the firm Spencer Stuart, an independent external consultant, which has assisted it with the evaluation of the proceedings of the Board of Directors, the directors, its Committees, and of the performance of the Committee members and the Executive Chairman. Page 10