CORPORATE GOVERNANCE REPORT 2009

Transcription

1 CORPORATE GOVERNANCE REPORT

2 CORPORATE GOVERNANCE REPORT The purpose of this report is to describe the Corporate Governance practices adopted by SAG GEST Soluções Automóvel Globais, SGPS, SA. This report has been prepared in accordance with the form appended to the Securities Commission (CMVM) Regulation no 1/2007. Also, the purpose of this report is compliance with the obligation to annually divulge in detail the corporate governance structure and practices, in accordance with clause 245-A of the Securities Code, which applies to issuers of shares listed for trading in a regulated market. CHAPTER 0. STATEMENT OF COMPLIANCE 0.1. Location where the public may find the Corporate Governance Codes to which the issuer is subject to or those by which the issuer voluntarily abides SAG GEST is an issuer of shares admitted for trade by a regulated market, namely in the official share price market of NYSE Euronext Lisbon, and the Recommendations of the Corporate Governance Code which was approved by Comissão do Mercado de Valores Mobiliários (CMVM Securities Commission) in September 2007 apply to the Financial Year The full text of the said Code can be consulted on CMVM s website Detailed description of the recommendations contained in the CMVM Corporate Governance Code that have or have not been adopted by the Company, and 0.3. Explanation and justification of differences existing between the Company s structure or governance practices and CMVM s Recommendations. The table below identifies the Recommendations of CMVM that are part of the Corporate Governance Code, and full adoption or non adoption of the same by SAG GEST is identified on a comply or explain basis, as well as the relevant part of the report where a more detailed description regarding the adoption can be consulted. Recommendation I.1.1. The Chair of the General Meeting Board shall be equipped with the necessary and adequate human resources and logistics support, taking the financial position of the company into consideration. I.1.2. The remuneration of the Chair of the General Meeting Board shall be disclosed in the annual report on corporate governance. COMPLIANCE STATEMENT Status on adoption of the Recommendation Remarks I. GENERAL MEETING I.1. Board of the Shareholders Meeting: The Chair of the General Meeting Board is equipped with adequate human resources and logistics support as needed and also to ensure proper functioning of the meeting, namely through legal consultancy and the investor relations office. Description in the Report I.2. Attendance of the General Meeting I.2.1. The obligation to deposit or Clause 14, para. 1 of the I.4. I.3. 2

3 block shares before the General Meeting, as per the Company Bylaws, shall not exceed 5 working days. I.2.2 Should the Shareholders Meeting be suspended, the company shall not demand the blocking of shares during the entire period until the meeting is resumed, and the standard notice shall apply to the first session. I.3.1 Companies may not impose any statutory restriction on postal voting. I.3.2 The statutory deadline for receiving early voting ballots by mail shall not exceed 3 working days. I.3.3 The company s articles of association shall provide for the one share / one vote principle. I.4.1. Companies shall not set a constitutive or deliberating quorum that outnumbers that which is prescribed by law. I.3. Voting and Exercising Voting Rights I.4. Quorum and resolutions Not Company By-Laws. The General Meeting comprises only the shareholders entitled to vote and holding shares or subscription certificates in lieu of the latter and who, until five business days before the Meeting, have ( ): Clause 14, para. 3 of the Company By-Laws. Deposit with a financial mediator and registering of the shares in security accounts shall be certified by a letter issued by the said entity and received at the Company at least three business days before Shareholders the meeting. In the event of suspension of the General Meeting, the same period of blocking of shares required for the first session shall apply, i.e., 5 business days. Clause 15, para. 1 of the Company By-Laws. Voting by mail is authorized. Clause 14, para. 2 of the Company By-Laws. Each share corresponds to one vote. Clause 16 of the By-laws provides for a larger quorum than provided by law. The Company considers that adoption of this recommendation would not be adjusted in view of the reduced dispersion of the Company s capital among a small number of shareholders. In fact, considering that the shareholders of reference control 75.94% of the I.5. I.8. I.10. I.6. I.7. 3

4 I.5.1 The minutes of the General Meetings shall be made available to shareholders on the company s website within a 5 day period, irrespective of the fact that such information may not be legally classified as material information. The list of attendees, agendas and resolutions passed during such meetings shall be kept on file on the company s website for a 3 year period. I.6.1 Measures adopted with the aim to prevent successful takeover bids shall respect both the company s and the shareholders interests. I.6.2 In compliance with the principle stated in above, the company s by-laws that restrict/limit registered share capital, it would not make sense to hold a shareholders meeting without their presence. Clause 17 further requires a deliberative quorum larger than the one provided for by law which requires the need for a quorum of two thirds corresponding to the share capital required for the approval of resolutions by the shareholders meeting on capital increases, changes to the by-laws and dissolution. Considering once again the shareholder structure of the Company and bearing in mind the matter under review which is subject to deliberation, one understands the option made by the shareholders requiring the need to obtain significant support from the shareholders in the General Meeting. I.5. Minutes and information on resolutions passed Minutes of the Shareholders Meetings are made available to shareholders on the company s website until 5 days before the date of the meeting. A record of meetings held is kept for at least the 3 previous years, including the agenda, background documents, attendance list and minutes. I.6. Measures on corporate control No measures have been adopted to prevent successful takeover bids. Not applicable 4

5 the number of votes that may be held or exercised by a sole shareholder, either individually or in concert with other shareholders, shall also foresee for a resolution by the Shareholders Meeting, (5 year intervals, at least) on whether that statutory provision is to prevail without higher quorum requirements than the one legally in force and that in said resolution, all votes issued be counted, without applying said restriction. I.6.3. In cases such as change of control or changes to the composition of the Board of Directors, defensive measures should not be adopted that instigate an immediate and serious asset erosion in the company, and furthermore disturb the free transmission of shares and voluntary assessment of the performance of the Board of Directors by the shareholders. I.13. 5

6 II. MANAGEMENT AND SUPERVISORY BOARDS II.1. General Points II.1.1. Structure and Duties II The Board of Directors shall, in its corporate governance report, assess the governance model adopted by the Company, by identifying any constraints that are holding back performance and proposing remedial action deemed adequate to resolve said constraints II Companies shall set up internal control systems in order to efficiently detect any risk to the company s activity by protecting its assets and keeping its corporate governance transparent. II The Management and Supervisory Boards shall establish internal regulations and shall have these disclosed on its website. The board of directors and the audit board both have their operational rules which are published on the company s website. Chapter II II.4. II.6. II.1.2. Governance incompatibility and independence II The Board of Directors shall include a number of nonexecutive members that ensure the efficient supervision, auditing and assessment of the executive members activity. The board of directors comprises several members who provide actual guidance regarding the company s management. The board of directors elected for the mandate comprises currently eight members being four of them non-executive, and usually has ordinary meetings on a bi-monthly basis, however, it has updated information on all matters being discussed and on all decisions made by a 4-member executive committee. II.9. 6

7 II Non-executive members must include an adequate number of independent members. The size of the company and its shareholder structure must be taken into account when devising this number and may never be less than a fourth of the total number of Directors. Not Of the four non-executive members of the board of directors, none is considered independent as per the terms of clause 414, paragraph 5 of the Commercial Company Act, reason why this recommendation is not fulfilled. The Company considers that the current structure of its board of directors is adequate to the current shareholder structure and that the existing corporate organization mechanisms and strict compliance of the Company s various obligations as a listed company to which it is subject fulfill the underlying objectives of this recommendation. Furthermore, the added value provided by the previous experience of all the current non-executive directors ensures constant monitoring and supervision of the company s business, ensuring a useful contribution to the discussion and interaction with executive directors. On the other hand, the audit board also ensures constant monitoring and the External Auditor registered at the Securities Commission conducts regular audit operations throughout the financial year, and compulsory information to the market is also made available by the Board of Directors in a timely manner, and for the above reasons implementation of a new supervisory model in the company is considered to be II.9. 7

8 inadequate. II Depending on the applicable model, the Chair of the Audit Board, the Audit Committee or the Financial Matters Committee shall be independent and be adequately capable to carry out its duties. II The company shall adopt a policy whereby irregularities occurring within the company, are reported. Such reports should contain the following information: i) the means through which such irregularities may be reported internally, including the persons that are entitled to receive the reports; ii) how the report is to be handled, including confidential treatment, should it be required by the reporter. II.1.3 Eligibility Criteria for Appointment II.1.4 Policy on the Reporting of Irregularities The chair of the audit board is independent and is adequately capable to carry out his duties. With a view to adapting its corporate governance to CMVM Recommendations, the Company defined in 2006 a policy for divulging any irregular practices allegedly occurred within the Group as a means of early detection of eventual irregular practices that can contribute for the prevention of damaging and harmful situations for both the Group and its employees, as well as for the Shareholders. Within the process of implementation of the said policy of internal communication of irregularities, a request was made in May 2006 to the National Committee for Data Protection for permission to process personal data, which only gave its opinion in the last quarter of Subsequently, internal measures were adopted for dissemination with a view to implementing, effective 2010, a policy of internal communication of II.13. II.22. 8

9 II The general guidelines on this policy should be disclosed in the corporate governance report. II The remuneration of the members of the Board of Directors shall be aligned with the interests of the company. Thus: i) The remuneration of Directors carrying out executive duties should be based on performance and a performance assessment shall be carried out periodically by the competent body or committee; ii) the level of remuneration shall be consistent with the maximization of the long term performance of the company, and shall be dependent on sustainability of the levels of the adopted performance; iii) when the remuneration of non-executive members of the Board of Directors is not legally imposed, a fixed amount should be set. II.5.2 The Remuneration Committee and the Board of Directors shall submit a statement on the remuneration policy to be presented at the Annual Shareholders General Meeting on the Management and Supervisory bodies and other directors as provided for in Article 248/3/b of the Securities Code. The shareholders shall be informed on the proposed criteria and main factors to be used in the assessment of the performance for determining the level (share bonuses; option on share acquisition, annual bonuses or other awards). irregularities. II.1.5. Remuneration Remuneration of the Board of Directors has included a variable component which is determined in line with the Group s financial performance and which translates into a sharing of the profits as approved by the Shareholders Meeting. Remuneration of nonexecutive directors has exclusively comprised a fixed amount. During 2009, a specialized committee was created to ensure a competent and independent evaluation of the performance of the executive directors and to assess its own global performance. That committee includes the major shareholder and current Chairman of the Board, the Chairman of the Audit Board and a non-executive director. In 2006, the Remuneration Committee prepared a statement regarding the board of directors remuneration policy to be applied to the mandate which was approved by the Annual General Meeting held on 26 March The Remuneration Committee also submitted to the Annual General meeting held on 31 March 2008 a statement regarding the remuneration policy for the Audit Board and the Chairman of the General Meeting. The Salaries Committee submitted a statement to II.22. I.12. 9

10 II At least one of the Remuneration Committee s representatives shall be present at the Annual Shareholders General Meeting. II A proposal shall be submitted at the General Meeting on the approval of plans for the allotment of shares and/or options for share purchase or further yet on the variations in share prices, to members of the Management and Supervisory Boards and other Directors within the context of Article 248/3/B of the Securities Code. The proposal shall contain the regulation plan or in its absence, the plan s general conditions. The main characteristics of the retirement benefit plans for members of the Management and Supervisory Boards and other Directors within the context of Article 248/3/B of the Securities Code, shall also be approved at the General Meeting. II The remuneration of the members of the Management and Supervisory Boards shall be individually and annually disclosed and, information on fixed and the Annual Shareholders General Meeting held on 30 April 2009 on the remuneration policy regarding the corporate bodies and other officers within the meaning of para. 3 of Clause 248 B of the Securities Code. The Salaries Committee shall submit a statement to be presented at the Annual Shareholders General Meeting to be held on 4 May 2010 on the new remuneration policy regarding the corporate bodies and other officers within the meaning of para. 3 of Clause 248 B of the Securities Code. The Remuneration Committee is duly represented at the annual general meetings through the chair of the general meeting who is also chair of the said committee. Not applicable There are no plans involving share distribution or stock options. III.10. II

11 variable remuneration must be detailed as well as any other remuneration received from other companies within the group of companies or companies controlled by shareholders of qualifying holdings. II.2.1 Within the limits established by Law for each Management and Supervisory structure, and unless the company is of a reduced size, the Board of Directors shall delegate the day-to-day running and the delegated duties should be identified in the Annual Report on Corporate Governance. II.2.2 The Board of Directors shall ensure that the company acts in accordance with its goals, and should not delegate its duties, namely in what concerns: i) definition of the company s strategy and general policies; ii) definition of the corporate structure of the group; iii) decisions taken that are considered to be strategic due to the amounts, risk and particular characteristics involved. II.2.3 Should the Chair of the Board of Directors carry out executive duties, the Board of Directors shall set up efficient mechanisms for coordinating non-executive members that can ensure that these may decide upon, in an independent and informed manner, and furthermore shall explain these mechanisms to the shareholders in the corporate governance report. II.2.4 The annual management report shall include a description of the activity carried out by the nonexecutive Board Members and shall mention any restraints encountered. II.2. Board of Directors Not applicable This recommendation does not apply to SAG GEST because the Chairman of the Board does not have any executive functions. Transcription of an excerpt of the annual management report of 2009: Non-executive directors are advised about all relevant decisions made by the executive committee, and therefore permanently monitor the company s business. This knowledge, as well as their professional qualifications, enables an II.2. II.3. II.3. 11

12 II.2.5. The management body should promote the rotation of the member responsible for financial matters at least after 2 consecutive mandates. active presence in the Board of Directors, both in the supervision of the management activity as well as in pursuing the company s interests in a cooperative manner. Therefore, they provide full support and advise the executive committee, namely as concerns strategy, target achievement and compliance of applicable regulations. Non-Executive Directors assess the Company s monthly accounts and query the motive of any positive or negative variances. As part of their duties, Non-Executive Directors monitor and assess all matters concerning corporate governance, sustainability and internal codes of conduct, and address possible situations of conflict of interest regarding the company s relationship with its Shareholders. Non-executive directors do not meet autonomously but, further to board meetings, they maintain informal conversations about the business or operations of significant economic or strategic value, implicitly assessing the performance of their executive colleagues. The member of the board who is responsible for the financial area is ending his first mandate. II.3. Chief Executive Officer (CEO), Executive Committee and Executive Board of Directors Information requested by other members of the corporate bodies from executive directors is II.3.1. When Directors that carry out executive duties are requested by other Board Members to supply information, the former shall do so 12

13 in a timely manner and the information supplied must adequately suffice the request made. I.3.2. The Chair of the Executive Committee shall send the convening notices and minutes of the meetings to the Chair of the Board of the Directors and, when applicable, to the Chair of the Supervisory Board or the Auditing Committee. I.3.3. The Chair of the Executive Board of Directors shall send the convening notices and minutes of the meetings to the Chair of the General and Supervisory Board and to the Chair of the Financial Matters Committee. provided in a timely and adequate manner. The Chair of the Executive Committee sends the convening notices and minutes of the meetings to the Chair of the Board of the Directors and to the Chair of the Audit Board. Not applicable This recommendation does not apply to the corporate governance model adopted by SAG GEST. II.4. General and Supervisory Board, Financial Matters Committee, Audit Committee and Audit Board II.4.1 Besides fulfilling its Not applicable This recommendation supervisory duties, the General and does not apply to the Supervisory Board shall advise, corporate governance follow-up and carry out on an ongoing basis, the assessment on the model adopted by SAG GEST. management of the company by the Executive Board of Directors. Besides other subject matters, the General and Supervisory Board shall decide on: i) definition of the strategy and general policies of the company; ii) the corporate structure of the group; and iii) decisions taken that are considered to be strategic due to the amounts, risk and particular characteristics involved. II.4.2 The annual reports and financial information on the activity carried out by the General and Supervisory Committee, the Financial Matters Committee, the Audit Committee and the Audit Board shall be disclosed on the company s website together with the financial statements. II.4.3 The annual reports on the activity carried out by the General and Supervisory Board, the Financial Matters Committee, the Audit Committee and the Audit Board shall include a description on the supervisory activity and shall mention any restraints that they The annual reports on the activity carried out by the Audit Board are published on the company s website together with the financial statements. The annual reports on the activity carried out by the Audit Board include a description of the supervisory activity conducted. 13

14 may have come up against. II.4.4 The Financial Matters Committee, the Audit Committee and the Audit Board (depending on the applicable model) shall represent the company for all purposes at the external auditor, and shall propose the supplier of the services, the relevant remuneration, ensure that adequate conditions for the supply of these services are in place within the company, and shall act as the liaison officer between the company and the first recipient of the reports. The Audit Board shall as per Clause 25 of the Company s By-laws, propose to the Shareholders Meeting the appointment of the statutory auditor or of the auditing company / external auditor. The Audit Board shall also approve the relevant remuneration, make sure that conditions are ensured within the company to enable proper provision of the services and also that it is the first recipient of the relevant reports. II.4.5 According to the applicable model, the Committees for Financial Matters, Audit Committee and the Audit Board, shall assess the external auditor on an annual basis and advise the General Meeting that he/she be discharged whenever justifiable grounds are present. II.5.1 Unless the company is of a reduced size and depending on the adopted model, the Board of Directors and the General and Supervisory Committees, shall set up the necessary Committees in order to: i) ensure that a competent and independent assessment of the Executive Directors performance is carried out, as well as its own overall performance and further yet, the performance of all existing Committees; ii) study the adopted governance system and verify its efficiency and propose to the competent bodies, measures to be carried out with a view to its improvement. II.5.2 Members of the Remuneration Committee or alike, The audit board assesses on an annual basis the external auditor whose mandate has a duration of one year and can be reelected, and it can further advise the General Meeting on the dismissal of the same whenever justifiable grounds are present. II.5. Special Committees The Company has a functioning Corporate Governance and Structure Assessment Committee The Company established in 2009 a specialized committee to ensure a competent and independent evaluation of the performance of the executive directors and to assess its own global performance. This committee includes the major shareholder and current Chairman of the Board, the Chairman of the Audit Board and a Non-Executive Director. The current Remuneration Committee II. II

15 shall be independent from the Members of the Board of Directors. II.5.3. All the Committees shall draw up minutes of the meetings held. comprises three members who are independent from the members of the Board of Directors. All existing committees in the Company have drawn up minutes of the meetings held. 15

16 Companies shall maintain permanent contact with the market thus upholding the principle of equality for shareholders and ensure that investors are able to access information in a uniform fashion. To this end, the company shall create an Investor Assistance Unit. III.1.3 The following information that is made available on the company s Internet website, shall be disclosed in the English language: a) The company, public company status, headquarters and remaining data provided for in Article 171 of the Commercial Companies Code; b) Articles of Association c) Credentials of the members of the Board of Directors and the Market Liaison Officer; d) Investor Assistance Unit its functions and access tools; e) Accounts Reporting documents; f) Half-Yearly Calendar on Company Events; g) Proposals sent through for discussion and voting during the General Meeting; h) Notices convening meetings. III. INFORMATION AND AUDITING III.1. General Disclosure Duties The Company has an Investor Relations Office that centralizes all questions asked by market agents, ensuring the divulgation of information to Shareholders and to the market in general under equal terms, and liaising with the Regulatory Authority. Therefore, all information concerning the operational and financial performance of Group companies is provided to the investor community through the Investor Relations Office. All the information on the Company s website is available in English. III.12. III

17 0.4. The corporate body or the committee shall at all times, assess the independency of each of its members and shall inform the shareholders, via a statement included in the corporate governance report, on its assessment both at the time of the appointment and following the loss of independency. Among the four mentioned non-executive directors of the board, none is considered independent under the provisions of Clause 414 of the Companies Act, and therefore this recommendation is not fulfilled. On the date of their appointment, each member of the above bodies issued a statement where they expressly declared, in accordance with the criteria for assessment of incompatibilities provided for in Clause 414 of the Companies Code, that they had no incompatibility for performance of their mandates, namely because they did not hold any positions in competitive companies or in any company with any relationship with SAG GEST s competitors. And all members declared, in accordance with the criteria of assessment of independence provided for in para. 5 of Clause 414 of the Companies Act, that they fully complied with the criteria of independence. As at 31 December 2009, no communication has been received from SAG GEST announcing the occurrence of any fact which has negatively altered compliance with those requirements, and for this reason it was concluded that the above have been fulfilled. Bearing in mind the concept of independency presented by CMVM in the preamble of Regulation 1/2007 ( Reference to the independency of non-executive directors that are not directly covered by the provisions of the Companies Act, is now mentioned in articles 414/A and para. 5 of 414 of the Companies Act ), none of the non-executive members of the Board of Directors of SAG GEST is considered independent. It should be noted however that confirmation of independency under the terms proposed by the said Regulation constitutes a benchmark for assessment of compliance with the best practices recommended by the Corporate Governance Code and does nor represent a legal or statutory requirement for a valid appointment and performance of duties of the members of this Board. 17

18 Chapter I. General Shareholders Meeting I.1. Identification of the members of the Board of the Shareholders Meeting The Board of the Shareholders Meeting comprises a Chairman and the Company Secretary, as established on Clause 12 of the By-Laws. The current composition of the Board of the General Meeting is the following: Chairman - Dr. Lopo Roque de Pinho Cancella de Abreu Company Secretary Maria do Carmo Gomes Teixeira I.2. Indication of the commencement and end of the mandates of the members of the Board of the Shareholders Meeting - Chairman - Dr. Lopo Roque de Pinho Cancella de Abreu o Date of first appointment 3 November o Date term ends 31 December Company Secretary: Maria do Carmo Gomes Teixeira o Date of first appointment April o Date term ends - 31 December I.3. Remuneration of Chairman of the Board of the Shareholders Meeting The Chairman of the Shareholders Meeting receives a fixed retribution paid as an attendance ticket in the amount of Eur 1,500 for each Shareholders Meeting he chairs. In 2009, only one Shareholders Meeting was held. I.4. Rules applicable to the blocking of shares for participation in the Shareholders Meeting Currently, under the terms of Clause 14 of the Company By-laws, the general shareholders meeting shall be attended by Shareholders entitled to vote who, five business days before the meeting, hold Shares that are registered in securities accounts, the latter registration needing to be certified in writing by the relevant financial mediator and to be received by the Company, at the latest, three business days before the meeting. I.5. Rules applicable to the blocking of shares in the event of the suspension of the Shareholders Meeting As per the understanding of the Chairman of the Shareholders Meeting, in the event of suspension of the Shareholders Meeting, the same period of blocking of shares required for the first session shall apply, i.e., 5 business days. I.6. Number of shares that correspond to one vote According to Clause 14 of the Company s By-laws and according to Recommendation I.3.3. of the Corporate Governance Code, each share corresponds to a vote. 18

19 I.7. Statutory rules on the exercise of voting rights, including constitutive or deliberating quorums or systems for equity rights Apart from the rules mentioned in points I.4., I.6. e I.8., the By-laws of SAG GEST establish specific requirements as regards constitutive / deliberative quorums for the following situations: Clause 16 of the By-Laws establishes a constitutive quorum which is larger than the one required by law, i.e., after the first call, the Shareholders Meeting shall only function when holders of shares representing fifty per cent of the share capital are present or represented, regardless of the matters included in the agenda. Clause 17 of the By-laws determines the need of a quorum of two thirds of the votes corresponding to the share capital for the approval of deliberations by the shareholders meeting regarding capital increases, changes in the By-laws and dissolution. I.8. Statutory rules on the exercise of voting rights via postal voting SAG GEST s By-laws provide for voting by mail. Votes sent by mail will count for the purpose of establishment of the quorum required for the shareholders meeting and will also count for the second call to the Shareholders Meeting for which they were issued, and it is the Chairman of the Shareholders Meeting s duty to check that they are authentic and in compliance under terms announced in the call to the Shareholders Meeting. It is also the Chairman of the Shareholders Meeting s duty to ensure that votes by post remain confidential until voting time. Votes by post shall be counted at the same time as votes delivered at the shareholders meeting. Votes cast by mail count as negative votes on deliberation proposals made after their date of issue. The presence of the shareholder, or of his representative at the Shareholders Meeting revokes the vote cast by mail. I.9. Availability of a model format for exercising the right to vote by mail Voting forms for exercising the vote by post can be obtained two weeks in advance by Shareholders either at the Company's registered address or downloaded from the Company s website, I.10. Requirement of a period of time to exist between the receipt of the postal ballots and the date on which the Shareholders Meeting is held Mailed votes shall be sent to the Company s registered address by registered mail to the attention of the Chairman of the Shareholders Meeting and received at least three working days before the meeting, and clearly specify the Shareholder s full identification and include the corresponding signature certified by the relevant financial mediator; the letter shall also include a document confirming the number of Shares held, as well as a closed envelope for each item on the agenda the Shareholder wants to vote on; each envelope should indicate the relevant item of the agenda. I.11. Exercise of voting rights via electronic means As per the Company s by-laws, electronic voting is not allowed. 19

20 I.12. Intervention by the Shareholders Meeting on matters concerning the remuneration policy of the company and the performance assessment of the members of the management bodies Under the terms of Clause 22, para. 1 of the Company s By-laws, the Salaries Committee determines the remunerations of members of the corporate bodies. However, with a view to transparency of the procedure of determining remunerations and to comply with the Recommendations of the Securities Commission, the Salaries Committee prepared at the beginning of the mandate of the current directors a statement on the Board remuneration policy which was approved by the Annual Shareholders Meeting held on 31 March 2006, the terms of which are transcribed in full below: The remuneration policy regarding the Board of Directors of SAG is based on two different components: Fixed Remuneration The fixed remuneration is paid in 14 annual installments. As a guiding principle, the updating of the fixed remuneration is not subject to automatic salary indexation, but rather to a reassessment based on market conditions. Variable Remuneration The variable portion of the remuneration is paid in a single annual installment and corresponds to a share in profits that has been previously decided upon at the Shareholders Meeting. It is determined in accordance with the Group s financial performance and with an assessment of individual performance. This variable remuneration does not depend on the evolution of the Company s share price. Remuneration of Board members can be paid for by an affiliate, in which case it will be considered in determining the amount of the global individual retribution. As regards payment of social security taxes on the said remuneration, it is accepted that, at the Director s request, and provided all legal requirements are met, contributions are paid on the actual amount of the gross remuneration, therefore disregarding the maximum limit of 12 times the national minimum salary. This policy was adopted in the determination of the remuneration paid to the members of the Board of Directors in office during the 2005 financial year, and the Salaries Committee proposes that those same underlying principles be maintained during the term of the Board of Directors which will be elected for the four-year period. The Salaries Committee also prepared a statement on the Audit Board s and the Chairman of the Shareholders Meeting's remuneration policy in the following terms which was submitted by the Annual Shareholders Meeting on 31 March 2008, which reads as follows: Remuneration policy for the Audit Board and Chairman of the Shareholders Meeting: 1. Members of the Audit Board receive a fixed retribution paid as an attendance ticket, for each Audit Board meeting attended. 2. The Chairman of the Shareholders Meeting receives a fixed retribution paid as an attendance ticket, for each Shareholders Meeting he chairs. This policy was adopted in the establishment of the remuneration paid to the Audit Board elected on 30 March 2007 for the four-year period and to the Chairman of the Shareholders Meeting, whose appointment ends in 2009, and application of the underlying principles shall continue for the length of the current mandates. I.13. Defensive measures that are intended to immediately instigate asset erosion in cases such as changes in the control or to the composition of the Board of Directors No defensive measures were taken with the intention to immediately instigate a serious erosion of the Company s assets in case of changes in the control or to the composition of the board of directors. 20

21 I.14. Significant agreements which the company is a party to and that come into force, are changed or end in the case of change in company control, as well as related outcomes, unless the disclosure of same, due to their nature, is highly damaging to the company, except in the case where the company is specifically obliged to disclose such information due to other legal imperatives No significant agreements exist of which the Company is a party to and that will come into force, be altered or will cease should there be changes in the control of the Company. I.15. Agreements between the company and the Board of Directors, within the meaning of para. 3 of Clause 248 B of the Securities Code, that provide for compensation if the Directors resign or are made redundant without a valid reason or if their employment ceases following a change in company control. There are no agreements between the Company and members of the board of directors or workers which provide for compensation in the case of resignation, dismissal without just cause or end of employment following a change in company control. 21

22 Chapter II Management and Supervisory Bodies The Annual Shareholders Meeting on 30 March 2007 approved a new Corporate Governance model in line with the legal requirements resulting from the amended Companies Act, and adopted the so-called Latin model which keeps conduction of the Company with the Board of Directors and assigns the auditing of the Company s activity to an Audit Board in conjunction with an Audit Company. The model of governance adopted by SAG GEST allows a separation of the powers of the various corporate bodies and allows efficient management and administration, by means of delegation by the Board of Directors of day-to-day management of the business units and corporate services to the Executive Committee. For more information on the functioning of SAG GEST in terms of corporate governance, Shareholders can obtain the By-laws and regulations on the functioning of the Board of Directors and Executive Committee and Audit Board on the Company s website, There has been a committee since 2004 the aim of which is to evaluate the corporate structure and governance the Committee for Corporate Structure and Governance Evaluation. It currently comprises 4 members CFO (Executive director responsible for the financial area) and Investor Relations, Non-Executive Director, HR Development Manager and Company Secretary. This committee is responsible for ensuring that the Group complies with legal, regulatory and other regulations as regards corporate governance and monitoring of the adequacy of governance rules adopted by the Group; for monitoring the preparation of the management report and giving an opinion on chapters pertaining to corporate governance; for monitoring compliance of the code of conduct and proposing measures that it considers to be adequate to ongoing updating and renewal, and for controlling effective compliance by all Group SAG companies; for proposing to the Board of Directors initiatives and proposal that it considers adequate for the achievement of its targets. The Board of Directors considers that, taking into account the specific situation of SAG GEST, the model of governance adopted is adequate and follows principles that have been fully apprehended by its members, and it has shown to be effective in terms of creating value for the shareholders and safeguarding the interests and rights of the stakeholders. II.1. Identification and composition of the corporate bodies On 31 December 2009, the corporate bodies had the following members: Board of Directors Chairman João Manuel de Quevedo Pereira Coutinho Voting Members Esmeralda da Silva Santos Dourado Carlos Alexandre Antão Valente Coutinho Fernando Jorge Cardoso Monteiro António Carlos Romeiras de Lemos Rui Eduardo Ferreira Rodrigues Pena José Maria Cabral Vozone Pedro Roque de Pinho de Almeida Audit Board Chairman João José Martins da Fonseca George Voting Members Duarte Manuel da Palma Leal Garcia 22

23 Alternate Member Martinho Lobo de Almeida Melo de Castro António Marques Audit Company Auditing Company Ernst & Young - Audit & Associados SROC (SROC nº 178), represented by Paulo Jorge Luís da Silva (ROC nº. 1334). II.2. Identification and composition of other committees created with responsibilities for the management or the supervision of the company The organization model implemented at SAG GEST includes an Executive Committee in addition to the Board of Directors, with its own and distinctive responsibilities. On 31 December 2009, the Executive Committee had four members: Chairperson - Esmeralda da Silva Santos Dourado - Fernando Jorge Cardoso Monteiro - José Maria Cabral Vozone - Pedro Roque de Pinho de Almeida II.3. Organizational chart concerning the delegation of responsibilities and other duty related information -{}- Board of Directors Executive Committee CEO Esmeralda Dourado International Area Human Resources Fernando Monteiro José Vozone Pedro Almeida Automotive Distribution Retail Specialized Retail Logistics Group Management and Financial Control IT Automotive Services/ Fleet Management Remarketing Recycling / ELV 23

24 Model of operation of the Board of Directors / Executive Committee In light of the adopted management model, the Board of Directors is focused on the definition and revision of the strategy and policy regarding management, monitoring and control of the Group s performance, ensuring that the interests of Shareholders, Clients and Employees are protected, including among others, the following tasks, (i) approval of the Group's Strategic Plan, which includes the main guidelines for the development of the business in the various areas and quantification of growth and global profitability targets by business areas, as well as the main activities to be conducted in order to achieve the said targets; (ii) approval of annual and multiannual operation and corporate investment plans for the Company and its affiliates, as well as of the financial plan duly validated by the Executive Committee, (iii) monthly monitoring of the Group s financial performance, (iv) follow-up of ongoing projects, (v) approval of the acquisition or divestment from actual or financial non-operational assets, (vi) approval of the corporate communications plan for the group. The Board of Directors is required to have an ordinary meeting at least once every two months and whenever it must deliberate on a specific matter. The Board of Directors is kept informed and aware of all matters and decisions taken by the Executive Committee and has access to the minutes of the meetings. Conversely, the Executive Committee exists as a structure to speed up decision-making on behalf of the Board in order to optimize Group performance and to ensure day-to-day management of the Company, as per the Companies Act. Apart from defining the strategy for the Group and for its different business areas which are ultimately approved by the Board of Directors, the Executive Committee is responsible for institutional relations management of projects, whether these are of a structuring or a specific nature, as well as for controlling business development. The management model of the Executive Committee is essentially based on three main vectors: (i) assignment of responsibilities among its members, whether these are business areas or areas supporting the Group s business, (ii) representation by members of the Executive Committee in the various Boards of the Companies included in the various areas of business or support under their responsibility, (iii) use of the Project Management methodology according to which projects are executed by multidisciplinary teams. The Executive Committee usually meets on a bi-monthly basis. II.4. Description of the internal control and risk management systems within the company, namely as regards the financial information disclosure system The methodologies used to assess inherent risks to which Company activities are exposed and the organic units in charge of monitoring and controlling the same are briefly described below. Financial Risk The ALCO Committee (Assets and Liabilities Committee) is responsible for defining and controlling policies on management of financial risk factors which could affect the equity of the Company, as well as for monitoring and controlling liquidity risk, exchange risk, interest rates risk and credit risk. The management of liquidity risk involves the dynamic monitoring and measuring of that type of risk in order to ensure the fulfillment of all short and medium term financial responsibilities (cash outflows) by Grupo SAG companies towards companies doing business with them. By planning several financial operations for fund capture, together with the monitoring and control of operational activities having an impact on the various items of the Group's Balance Sheet, liquidity risk management seeks additionally to avoid unplanned seizing of funds during normal business activities, in order to avoid negative impacts on the Group's funding costs. Exchange rate risk management controls the impact that exchange rate changes can have on the Group s equity and tries to ensure accurate measurement and dynamic management of global 24

25 exchange risk. Furthermore, the adopted exchange risk management policy also defines the limits of exposure to this risk, as well as suitable coverage levels. Interest rate risk management aims to ensure the assessment and dynamic management of this risk by defining and establishing the limits of exposure of the Group s Balance Sheet and Income Statement to interest rate variations. The control policy that has been adopted aims to select suitable strategies for each business area in order to ensure that this risk factor does not negatively affect the relevant operational capacity. On the other hand, exposure to interest rate risk is further monitored through simulation of adverse scenarios having some degree of probability and which could negatively affect the Group's results. These are the main activities conducted in 2009 in the area of financial risk control in the Group: Proposal for presentation of Grupo SAG's Financial Plan for 2009 to the Board of Directors Regular meetings to monitor the Group s financial activity, including monitoring of the key financial ratios, recommendation of effective measures for Balance Sheet operational management, coordination of relations with financing entities and review of intra-group financing policy. Monthly preparation of the Group's risk control reports, namely cash-flow, exchange rate exposure and interest rate risks. In what regards credit risk management, the development of the Group's Client portfolio and each business unit's exposure are monitored on a monthly basis. The Group adopted in 2001 a Credit Risk Manual establishing policies, criteria and procedures to be adopted in the credit control area. The Credit Risk Manual is regularly updated and includes criteria to be used in determining a credit rating. The purpose of the ALCO Committee (Assets and Liabilities Committee) is to monitor and control the Group s financial risks, namely as concerns liquidity risk, exchange rate risk, interest rate risk and credit risk. Members of this Committee are those who are responsible for finance of the Group s Companies whose activity is likely to significantly influence the Group s consolidated assets and liabilities. The ALCO Committee (Assets and Liabilities Committee)comprises eight members, including tow executive members of the Board, namely Dr. José Vozone and Eng. Pedro Almeida and a nonexecutive member, namely António Lemos. Automobile Risk The management and control of Grupo SAG s automobile risk position, namely the definition and control the policies of vehicle assessment and determining devaluation factors and indicators is performed by the Automobile Risk Committee; its responsibilities include monitoring and control of extraordinary depreciation risk of automobile assets of the Group, which represents a very significant percentage of Grupo SAG s total assets. Management of automobile risk seeks to limit the risk of extraordinary depreciation of Grupo SAG's used car fleet through proper estimation of its market values, and also to ensure a suitable disposal and distribution policy that is compatible with the volumes transacted by establishing maximum levels of exposure by business unit, taking into account the expected profitability of those units. The main activities conducted in 2009 in this area were the following: Grupo SAG Fleet Plan Proposal for 2009 Regular meetings to monitor the portfolio of Group vehicles likely to suffer extraordinary depreciations, namely the entire vehicle portfolio established as Fixed Assets, as well as all used or semi-new car inventories. 25