15 December 2015 Policy for the Definition and Coordination of the Iberdrola Group and Foundations of Corporate Organisation
Content 1. General Principles 3 2. Definition of the Corporate and Governance Structure 3 3. The Group s Business Model and Use of the IBERDROLA Brand 4 4. Presence of the Group on the Internet and on Social Networks. Corporate Websites 4 5. Duties of the Board of Directors in Connection with the Corporate Organisation 4 6. Operating Committee 5 Look after the Environment. Print in black and white, and only if necessary. / 2
Corporate Governance and Regulatory Compliance Policies 20 October 2015 POLICY FOR THE DEFINITION AND COORDINATION OF THE IBERDROLA GROUP AND FOUNDATIONS OF CORPORATE ORGANISATION 1. General Principles The Board of Directors of IBERDROLA, S.A. (the Company ) establishes the structure of the group of companies of which the Company is the controlling entity, within the meaning established by law (the Group ). In this connection, and exercising the powers vested therein, the Board of Directors approves this Policy for the Definition and Coordination of the Iberdrola Group and Foundations of Corporate Organisation, which forms part of the Company s Corporate Governance System. Pursuant to the provisions of its, By-laws, the Company carries out its corporate purpose indirectly, through the ownership of shares or equity interests in other companies, and increasingly abroad. The corporate and governance organisation is based on the recognition of this multinational character of the Group, which is diversified, efficiently organised, and coordinated around the Company and the various country subholding companies and head of business companies, subject to certain common guidelines and to the principle of subsidiarity. The differentiation of the functions of the Company, as the holding company of the Group, a Spanish company registered in Biscay, those of the country subholding companies established in the various territories in which the Group operates, and those of the head of business companies, whether Spanish or foreign, is thus one of the basic premises of this Policy. Accordingly, taking previous policies as a starting point, this Policy lays the foundations for the corporate and governance organisation of the Company and the Group that best reflects their multinational and multi-company nature and their presence in different businesses and industries, and that best promote the achievement of the objects of the Company and the furtherance of the corporate interest in today s environment. 2. Definition of the Corporate and Governance Structure The corporate structure of the Group, which forms an essential part of the Corporate Governance System, includes: a) The Company, the principal function of which is to act as the holder of the equity stakes in the country subholding companies. b) The country subholding companies, which in turn group together the energy head of business companies that conduct their activities in each country in which the Group operates. The Group also has a country subholding company for the non-energy head of business companies, which do business in various countries. c) The head of business companies. All of them have human and material resources of their own to independently carry out the duties assigned thereto by the Corporate Governance System. This structure is intended to favour a process of agile and rapid decision-making in day-to-day management, subordinate to the head of business companies, while achieving appropriate coordination at the Group level as a result of the duties of supervising the country subholding companies and the Company. Based on this corporate structure, the governance of the Group is determined in accordance with the basic principles described below, which duly distinguish between day-to-day and effective management duties, on the one hand, and supervision and control duties, on the other: a) Attribution to the Board of Directors of the Company, which exclusively exercises holding company duties, of the powers relating to establishing the Group s policies and strategies, and the basic guidelines for the management thereof, as well as general supervision of the development of such policies, strategies, and guidelines and of decisions on matters of strategic importance at the Group level, fully observing the special framework of strengthened autonomy of the listed country subholding companies referred to in paragraph d) below. b) Assumption by the chairman of the Board of Directors & chief executive officer, with the technical support of the Operating Committee, by the Business CEO (director general) appointed by the Board of Director, with overall responsibility for all of the businesses of the Group, and by the rest of the management team, of the duty of organisation and strategic coordination within the Group through the dissemination, implementation, and monitoring of the general strategy and basic management guidelines established by the Board of Directors. c) The function of organisation and strategic coordination is strengthened through country subholding companies in those countries where the Board of Directors of the Company has so decided. Such entities group together equity stakes in the energy head of business companies carrying out their activities within the various countries in which the Group operates. This structure is rounded out with a country subholding company that groups together certain equity interests in other entities, including the non-energy head of business companies, with a presence in various countries. One of the main functions of the country subholding companies is to centralise the provision of services common to the companies in which it holds an interest, always in accordance with the provisions of applicable law and especially the legal provisions regarding the separation of regulated activities. Country subholding companies have boards of directors that include independent directors and their own audit committees, internal audit areas, and compliance units or divisions. The selection of directors of the country subholding companies avoids any type of implicit bias that could entail discrimination of any kind, and particularly discrimination that might hinder the selection of female directors. Country subholding companies are responsible for disseminating, implementing, and ensuring compliance with the policies, strategies, and general guidelines of the Group in each of the countries in which it operates and with respect to the business grouped within each of them, taking into account the characteristics and unique aspects of such countries. / 3
In this regard, country subholding companies facilitate the coordination of the companies in which they hold interests and are assigned responsibility for effective compliance with the laws and regulations on separation of regulated activities. In order to concretise the application of the Corporate Governance System based on the applicable law in each country, as well as the characteristics and unique aspects of such countries, and to meet the responsibilities that the Corporate Governance System assigns thereto, the country subholding companies approve the rules applicable to the companies in which they have a stake, and specify the application at the country level, if applicable, of the content of the basic policies and guidelines approved by the Company s Board of Directors for the entire Group. d) The listed country subholding companies of the Group have a special framework of strengthened autonomy that covers three areas: In the regulatory area, the boards of directors of the listed country subholding companies are authorised to approve their own corporate governance and regulatory compliance policies, their own risk policies, and other internal codes and procedures that specify, further develop or make exceptions to the content of equivalent rules within the Corporate Governance System. In the related party transactions area, the boards of directors of the listed country subholding companies have a committee within their Board of Directors made up exclusively of directors not linked to the Company, and which has the power to approve all transactions between the listed country subholding company and its subsidiaries with the other companies of the Group (in addition to the authorisations generally required in each case, given the nature of each transaction. In the management area, the listed country subholding companies enjoy a system of strengthened autonomy with respect to the Company preventing the Company and other companies of the Group from giving instructions to their management team or the management teams of the subsidiaries thereof that entail interference with the exercise of the powers that the Corporate Governance System vests therein. The special framework of strengthened autonomy is further developed in the respective agreement signed by the Company with each listed country subholding company. e) The head of business companies of the Group assume decentralised executive responsibilities, enjoy the independence necessary to carry out the day-to-day and effective management of each business, and are assigned responsibility for the day-to-day control thereof. These head of business companies are organised through their respective boards of directors, which include independent directors where appropriate, and their own management decision-making bodies; they may also have their own audit committees, internal audit areas, and compliance units or divisions. The selection of directors of the country subholding companies avoids any type of implicit bias that could entail discrimination of any kind, and particularly discrimination that might hinder the selection of female directors. In order to facilitate the orderly performance of the functions inherent in its capacity as the controlling company of the Group, the Company s Board of Directors establishes a number of mechanisms that allow for the exchange of information required for the strategic coordination of the activities conducted by the various country subholding companies and head of business companies, without detracting from the decision-making autonomy of each of such companies or from the requirements imposed on their directors by law or those stemming from the Corporate Governance System, in the interest of all the companies making up the Group. 3. The Group s Business Model and Use of the IBERDROLA Brand The corporate and governance structure of the Group permits, in turn, the global integration of the businesses in accordance with the Group s Business Model, which focuses on maximising the operational efficiency of the various business units and guarantees the dissemination, implementation, and monitoring of the overall strategy and of the basic management guidelines established for each business, primarily through the exchange of best practices among the various companies within the Group and without detracting from the decision-making autonomy of each of such companies. The Corporate Governance System recognises the IBERDROLA brand as a hallmark of the Company s identity and as the principal symbol of the mission, vision, and values of the Group. Generally, the companies of the Group use this brand which is owned by the Company as part of their trade names and distinctive marks used in carrying out their businesses. The use thereof is governed by the provisions of the Brand Policy and the other internal rules established by the Company. 4. Presence of the Group on the Internet and on Social Networks. Corporate Websites The country subholding and head of business companies of the Group shall endeavour to have a presence on the Internet and, in particular, to actively participate in social networks in order to maintain a relationship with their stakeholders. For these purposes, the country subholding and head of business companies shall have their own identity on social networks and their own corporate website, the contents of which must be managed in accordance with the guidelines established for such purpose by the Company, and by the country subholding companies for each country, if applicable. The country subholding companies and head of business companies shall adopt the measures necessary to avoid the confusion of their corporate websites with that of the Company. The corporate websites of the country subholding and head of business companies shall be structured around specific sections intended to identify the relevant company and its activities, describe its relationship to the Group and its position regarding corporate governance, sustainability, and the environment; and promote its relations with the most significant stakeholders and with society in general. Look after the Environment. Print in black and white, and only if necessary. / 4
Corporate Governance and Regulatory Compliance Policies 20 October 2015 5. Duties of the Board of Directors in Connection with the Corporate Organisation The Company s Board of Directors has, in all cases, the following duties in connection with the corporate and governance structure of the Group: a) To conform the corporate and governance structure and the Business Model of the Group to the requirements of the corporate interest at all times, always in compliance with applicable law and with the Corporate Governance System. b) To adapt the structure of the Group to the legal requirements applicable in the jurisdictions in which it carries out its activities and, specifically, as regards the rules governing the separation of regulated activities in each jurisdiction. c) To choose the location of the registered office of the Company and of the other companies of the Group that are not listed or owned through a listed country subholding company on the basis of the corporate interest and to adopt the respective decisions or, when required, to submit them to the shareholders at a General Shareholders Meeting for adoption. d) To regulate, analyse, and decide upon possible conflicts of interest and related-party transactions among the companies of the Group. As regards those affecting listed country subholding companies, the Company s Board of Directors shall ensure compliance with the rules for related party transactions set forth in the relevant special framework of strengthened autonomy. e) To ensure the reconciliation of the interest of the companies of the Group that have minority shareholders with the policies and strategies of the Group. f) To implement appropriate strategic coordination mechanisms in the interest of the Company and of the companies that are part of the Group, in accordance with the Group s Business Model. g) To approve the creation or acquisition of equity interests in special purpose entities or entities registered in countries or territories that are considered to be tax havens, as well as any other transactions or operations of a similar nature that, due to their complexity, might diminish the transparency of the Group. h) To submit to a decision by the shareholders at a General Shareholders Meeting the assignment to dependent entities of core activities theretofore carried out by the Company, even though the Company retains full control of such entities. Moreover, as regards affiliated entities that are not part of the Group, the Board of Directors shall, upon defining the general strategy of the Group, respect the specific regulations applicable to such entities by reason of their nature as regulated or listed companies, or because of their nationality, the jurisdictions in which they carry out their activities, or any other circumstance that may affect them. 6. Operating Committee Within the corporate and governance structure of the Group, the Operating Committee is an internal committee of the Company, providing technical, informational, and management support both with respect to the functions of definition, supervision, organisation, and monitoring of the general management guidelines and to the strategic planning of the business managed by the head of business companies, in accordance with the Group s Business Model. This Policy for the Definition and Coordination of the Iberdrola Group and Foundations of Corporate Organisation was initially approved by the Board of Directors on 18 December 2007 and was last amended on 15 December 2015. / 5