Annual report and accounts 2016

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208 Spanish corporate governance report continued 44. The audit committee should be informed of any fundamental changes or corporate transactions the company is planning, so the committee can analyse the operation and report to the board beforehand on its economic conditions and accounting impact and, when applicable, the exchange ratio proposed. Complies 45. Risk control and management policy should identify at least: a) The different types of financial and non-financial risk the company is exposed to (including operational, technological, financial, legal, social, environmental, political and reputational risks), with the inclusion under financial or economic risks of contingent liabilities and other offbalance-sheet risks. b) The determination of the risk level the company sees as acceptable. c) The measures in place to mitigate the impact of identified risk events should they occur. d) The internal control and reporting systems to be used to control and manage the above risks, including contingent liabilities and offbalance-sheet risks. Complies 46. Companies should establish a risk control and management function in the charge of one of the company’s internal department or units and under the direct supervision of the audit committee or some other dedicated board committee. This function should be expressly charged with the following responsibilities: a) Ensure that risk control and management systems are functioning correctly and, specifically, that major risks the company is exposed to are correctly identified, managed and quantified. b) Participate actively in the preparation of risk strategies and in key decisions about their management. c) Ensure that risk control and management systems are mitigating risks effectively in the frame of the policy drawn up by the board of directors. Complies 47. Appointees to the nomination and remuneration committee – or of the nomination committee and remuneration committee, if separately constituted – should have the right balance of knowledge, skills and experience for the functions they are called on to discharge. The majority of their members should be independent directors. Complies 48. Large cap companies should operate separately constituted nomination and remuneration committees. Complies 49. The nomination committee should consult with the company’s chairman and chief executive, especially on matters relating to executive directors. When there are vacancies on the board, any director may approach the nomination committee to propose candidates that it might consider suitable. Complies 50. The remuneration committee should operate independently and have the following functions in addition to those assigned by law: a) Propose to the board the standard conditions for senior officer contracts. b) Monitor compliance with the remuneration policy set by the company. c) Periodically review the remuneration policy for directors and senior officers, including share-based remuneration systems and their application, and ensure that their individual compensation is proportionate to the amounts paid to other directors and senior officers in the company. d) Ensure that conflicts of interest do not undermine the independence of any external advice the committee engages. e) Verify the information on director and senior officers’ pay contained in corporate documents, including the annual directors’ remuneration statement. Complies 51. The remuneration committee should consult with the company’s chairman and chief executive, especially on matters relating to executive directors and senior officers. Complies INTERNATIONAL AIRLINES GROUP Annual Report and Accounts 2016
209 52. The terms of reference of supervision and control committees should be set out in the board of directors regulations and aligned with those governing legally mandatory board committees as specified in the preceding sets of recommendations. They should include at least the following terms: a) Committees should be formed exclusively by non-executive directors, with a majority of independents. b) They should be chaired by independent directors. c) The board should appoint the members of such committees with regard to the knowledge, skills and experience of its directors and each committee’s terms of reference; discuss their proposals and reports; and provide report-backs on their activities and work at the first board plenary following each committee meeting. d) They may engage external advice, when they feel it necessary for the discharge of their functions. e) Meeting proceedings should be minuted and a copy made available to all board members. Partially complies The Board of Directors of IAG, under its powers of self-organisation, considers it appropriate to have a Safety Committee in order to exercise a high level overview of each airline’s safety performance and of any important issues that may affect the industry, although responsibility for safety matters belongs to each of the Group’s airlines. This Committee is governed by the same principles as all Board Committees and has a clear majority of non-executive directors. However, the Committee’s composition is not compliant with the Code’s recommendation as an executive director, the Chief Executive, is a member of this Committee, being also its chairman. The Board believes this to be appropriate in the current circumstances for the following reasons: a) IAG is a holding, non-operational company, exercising a supervisory role within the Group. b) Consistent with the civil aviation regulatory framework, responsibility for safety matters remains with each operating airline. c) The technical nature of safety issues and the fact that each operating airline has its own particular characteristics makes it advisable that the Group’s top executive leads this Committee and coordinates the reporting of the different Group airlines. Furthermore, the remaining Committee members are independent directors of IAG, including the Chairman of the Board and the Chairman of the Audit and Compliance Committee. Finally, it has to be taken into consideration that safety is a highly regulated area that is subject to strict reporting requirements to the local regulatory authorities of each airline and to regular external audit reviews. 53. The task of supervising compliance with corporate governance rules, internal codes of conduct and corporate social responsibility policy should be assigned to one board committee or split between several, which could be the audit committee, the nomination committee, the corporate social responsibility committee, where one exists, or a dedicated committee established ad hoc by the board under its powers of self-organisation, with at the least the following functions: a) Monitor compliance with the company’s internal codes of conduct and corporate governance rules. b) Oversee the communication and relations strategy with shareholders and investors, including small and medium-sized shareholders. c) Periodically evaluate the effectiveness of the company’s corporate governance system, to confirm that it is fulfilling its mission to promote the corporate interest and catering, as appropriate, to the legitimate interests of remaining stakeholders. d) Review the company’s corporate social responsibility policy, ensuring that it is geared to value creation. e) Monitor corporate social responsibility strategy and practices and assess compliance in their respect. f) Monitor and evaluate the company’s interaction with its stakeholder groups. g) Evaluate all aspects of the non-financial risks the company is exposed to, including operational, technological, legal, social, environmental, political and reputational risks. h) Coordinate non-financial and diversity reporting processes in accordance with applicable legislation and international benchmarks. Complies Strategic Report Corporate Governance Financial Statements Additional Information www.iairgroup.com
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INTERNATIONAL AIRLINES GROUP The be
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Strategic report “2016 was a chal
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3 Chairman’s letter A firm focus
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5 Q A And, importantly, we have to
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7 IAG combines the leading airlines
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9 Operating highlights British Airw
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11 Business model and strategy Maxi
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13 4 5 6 Grow share of Europeto-Afr
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15 The performance indicators prese
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17 IT This year significant work ha
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19 and additional summer aircraft a
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21 This is why we have recently lau
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23 Aer Lingus Making the most of ou
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25 IAG Cargo Resilient performance
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27 Risk management and principal ri
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29 Risk Potential impact Management
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31 Risk Potential impact Management
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33 Financial overview A significant
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35 However, continued weakness in t
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37 Exchange impact before exception
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39 By supplier cost category: Handl
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41 Capacity 21% 11% 8% 60% Operatin
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43 Cash flow € million 2016 2015
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45 Sustainability Committed to our
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47 UN Sustainable Development Goals
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49 Aspect and link to SDGs Noise Wa
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51 Air quality - electric tug trial
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“2016 has really tested the Group
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55 I think we can be very proud tha
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57 James Lawrence Non-Executive Dir
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59 The Group operating companies Av
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61 The Board Secretary is Álvaro L
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63 Induction programme New director
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65 Other statutory information Dire
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67 The significant shareholders of
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69 Report of the Audit and Complian
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71 ICFR, which is a Spanish Corpora
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73 The Committee’s responsibiliti
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75 Report of the Safety Committee D
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77 Despite a growth in share price
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79 The table below summarises the m
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81 Malus and Clawback Provisions Th
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83 Service contracts and exit payme
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85 Annual Remuneration Report Commi
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87 Additional explanations in respe
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89 IAG PSP Award 2014 The IAG PSP a
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91 Statement of Voting The table be
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93 IAG’s total shareholder return
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95 The second performance condition
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97 Incentive Award Deferral Plan Th
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Strategic Financial Statements Repo
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101 Consolidated statement of other
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103 Consolidated cash flow statemen
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105 Consolidated statement of chang
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107 the Income statement. All other
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109 b Other interest-bearing deposi
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111 Employee leaving indemnities an
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113 IAG has initiated a project to
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115 For the year to December 31, 20
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117 7 Auditors’ remuneration The
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119 For the year to December 31, 20
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121 c Reconciliation of the total t
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123 13 Property, plant and equipmen
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125 16 Intangible assets and impair
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127 Basis for calculating recoverab
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129 19 Trade and other receivables
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131 2 Floating rate euro mortgage l
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133 depending on whether the employ
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135 At December 31, 2016 the Group
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137 27 Financial instruments a Fina
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139 The carrying amounts and fair v
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141 December 31, 2015 Financial ins
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143 31 Other reserves and non-contr
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145 Defined benefit schemes i. APS
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147 d Fair value of scheme assets A
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149 e Present value of scheme liabi
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151 33 Contingent liabilities and g
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Spanish corporate governance report
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155 Indicate the most significant m
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Page 231 and 232: Shareholder information Registered
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Annual report and accounts 2016

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