Annual Corporate Governance Report 2017 2 WITHWITH the the CHAIRMANCHAIRMAN
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ANNUAL 20 CORPORATE GOVERNANCE 17 REPORT The value of connected energy 2 7 28 80 106 - 01 03 05 07 INTERVIEW REGULATORY THE BOARD OF ASSESSMENT AND LOOKING TO WITH THE FRAMEWORK DIRECTORS AS THE REMUNERATION THE FUTURE CHAIRMAN AND CORPORATE BODY RESPONSIBLE POLICY GOVERNANCE POLICY FOR CONTROL AND / 5.1 Assessment AS THE EXPRESSION SUPERVISION OF CORPORATE / 5.2 Remuneration / 3.1 Composition GOVERNANCE STRATEGY / 3.2 Responsibilities and activity 4 / 3.3 Committees 109 • 3.3.1 Audit Committee 88 • 3.3.2 Appointments 16 and Remuneration Committee / 3.4 Relations with - management - INTRODUCTION: OFFICIAL ANNEX: RED ELÉCTRICA / Standard Form of GROUP 06 02 APPLICATION OF Annex I to Spanish COMMITMENT TO THE INTEGRATED Stock Exchange DIALOGUE WITH COMPLIANCE, RISK Authority (CNMV) AND PARTICIPATION MANAGEMENT AND Circular 7/2015 62 CONTROL SYSTEM of 22 December OF SHAREHOLDERS AND OTHER / 6.1 Ethics STAKEHOLDERS • 6.1.1 Ethics and / 2.1 Ownership compliance culture structure • 6.1.2 Ethics Code / 2.2 Powers of the • 6.1.3 Ethics Channel Annual General Meeting of 04 • 6.1.4 Tax strategy BALANCE OF POWER Shareholders / 6.2 Compliance IN THE BOARD OF / 2.3 Right of DIRECTORS / 6.3 Integrated Risk information Management and Control / 4.1 Separation of / 2.4 Right of Chairman and Managing • 6.3.1 Integrated Risk attendance Director roles Management System / 2.5 Right of / 4.2 Selection and • 6.3.2 Main risks, participation succession processes tolerance level, and supervision plans. / 2.6 Relations with / 4.3 The Lead Independent CONTENTS other stakeholders Director / 6.4 Internal audit - - INTERVIEWINTERVIEW Annual Corporate Governance Report 2017 www.ree.es 2 WITHWITH THE THE CHAIRMANCHAIRMAN - INTRODUCTION: RED ELÉCTRICA GROUP 01 Interview with the chairman REGULATORY FRAMEWORK AND CORPORATE GOVERNANCE POLICY José Folgado Blanco / Chairman of Red Eléctrica AS THE EXPRESSION OF CORPORATE GOVERNANCE STRATEGY 02 COMMITMENT TO DIALOGUE WITH AND PARTICIPATION OF SHAREHOLDERS AND OTHER STAKEHOLDERS 03 THE BOARD OF Mr. Chairman, The Board of Directors has DIRECTORS AS THE BODY RESPONSIBLE for Red Eléctrica unquestionably made a permanent FOR CONTROL AND SUPERVISION what is good corporate objective to remain in the top ranks governance? “We want to of good corporate governance, 04 We understand good corporate which is also something our BALANCE OF POWER IN THE BOARD OF continue to have governance as a system which shareholders value highly. That DIRECTORS regulates the relations between is why we make a great effort the trust of our Company’s governing bodies. each year to listen to investors, 05 The shareholders, the Board of proxy advisors, our own advisers, ASSESSMENT AND REMUNERATION shareholders, the markets Directors, the senior management corporate governance specialists POLICY team and all the other people and assessors and, in general, all and society as a whole, who work in the Company must those of our stakeholders who have 06 willingly act in such a way as to something to say on the matter. APPLICATION OF THE INTEGRATED align their interests, motivated We know that good governance is COMPLIANCE, RISK as a model of an honest, MANAGEMENT AND CONTROL SYSTEM by a shared value that includes a value shared by society as a whole committed, transparent, economic, social, environmental and a true reflection of the pillars and good governance criteria, not that must sustain the business 07 LOOKING TO only in order to contribute to the world, which are ethics and integrity. THE FUTURE excellent and flexible sustainability, solvency and good reputation of the Company but organization that reacts also to promote trust, stability, - OFFICIAL ANNEX progress, and economic and social quickly to change”. development in our world. - - INTERVIEWINTERVIEW Annual Corporate Governance Report 2017 www.ree.es 3 WITHWITH THE THE CHAIRMANCHAIRMAN - INTRODUCTION: RED ELÉCTRICA GROUP Red Eléctrica has implemented Which of the corporate Directors and its committees; and Chairman of the Board and the a model in which the positions governance practices followed the consolidation of our leadership Managing Director; promotion of non-executive chairman and by Red Eléctrica in 2017 01 position in matters of gender of diversity in the broadest sense REGULATORY managing director are separated. would you highlight? FRAMEWORK diversity, both on the Board and in within the corporate governing AND CORPORATE GOVERNANCE POLICY How is that working? AS THE EXPRESSION It is worth pointing out that the the organization as a whole, aiming bodies, in line with international OF CORPORATE GOVERNANCE STRATEGY Before submitting the proposal Company has a small, effective and to have the best talent and find standards; review of the current for the separation of the two efficient Board of Directors that is the most appropriate balance directors’ remuneration policy, 02 COMMITMENT TO positions to an Extraordinary fully committed to the development in the composition of all the which expires this year, and the DIALOGUE WITH AND PARTICIPATION OF SHAREHOLDERS AND General Meeting of Shareholders of the Company’s businesses and corporate bodies. new design of this Annual Corporate OTHER STAKEHOLDERS convened in 2015 at the Company’s the search for opportunities and that Governance Report (prepared after own initiative and exclusively for acts as the driver and essential lever Lastly, can you tell us what plans analysing international reporting 03 THE BOARD OF that purpose, the Board analysed of the Company’s good corporate the Company has for its corporate best practices, so as to improve DIRECTORS AS THE BODY RESPONSIBLE the new organizational model that governance and strategic framework. governance in 2018? its quality), which we will submit FOR CONTROL AND SUPERVISION was to be implemented in detail. It If we wish to continue to be leaders to independent external review: concluded that besides contributing Throughout 2017 we made in corporate governance, we must these are all examples of good 04 to a proper balance of power in the further progress in the adoption practise what we preach. We want corporate governance practices BALANCE OF POWER IN THE BOARD OF composition of the Board of Directors of new corporate governance to continue to have the trust of that we plan to put into effect DIRECTORS and improving the Company’s practices. In this connection I our shareholders, the markets and in the current year. corporate governance structure, would like to mention the approval society as a whole, as a model of 05 the separation of positions would of Contingency Plans for the an honest, committed, transparent, The Board of Directors will ASSESSMENT AND REMUNERATION facilitate the compliance with the Succession of the Chairman of the excellent and flexible organization continue to make the adoption POLICY goals and strategies set out in the Board and the Managing Director; that reacts fast to change and is of new practices and the ongoing Group’s strategic plan and would the preparation of an incorporation capable of generating value from development of our corporate 06 assist towards the sustainable plan for new directors (Induction any new opportunities that arise in governance system, as summarised APPLICATION OF THE INTEGRATED COMPLIANCE, RISK development of its various business Plan); the development and the industries in which we operate, in this Report, a priority objective, MANAGEMENT AND CONTROL SYSTEM areas. Time is proving us right, as the final implementation of the new putting our values, our culture and so as to maintain our sustainable new model of separation of positions integrated regulatory compliance our way of doing things into practice. commitment to shareholders. is working very efficiently, thanks system; the digital transformation 07 LOOKING TO also to magnificent coordination of the operating of the Board of Issues such as our commitment THE FUTURE between the managing director to sustainability as the strategy and myself in the exercise of our for driving the Group’s businesses; respective responsibilities. continuous review of the Contingency - OFFICIAL ANNEX Plans for the succession of the - INTERVIEW Annual Corporate Governance Report 2017 www.ree.es 4 WITH THE CHAIRMAN -- INTRODUCTION:INTRODUCTION: REDRED ELÉCTRICA ELÉCTRICA GROUPGROUP 01 Introduction: REGULATORY FRAMEWORK AND CORPORATE GOVERNANCE POLICY AS THE EXPRESSION OF CORPORATE GOVERNANCE STRATEGY The Red Eléctrica Group 02 COMMITMENT TO DIALOGUE WITH AND PARTICIPATION OF SHAREHOLDERS AND OTHER STAKEHOLDERS 03 THE BOARD OF The world’s first company The Group’s parent Company is (REINTEL), which manages the The investment in electricity DIRECTORS AS THE BODY RESPONSIBLE devoted exclusively to electricity Red Eléctrica Corporación, S.A. telecommunications business. transmission infrastructure FOR CONTROL AND SUPERVISION system operation and electricity The parent controls the subsidiary In addition, the subsidiary outside Spain is channelled through transmission was incorporated Red Eléctrica de España, S.A.U. Red Eléctrica Infraestructuras various subsidiaries integrated into 04 on 29 January 1985 under the (REE), which is responsible for en Canarias, S.A.U. (REINCAN) Red Eléctrica Internacional, S.A.U. BALANCE OF POWER IN THE BOARD OF name of Red Eléctrica de España, the electricity activities in Spain; meets the need to develop energy (REI). Those subsidiaries are DIRECTORS S.A. (currently Red Eléctrica the subsidiary Red Eléctrica storage projects in the Canary the following: Corporación,