System for approval and transparency

35. "That the remuneration policy approved by the Board pronounce at least on the following questions:

Importe de los componentes fijos, con desglose, en su caso, de las dietas por participación en el Consejo y sus Comisiones y una estimación de la retribución fija anual a la que den origen;

  • Value of the fixed components, with breakdown, where appropriate, of the per diem allowances for participating in meetings of the Board and its Committees and an estimate of the fixed annual remuneration they give rise to;

  • Remuneration concepts of a variable nature, including, in particular:

    • Kinds of director to whom they apply, as well as an explanation of the relative importance of the variable remuneration concepts in respect of those that are fixed;

    • Criteria for evauating the results on which any right to remuneration in shares, share options or any variable component is based;

    • Basic paramenters and foundation of any annual bonus system or other benefits not settled in cash; and

    • An estimate of the absolute value of the variable remuneration that the proposed remuneration plan will give rise to, according to the degree of compliance with the hypotheses or objectives it takes as a reference.

  • Main characteristics of benefits systems (for example, supplementary pensions, life insurance and similar items), with an estimate of their value or equivalent annual cost.

  • Conditions to be respected by the employment contracts of those who perform senior management functions as executive directors, which shall include the following:

    • Duration;

    • Advance notice periods; and

    • Any other clauses relating to contract bonuses, besides indemnities or protection against early termination or the severance of contractual relations between the company and the executive director"

Visto bueno The Company complies partially.

The Board of Directors considers that to anticipate the estimated value of variable remuneration may be an unnecessary, disturbing constriction factor, when it comes to the actual defining of the variable remuneration payable to Executive Directors.

Guidance criteria

36. "That remuneration through the delivery of company or group company shares, share options or instruments linked to the share value, variable remuneration linked to the performance of the company or benefit systems, be limited to executive directors.

This recommendation shall not extend to the delivery of shares when this is conditional upon the directors keeping them until they cease in the performance of their functions as directors".

Visto bueno The Company complies.

However, in order to avoid confusion, it must be pointed out that since 2003 the Company has been operating a system whereby the per diem and statutory duty allowances received by the Directors must compulsorily be invested in Company shares. This system, which is not, therefore, a delivery of shares in the sense indicated by the Recommendation, permits disinvestment of the shares when three full business years have elapsed since the year in which their acquisition occurred.

37. "That the remuneration of external directors be whatever is necessary in order to reward them for the dedication, qualification and responsibility their position requires; but not so high as to compromise their independence".

Visto bueno The Company complies.

38. "That the remuneration related to company profits take account of possible reservations that appear in the external auditor's report and reduce these profits.

Visto bueno The Company complies, in its internal regulations, to the extent provided for in these Recommendations, although the situation in which its application would be appropriate has not arisen to date.

39. "That in the case of variable remuneration, the remuneration policies include the necessary technical precautions in order to ensure that such remuneration is in keeping with the professional performance of its beneficiaries and does not arise simply from general market evolution or the evolution of the company's activity sector or from other similar circumstances".

Visto bueno The Company complies.

Consultative voting by the Shareholders' Meeting

40. "That the Board present for voting on by the Shareholders' Meeting, as a separate item on the agenda, and on a consultative basis, a report on the remuneration policy for directors. And that this report be made available to the shareholders, whether separately or in any other way considered appropriate by the company.

This report shall focus particularly on the remuneration policy approved by the Board for the current year and also, as appropriate, that proposed for future years. It shall deal with all issues referred to in Recommendation 34, with the exception of the points that may entail the disclosure of sensitive business information. It shall place emphasis on the most significant changes in such policies concerning the one applied during the past year to which the Shareholders' Meeting refers. It shall also include an overall summary of how the remuneration policy was applied in that past year.

That the Board also report on the role played by the Remuneration Committee in drafting the remuneration policy and, if it has used external consultancy, the identity of the external consultants that have provided this".

Visto bueno The Company complies partially.

The Board of Directors Regulations establish that the Board of Directors shall draw up a Report on the remuneration policy it has approved; the policy planned, where appropriate, for future years; the most significant changes that have occurred in respect of previous years and other points of interest that it considers appropriate. This report, which was drawn up for the first time in relation to remuneration in 2007, will be put before the shareholders on the occavsion of the convening of the Shareholders' Meeting that is to take place in 2008.

However, the Board of Directors considers that this recommendation means, as regards voting on a consultative basis, introducing a distortion of attributions of powers between the Shareholders' Meeting and the Board of Directors and represents a potential element of confusion.

Transparency of individual remuneration

41. "That the Report give details of the individual remuneration paid to directors during the business year and include:

  • The individualized breakdown of the remuneration paid to each director, which shall, where appropriate, include:

    • The per diem attendance allowances and other fixed remuneration received as director;

    • The additional remuneration received as chairman or member of a Board committee;

    • Any remuneration by way of profit-sharing or bonuses, and the reason why they were granted;

    • Contributions to defined contribution pension plans in  favour of the director; or the increase of consolidated rights of the director, in the cases of contributions to defined benefit plans;

    • Any indemnities agreed or paid in the event of the director ceasing to perform his/her duties;

    • The remuneration received as director of other group companies;

    • Remuneration for the performance of senior management functions by executive directors;

    • Any other remunerative concept that is different from the above, whatever its nature or the group company paying it, particularly when is a linked-party transaction or its omission distorts the true image of the total remuneration paid to the director.

  • The individualized breakdown of possible deliveries to directors of shares, share options or any other instrument linked to the share value, with details of:

    • Number of shares or options granted during the year, and conditions for their exercise;

    • Number of options exercised during the year, with an indication of the number of shares affected and the exercise price;

    • Number of options pending exercise at year-end, with an indication of their price, date and other requirements for exercise;

    • Any modification made during the year to the conditions for exercising options already granted.

  • Information on the ratio, in the past business year, between the remuneration received by the executive directors and the results or other corporate performance measurements".

      Visto bueno The Company complies partially.

The Report includes information on the remunerative concepts stated in the Recommendation, and individualizes the amounts corresponding to per diem and statutory duty allowances paid to Directors. However the remuneration corresponding to the performance of Senior Management functions by Executive Directors is not presented in an individualized form, since it is understood that relevant information for shareholders and the market in general is that relating to the remunerative cost of the management team and not necessarily the individualized remuneration paid to each one of its component members.