4. Main lines of action

As for the lines of action of the Nomination and Remuneration Committee during FY2013, they have revolved around the following aspects:

A. Remuneration policy and remunerations

A.1. Design and implementation of a Long Term Performance Plan

  • For the purposes of designing the Long Term Performance Plan, the Nomination and Remuneration carried out on the advice of Towers Watson, a research on market practices in the area of long term incentive in the US and in Europe, and namely in Spain, with reference to benchmarking international companies in the retail sector. The Committee involved in the process the Financial Division and the Human Resources Department.
  • On 11 March 2013, the Committee approved a motion for a Long Term Performance Plan, addressed to members of the management, including the Chairman and Chief Executive Officer, and other key employees of the Inditex Group. Such Plan consisted of a Long Term Performance Shares Plan and a Long Term Performance Cash Plan. The Committee also approved on such date the relevant regulations for both Plans and submitted them to the Board of Directors for approval. The Board of Directors approved the Long Term Performance Plan on 12 March 2013 and submitted it to the Annual General Meeting of Shareholders (AGM) for approval. Such Plan was approved by the AGM on 16 July 2013.
  • Subsequently, in the meeting held on 12 September 2013. The Nomination and Remuneration Committee acknowledged the list of beneficiaries of the Long Term Performance Plan.

A.2. Terms of employment agreements and remuneration of senior management of the Inditex Group

On 11 March 2013, the Committee gave a favourable report to the severance and golden parachute clauses included in the employment agreements for 12 senior managers, including the Chairman and Chief Executive Officer.

A.3. Remuneration of the Chairman and Executive Director

  • The Nomination and Remuneration Committee submitted to the Board of Directors a motion on the remuneration of the Chairman and Chief Executive Officer for the discharge of his senior management duties for fiscal year 2013. The Board of Directors approved such motion in the meeting held on 11 June 2013.
  • Prior to submitting such motion to the Board, the Committee conducted on the advice of Towers Watson, a review of the remuneration policy in respect of the Chairman and Executive Director, through a comparative analysis, determining as Inditex’s market benchmarks the following comparison groups:
    • Dow Jones Retail Titans 30 Index.
    • Companies included in the list published by Barrons on the best CEOs worldwide for 2013.
    • FTSE Eurotop 100.
    • A sample of 20 companies selected pursuant to the following yardsticks:
      • The largest multinational companies in Spain.
      • Benchmarking companies in the retail sector in Europe and the United States.
      • Other companies whose businesses have a similar level of complexity and whose market capitalization and turnover is within a range of 0.5 to 2 times Inditex’s parameters.

        Such companies are: Unilever, SAP, LVMH, eBay, Santander, L’Oréal, CVS Caremark, Telefónica, Nike, Diageo, Starbucks, Reckitt Benckiser, Hermes, Gap, Coach, Macys, Ralph Lauren, The Limited, Bed Bath & Beyond and Mark & Spencer.

A.4. Drafting of the Annual Report on Remuneration of Directors for FY2012.

  • Pursuant to the prevailing regulations then in force and to the Recommendations of the Unified Good Governance Code of Listed Companies, and on the advice of Towers Watson, the Committee approved on 10 June 2013 the Annual Report on the Remuneration of Directors for FY2012. Said report covered, inter alia, the remuneration of directors, in addition to the remaining relevant terms of the employment agreements executed with those who discharge senior management duties in their capacity as executive directors.

    Such report was submitted to the Board of Directors, who approved it on 11 June 2013. Subsequently, such report was put to the advisory say-on-pay vote of the Annual General Meeting of Shareholders last 16 July 2013, with a 98.53% of votes for.

The information regarding activities in the area of remuneration policy and remunerations is available on the Annual Report on the Remuneration of Directors.

B. Appointments

B.1. Chairwoman of the Audit and Control Committee

The Committee gave a favourable report in the meeting held on 9 December 2013 to the appointment of Ms Irene Ruth Miller as Chairwoman of the Audit and Control Committee, following the resignation tendered by the former Chairman, Mr Juan Manuel Urgoiti López de Ocaña.

B.2. Members of the Social Board

The Committee gave a favourable report in the meeting held on 9 December 2013 to the appointment of Ms Paula Farias Huanqui and Mr Francisco Javier Sardina López, as members of the Social Board of Inditex.

C. Transactions with related parties

Pursuant to the provisions of section 15.2 (j) of the Board of Directors’ Regulations, the Committee gave a favourable report to a transaction with related parties, having examined it, mainly from the standpoint of market conditions and equal treatment for all shareholders.

D. Assessment

Pursuant to the provisions of article 32.3.e) of the Articles of Association and section 15.2.f) of the Board of Directors’ Regulations and the Recommendations of the Unified Good Governance Code of Listed Companies, the Committee assessed in the meeting held on 9 December 2013 the performance of the Board of Directors, the Audit and Control Committee, the Nomination and Remuneration Committee, and the Chairman and Chief Executive Officer. Additionally, the individual performance of Independent Directors sitting on both Committees and of the Deputy Chairman was also assessed.

The result of such assessment was very positive in respect of the assessed topics. Mention should be made, among others, of the qualifications and structure, the duties, readiness and effectiveness and the planning and organization of the meetings of the Board of Directors, the Audit and Control Committee and the Nomination and Remuneration Committee, as well as the contribution and performance of the non-executive Independent Directors, the Deputy Chairman and the Chairman and Chief Executive Officer.

E. Report on its activities

The Committee issued its annual report showing the activities carried out by such body during fiscal year 2012 on 10 June 2013, which was published in the 2012 Annual Report. This report has been issued on an annual basis since fiscal year 2005.