Authorities

The Board of Directors will directly exercise the following authorities:

(a) Approval of the general policies and strategies of the Company, and namely:

1. the strategic or business Plan, as well as the management goals and the annual budgets;
2. the investment and financial policy;
3. the definition of the structure of the corporate group;
4. the corporate social responsibility policy;
5. the policy regarding compensation and assessment of performance of senior executives;
6. the enterprise risk management and control policy as well as the periodic monitoring of the internal information and control systems;
7. the dividends policy as well as the treasury stock policy and especially, the limits thereto.

(b) The following decisions:

1. At the proposal of the chief executive of the Company, the appointment and, if applicable, removal of senior executives, as well as their severance packages.
2. The compensation of directors and, in the case of executive directors, the additional compensation to be paid for their executive duties and other terms of their contracts.
3. The financial information that the Company must periodically disclose due to its status as a listed company.
4. The Investments or transactions of all kinds which are strategic in nature due to the large amount or special characteristics thereof, unless the approval thereof falls upon the shareholders at the General Meeting of Shareholders.
5. The creation or acquisition of interests in special-purpose entities or entities resident in countries or territories regarded as tax havens, as well as any other transactions of a similar nature whose complexity might impair the transparency of the group.

(c) Assessing on a yearly basis:

1. the quality and efficiency of the proceedings of the Board.
2. the performance of his/her duties by the chief executive officer.
3. the proceedings of its Committees, on the basis of the report they submit.

(d) All other authorities reserved by the Board of Directors’ Regulations.

Composition

The Board of Directors is made up of 9 members: 4 non-executive independent directors, 3 non-executive proprietary directors, 1 affiliate director and one executive director.

As at 31 January 2015 the Board of Directors was comprised of the following members:

Profile of Directors

Mr Pablo Isla Álvarez de Tejera

Chairman and CEO of Inditex since 2011. He has been the Deputy Chairman and CEO since 2005. He is a graduate in Law from the Complutense University of Madrid and Abogado del Estado [State lawyer] on leave. From 1992 to 1996 he was Director of Legal Services for Banco Popular. He went on to be appointed General Director of State Assets at the Ministry of Economy and Finances. From July 2000 to 2005 he was Chairman of Altadis group. Likewise, he sits on the Board of Directors of Telefónica, S.A.

Mr Amancio Ortega Gaona

He is the founding shareholder of Inditex. He began his textile manufacturing operations in 1963. In 1972 he founded Confecciones Goa, S.A., the first garment-making factory of Inditex and three years later he founded Zara España, S.A. the first distribution and retailing company. He was re-elected to the Board of Directors by the Annual General Meetings held on 30 June 1990, 31 July 1995, 20 July 2000, 15 July 2005 and 13 July 2010.

Mr José Arnau Sierra

A Law graduate from the University of Santiago de Compostela and State Tax Inspector on leave, Mr Arnau has been the chief executive of Grupo Pontegadea since 2001, a Director at GARTLER, S.L., PARTLER 2006, S.L. and member of the Board of Trustees of the Fundación Amancio Ortega Gaona. He was the director of Inditex’s Tax Department and member of its Steering Committee from 1993 through 2001 and he also served on the Board of Directors of the Company from 1997 through 2000. Previously, he held different positions in the Tax administration. He has also been a member of the Board of Directors of Banco Pastor (from 2005 through 2012) and Profesor asociado [Part-time instructor] of Tax Law at the University of Coruña from 1993 through 1996.

GARTLER, S.L.

The company Gartler, S.L. is represented in the Board of Directors of Inditex by Ms. Flora Pérez Marcote, and directly holds 1,558,637,990 shares in the Company, which represents 50.01% in the share capital. This company was appointed to the Board of Directors in December 2006, ratified by the AGM held on 17 July 2007, and re-elected by the AGM held on 17 July 2012.

Ms Irene R. Miller

She has been an independent director since April 2001. She is a graduate of the University of Toronto with a Bachelor of Science and of Cornell University with a Master of Science in chemistry. She began her career at General Foods Corporation and later worked as an investment banker for Rothschild Inc. and Morgan Stanley & Co. In 1991 she joined Barnes & Noble Inc. as Senior Vice President of Corporate Finance and in 1993, before the flotation of Barnes & Noble, became Chief Financial Officer. In 1995, she was appointed Director and Vice-Chairman of the Board of Directors of Barnes & Noble. At the present time, she is CEO of Akim, Inc., an American investment and consulting firm, which she joined in 1997. She is also a member of the Board of Directors of the Toronto-Dominion Bank Financial Group. Previously, she served on the Board of Directors of Oakley Inc., Benckiser N.V., The Body Shop International Plc, Barnes & Noble, Inc. and Coach, Inc.

Mr Nils S. Andersen

He has been an independent director since June 2010. He is a graduate in Business and Economics from the University of Aarhus in Denmark. He joined Carlsberg in 1983 and became Group Vice President in 1988. From 1990 to 1997 Nils Andersen worked abroad as CEO of Carlsberg Spain and later of Carlsberg German Brewery group. Nils Andersen left Carlsberg in 1997 to become CEO of Hero’s drinks division based in Switzerland until his return to Carlsberg in 1999 as member of the Executive Board with responsibility for European drinks operations. In 2001 he became CEO of Carlsberg A/S and led the group through a period of acquisitions and international growth until 2007 when he left Carlsberg to become Partner & Group CEO of A.P. Moller – Maersk. Nils Andersen is a member of the European Round Table of Industrialists (ERT) since 2001 and since 2007 member of the EU-Russia Industrialists’ Round Table (IRT). Within the A.P. Moller – Maersk Group he is Chairman of the Executive Board, Chairman of Maersk Oil & Gas A/S and Chairman of Danish Supermarket A/S. In 2010 he was awarded “Knight of the Dannebrog”.

Mr Rodrigo Echenique Gordillo

He has been an independent director since July 2014. He is a graduate in Law from the Complutense University of Madrid and Abogado del Estado [State lawyer] currently on leave. From 1973 until 1976 he held several positions in the State Administration. From 1976 through 1983 he was Head of Legal Services and subsequently Deputy General Manager at Banco Exterior de España. He joined Banco Santander in 1984, where he became a member of the Board of Directors in October 1988, being appointed at the same time Chief Executive Officer and member of the Executive Committee where he served until September 1994. From October 1994 through January 1999, he was a member of the Board of Directors, the Executive Committee of Banco Santander, and of all Board Committees, Chairman of the Audit and Control Committee, and Deputy Chairman of Banco Santander de Negocios and of Santander Investment. Since January 1999 he has been a member of the Board of Directors and the Executive Committee of Banco Santander, and also serves on the Committee of Risks, the Nomination and Remuneration Committee, the International Committee and the Audit and Control Committee of said entity. He has been Deputy Chairman of Banco Banif, S.A., Chairman of Allfunds Bank, where he is currently Deputy Chairman, and Chairman of SPREA. He is a member of the Board of Directors of Banco Santander International and of Santander Investment. He has been Ordinary Member of the Board of Directors of different industrial and financial companies: Ebro Azúcares y Alcoholes, S.A., Industrias Agrícolas, S.A., SABA, S.A. and Lar, S.A. He was also a member and subsequently Chairman of the Advisory Board of Accenture, S.A., Lucent Technologies, and Quercus y Agrolimen, S.A. He has been Chairman of Vallehermoso, S.A. At 31 January 2015, he is the Chairman of NH Hoteles, S.A., Vocento, S.A. and Executive Vice-Chairman of Banco Santander. He is a member of the Executive Committee and of the Board of Trustees of Fundación Banco Santander and of Plan España. From July 2001 through February 2008, he chaired the Social Board of Carlos III University in Madrid.

Mr Carlos Espinosa de los Monteros Bernaldo de Quirós

He has been a Director since May 1997. He is a graduate in Law and Business Studies from ICADE and a Commercial Expert and State Economist on leave. He has been the Chairman of the Board of Directors of Mercedes Benz España, Deputy Chairman of the Instituto Nacional de Industria, Chairman of the Board of Directors of Iberia and Aviaco, member of the Executive Committee of the International Air Transport Association and Chairman of the Círculo de Empresarios, of the Spanish Association of Car and Truck Manufacturers and of the International Organization of Motor-Vehicle Manufacturers. At the present time he chairs Fraternidad-Muprespa and sits on the board of Acciona, S.A. and Schindler España. He has been awarded the Grandes Cruces del Mérito Civil and Mérito Aeronáutico. He was appointed Alto Comisionado del Gobierno para la Marca España [High Commissioner for the Brand “Spain”] in July 2012.

Mr Emilio Saracho Rodríguez de Torres

He has been an independent director since June 2010. A Graduate in Economics from the Complutense University in Madrid, he has an MBA from the University of California in Los Angeles (UCLA), awarded in 1980. He was also a Fulbright scholar. Mr Saracho began his career in 1980 in Chase Manhattan Bank, where he was responsible for operations in different sectors such as Oil and Gas, Telecommunications and Capital goods. In 1985, he took part in the launching and implementation of Banco Santander de Negocios, where he led the Investment Banking division. In 1989, he was appointed head of the Division of Large Companies of Grupo Santander and Deputy General Director. He has been a director of FISEAT, Santander de Pensiones and Santander de Leasing. In 1990, he worked for Goldman Sachs in London as co-head of Spanish and Portuguese operations. In 1995, he returned to Santander Investment as General Director in charge for the Investment Banking area worldwide. From 1996 to 1998, he was responsible for the Banking operations in Asia. Mr Saracho joined J.P. Morgan in 1998 as Chairman for Spain and Portugal and head of business for the Iberian Peninsula and member of the European Management Committee. From early 2006 to January 1st 2008, he was Chief Executive Officer of J.P. Morgan Private Bank for Europe, the Middle East and Africa, based in London. He also sat on the Operating Committee and on the European Management Committee, while chairing at the same time J.P. Morgan in Spain and Portugal. He is in charge of Investment Banking operations of J.P. Morgan in Europe, the Middle East and Africa. He sits on the Executive Committee of the Investment Bank and on the Executive Committee of JPMorgan Chase. He is Deputy CEO for EMEA since December 2012.

Chairman and Chief Executive Officer

Mr Pablo Isla Álvarez de Tejera has been the Chief Executive Officer of the Company since 9 June 2005 and the Chairman of the Board of Directors since 19 July 2011.

Balanced management is ensured through the following measures:

• Some of the powers delegated to the Chairman and CEO are subject to certain restrictions. Namely, those that involve the disposal of funds in excess of a certain amount expressly require that the Chairman and CEO acts jointly with another person who in virtue of any legal title is also empowered with the power in question; and those transactions that involve the alienation or encumbrance of real property of the Company, for which a prior resolution of the Board of Directors or its Executive Committee, shall be required.
• Mr Amancio Ortega Gaona, the founder and controlling shareholder of the Company and Chairman of the Board of Directors until 19 July 2011, remains on such Board of Directors and its Executive Committee as non-executive proprietary director.
• Mr José Arnau Sierra, non-executive proprietary director since 12 June 2012, has been Deputy Chairman of the Board of Directors since 17 July 2012. He sits on the Executive Committee, the Audit and Control Committee and the Nomination and Remuneration Committee.
• As at 31 January 2015, Mr Nils Smedegaard Andersen is the Lead Independent Director pursuant to the provisions of section 529 septies of the Act on Capital Companies, and of section 18.1 of the Board of Directors’ Regulations. Mr Andersen was appointed Lead Independent Director further to a resolution passed by the Board of Directors on 15 July 2014 – the executive director abstaining from voting on such issue –, replacing the former Lead Independent Director, Mr Carlos Espinosa de los Monteros, who had to cease in said office, as he had exceeded at the time of his re-election by the Annual General Meeting of 15 July 2014, the maximum period permitted to qualify as independent director, pursuant to the provisions of sec. 529 duodecis of LSC and the 2nd Transitional Provision of Order ECC/461/2013.

General Counsel and Secretary of the Board of Directors

Mr Antonio Abril Abadín is the General Counsel and Secretary of the Board of Directors. Likewise, he is the Secretary of all Board Committees.

The appointment and removal of the Secretary of the Board shall be approved by the Board of Directors in plenary session, after report of the Nomination and Remuneration Committee, The Secretary needs not be a director.

The Secretary shall support the Chairman in his duties and must provide for the smooth running of the Board of Directors by taking particular care to provide directors with the necessary advice and information, keep the documents of the Company, enter the proceedings in the minutes books and certify the Board’s resolutions. When directors or the Secretary himself/herself would express concern about some proposal or, in the case of directors, about the Company’s progress, and such concerns are not resolved by the Board of Directors, they will be placed on record in the minutes at the request of the person expressing them. Likewise, the Secretary shall devote particular attention to the formal and material legality of the Board of Directors’ actions and ensure that the corporate governance principles and the Company’s internal rules and regulations, are observed.

Gender diversity

The Nomination and Remuneration Committee shall ensure that, when filling up any new vacancies and when appointing new directors, the selection process does conform to the prohibition of any manner of discrimination.

As at 31 January 2015, two female directors sat on the Board of Directors: Ms Flora Pérez Marcote (representing GARTLER, S.L., non-executive proprietary director) and Ms Irene R. Miller (non-executive independent director); such presence represents 22.22 % on the aggregate number of directors, versus the average 15.6% percentage of female directors sitting on the boards of IBEX35 companies, according to the information disclosed by CNMV with regard to financial year 2013.

Additionally, Ms Irene R. Miller chairs the Audit and Control Committee and sits on the Nomination and Remuneration Committee, which represents a percentage of 16.7% female directors versus the aggregate number of members of such Board Committees.

Membership of Directors on Board of Directors of other listed companies

The Board of Directors may not propose or appoint to fill up a vacancy on the Board any person who already performs the office of director at the same time, in more than four listed companies other than the Company.

As at 31 January 2015, Directors who held offices in listed companies in Spain other than Inditex are shown below:

Mr Rodrigo Echenique Gordillo stepped down from the office he held in the company Vocento, S.A., above referred, after 31 January 2015.

Selection, appointment, re-election and removal of directors

The system for the selection, appointment and re-election of members of the Board of Directors constitutes a formal and transparent procedure, expressly regulated in the Articles of Association and the Board of Directors’ Regulations.

Directors may be re-elected indefinitely, for periods of equal duration, by the General Meeting, which may likewise resolve on the removal of any of these at any time.

The Board of Directors may fill up the vacancies that arise on said Board, temporarily, appointing from among the shareholders the persons who will have to fill the vacancies until the first General Meeting thereafter.

The proposals for the election of directors that the Board of Directors submits to be considered by the Annual General Meeting, and the election resolutions that said body passes by virtue of those powers to co-opt that are legally reserved to it, must be preceded by the relevant report from the Nomination and Remuneration Committee, and regarding independent directors, by the relevant proposal of the Nomination and Remuneration Committee.

The Nomination and Remuneration Committee shall ensure that, when filling up any new vacancies and when appointing new directors, the selection processes conform to the prohibition of any manner of discrimination.

Where the Board of Directors departs from the Nomination and Remuneration Committee’s suggestions, it must state the reasons for its actions and place them on the record.

The Board of Directors and the Nomination and Remuneration Committee, shall, within their remit, endeavour for the choice of candidates to fall on persons of well-known ability, qualifications and experience, and must maximize their care in relation to such person called to discharge the office of independent director.

The Board of Directors may not propose or appoint to fill up a director’s position any persons who hold the office of director simultaneously in more than four listed companies other than the Company. Where the vacancy which needs to be filled up is that of an independent director, the Board may not propose or appoint any persons who do not meet the independence criteria established in the applicable regulations.

The proposals for re-election of directors that the Board of Directors would submit to the Annual General Meeting will have to be subject to a formal process of preparation, which shall include, necessarily, a report issued by the Nomination and Remuneration Committee in which the quality of work and the dedication to office of the proposed directors during their previous mandate shall be assessed, and regarding independent directors, the relevant proposal for re-election of the Nomination and Remuneration Committee.

With regard to the process of selection, appointment and re-election of Directors, the Nomination and Remuneration Committee has, among others, the following responsibilities:

a) To prepare and check the criteria that must be followed for the composition of the Board of Directors in addition to selecting the candidates.

b) To advise on the proposals for nominations of directors, and regarding independent directors, to make such proposals so that they are approved by the Board of Directors prior to their appointment by the General Meeting of Shareholders or, where appropriate, by the Board of Directors by the co-optation procedure.

c) To advise on the appointment of the internal offices (Chairman, Deputy Chairman, CEO, Secretary and Deputy Secretary) of the Board of Directors.

d) To propose to the Board the members that must form part of each of the Committees.

Requests for information addressed to the Nomination and Remuneration Committee shall be made by the Board of Directors or its Chairman. Likewise, the Committee must consider the suggestions presented by the Chairman, the members of the Board of Directors, the officers or the shareholders of the Company.

Likewise, the Board of Directors shall explain to the Annual General Meeting in charge of appointing or ratifying the appointment of directors the nature thereof, and said nature shall be confirmed or, where appropriate, reviewed in the Annual Corporate Governance Report, after verification by the Nomination and Remuneration Committee.

As regards the removal of directors, the Nomination and Remuneration Committee is expressly entrusted with the duties of advising on the proposal, if any, of early dismissal of an independent director.

During FY2014, Mr Rodrigo Echenique Gordillo, non-executive independent director, was appointed as Board member and Mr Carlos Espinosa de los Monteros Bernaldo de Quiróas, affiliate director, was re-elected to the Board.

Resignation of Directors

Directors must resign in such scenarios which could have a negative impact on the proceedings of the Board of Directors or the credit and reputation of Inditex.

Additionally, Directors must place their office at the disposal of the Board of Directors and, should this latter deem it appropriate, tender their resignation in the following cases:

a) When they reach the age of 68. However, the directors who hold the office of Chief Executive Officer or Managing Director shall place their office at the disposal of the Board of Directors upon reaching the age of 65, being able to continue as ordinary members of the Board of Directors until the aforementioned age of 68. As an exception, the foregoing rules shall not apply in the case of Director, Amancio Ortega Gaona.

b) When they cease to hold such executive positions to which their appointment as director was associated.

c) When they are involved in any of the grounds of incompatibility or prohibition provided in the Law, the Articles of Association or in the Board of Directors’ Regulations. Namely, independent directors shall place their office at the disposal of the Board of Directors and shall tender, where appropriate, their resignation in the event that they fall under any of the cases of incompatibility or prohibitions provided by the applicable laws, or in the event that they suddenly come to hold the office of director in more than four listed companies other than the Company.

d) When they are seriously admonished by the Audit and Control Committee for having breached their duties as directors.

e) When they are involved in any circumstances which might have an impact on the reputation or name of the Company or otherwise jeopardize its interests, or when the reasons for their appointment cease to exist.

For their part, proprietary directors must resign when the shareholders they represent dispose of their ownership interest in its entirety or reduce it up to a limit which requires the reduction of the number of proprietary directors.

Mr Juan Manuel Urgoiti López de Ocaña, non-executive independent director, voluntarily resigned his position on 10 June 2014.

Proceedings of the Board of Directors

Quorum

Any Board meeting will be validly held when it is attended by at least half plus one of its members (or the whole number of directors immediately above half, should the Board be comprised of an odd number), whether in person or by proxy. Directors shall do their best to attend the meetings of the Board of Directors, and, when they cannot do so in person, they shall endeavour to grant a proxy to another member of the Board giving instructions as to its use and communicating the same to the Chair of the Board of Directors.

Attendance to meetings

The data on attendance of Directors to the meetings held during FY2014 are shown below:

Passing of resolutions

For resolutions to be passed, an absolute majority of votes for by the directors attending the meeting shall be required.

Notwithstanding the above, two-thirds of the members of the Board of Directors need to vote in order to permanently delegate any power of the Board of Directors to the Executive Committee or to the Chief Executive Officer, should there be one, and to appoint the directors who have to hold such offices.

Likewise, in order to amend the Board of Directors’ Regulations, the resolution must be passed by a majority of two-thirds of the directors present.

The Chair of the Board of Directors has a casting vote in the event of equality of votes between the directors attending the meeting.

Proxy granting

Any director can grant proxy to another director in writing to be represented, such proxy having to be granted specifically for each meeting, communicating this in writing to the Chair.

External advice

In order to be aided in the performance of their duties, non-executive directors may request that legal, accounting, financial or other experts be engaged at the Company’s expense. The commissioned task must of necessity deal with particular problems of a certain weight and complexity which may arise in the performance of the office.

The decision to engage external experts must be notified to the Chairman of the Company and it may be open to veto by the Board of Directors if it proves that: a) such engagement is not necessary for the proper performance of the duties entrusted to the non-executive directors; b) the cost thereof is not reasonable in view of the importance of the problem and of the assets and income of the Company; c) the technical assistance obtained may be adequately provided by in-house experts and technicians or; d) the confidentiality of the information to be provided to the expert may be jeopardized.

Information

The notice for the ordinary meetings of the Board of Directors shall be given at least three days in advance of the meeting, and the notice shall always include the agenda of the meeting and shall be accompanied by the duly summarized and prepared relevant information.

Likewise, Directors have the widest powers to: obtain information on any issue of the Company (and its subsidiary companies); examine its books, registers, documents and other records of the Company’s operations and inspect all its facilities, likewise it is also provided that the exercise of the powers of information shall be channeled through the Chairman, the Deputy Chairman or the Secretary of the Board of Directors, who will attend to the requests of Directors by providing them with the information directly, offering appropriate spokespersons at the appropriate level in the organization or establishing such measures so as to enable them to conduct the desired examinations and inspections in situ.

Meanwhile, Directors are bound to diligently gather information on the course of business of the Company and prepare suitably for the Board meetings and for any committees they belong to.

Assessment proceedings

Pursuant to the provisions of article 32.3.e) of the Articles of Association, section 15.2.f) of the Board of Directors’ Regulations and the Recommendations of the prevailing Good Governance Code of Listed Companies, the Nomination and Remuneration Committees carried out during FY2014 the annual assessment of the performance of the Board of Directors, the Audit and Control Committee and the Nomination and Remuneration Committee, and of the performance of the Chairman and Chief Executive Officer, as well as the individual evaluation of the performance of Independent Directors, of the affiliate Director, of the members of the Audit and Control Committee and of the Nomination and Remuneration Committee, and of the Deputy Chairman. The findings of this assessment were raised to the Board of Directors.

The result of the assessment carried out in FY2014 is very positive in respect of the assessed topics. Mention should be made, among others, of the qualifications and structure, the duties, the 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 independent Directors, and of the Chairman and Chief Executive Officer.