The Nomination and Remuneration Committee of Inditex: origin and evolution, regulations and composition

Origin and evolution

The Board of Directors of INDITEX held on 20 July 2000, approved the Board of Directors’ Regulations in order to adjust to the guidelines of the report drawn up by the Special Commission for the study of an Ethics Code for corporate governance (the “Olivencia Code”).

Section 15 of said Regulations established the Nomination and Remuneration Committee, entrusting it with the relevant duties pursuant to the above mentioned Olivencia Code.

Subsequently, in its meeting of 20 March 2003, the Board of Directors resolved:

1)To propose to the General Meeting of Shareholders the amendment of the Articles of Association, through a new wording of article 32, in order to include the regulation of the Nomination and Remuneration Committee.

2)To approve the amendment of the Board of Directors´ Regulations, clarifying and harmonising some of the duties of the Committee.

Subsequently, it was resolved by the Board of Directors in its meeting held on 10 June 2004, to approve a new Revised Text of the Board of Directors’ Regulations, whereby the duties of the Nomination and Remuneration Committee were enhanced, with the inclusion of the requirement for the Committee to give a report on the employment agreements of the personnel that include guarantee clauses or severance agreements, before they are subscribed.

Afterwards, the Board of Directors held on 11 December 2007 approved a new Revised Text of the Board of Directors´ Regulations in order to adjust the contents thereof to the Recommendations of the Unified Code. Further to this amendment, the duties of the Nomination and Remuneration Committee are enhanced as it assumes the Recommendations provided by the Unified Code on this issue.

Regulations

The amendment to the Board of Directors’ Regulations, approved by the Board in the meeting held on 13 July 2010, aimed at adjusting such regulations to the Articles of Association and extending the maximum number of members of the Audit and Control Committee and the Nomination and Remuneration Committee.

Finally, the Board of Directors’ Regulations were amended in the meeting held by the Board last 12 June 2012 for the purposes of encompassing, among others, recommendations number 44 and 54 of the Unified Good Governance Code of Listed Companies, and extending the remit of the Nomination and Remuneration Committee.

Section 32 of the Articles of Association currently in force, as amended further to a resolution passed by the Annual General Meeting of Shareholders held on 17 July 2012, provides as follows:

Section 32.- Nomination and Remuneration Committee

1. A Nomination and Remuneration Committee shall be formed within the Board of Directors, made up of a minimum of three and a maximum of seven non-executive directors, a majority of whom shall be independent directors.

For such purposes, independent directors are understood as those that meet the requirements referred to under the second paragraph of section 31.1.

2.- The Chairman of the Nomination and Remuneration Committee shall be appointed by the Board of Directors out of its independent members.

3.- Without prejudice to any other tasks that it might be assigned from time to time by the Board of Directors, the Nomination and Remuneration Committee shall have at least the following basic responsibilities:

(a) To report on the proposals to appoint directors prior to their appointment by the General Meeting of Shareholders or, where appropriate, by the Board of Directors through the co-option procedure;

(b)To report on the appointment of the internal offices (Chairman, Deputy Chairman(s), CEO, Secretary and Deputy Secretary) of the Board of Directors

(c) To propose to the Board the members that must form part of each one of the Committees;

(d) To draw up and review the criteria that must be followed for the selection of the senior management of the Company and to report on the appointment or removal of the managers reporting directly to the Board of Directors, including the CEO.

(e) To report annually to the Board on the assessment of the performance of the senior management of the Company, especially of the CEO and his remuneration;

(f) To report on the systems and on the amount of the annual remuneration of directors and senior management and to prepare the information to be included in the annual public information regarding the remuneration of the directors.

4.- The Nomination and Remuneration Committee shall meet, ordinarily, once a year, in order to prepare the information on the remunerations of the Directors, that the Board of Directors must approve and include in the public annual documents. Moreover, it shall meet each time that the Board or its Chairman requests the issuing of a report or the adoption of proposals within the scope of its competences and, in any case, whenever it is thought fit for the successful performance of its functions.

5.- The request 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 made by the Chairman, Directors, senior management or the shareholders of the Company.

6.- The Board of Directors may develop and complete the above-referred rules in its Regulations, pursuant to the provisions of the Articles of Association and of the Law.

Meanwhile, section 15 of the Board of Directors’ Regulations, as amended further to a resolution of the Board passed during the meeting held on 12 June 2012, reads as follows:

Section 15 - The Nomination and Remuneration Committee

1.The Nomination and Remuneration Committee shall be made up of a number of non-executive directors being no less than three and not greater than seven, most of whom shall be independent directors. The Chairman of the Nomination and Remuneration Committee shall be appointed out of its independent members.

2.Without prejudice to other tasks that are assigned to it by the Board and to the remaining duties reserved to it by these Regulations, the Nomination and Remuneration Committee shall have the following basic responsibilities, which are:

(a)To draw up 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, in case of independent directors, to submit said proposals to the Board of Directors for approval, prior to the nomination by the General Meeting of Shareholders or, where appropriate, by the Board of Directors for the co-optation procedure.

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

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

(e)To advise on the appointment and dismissal of senior managers as proposed by the chief executive to the Board of Directors.

(f)To annually advice the Board on the evaluation of the performance of the chief executive of the Company, and also of the Nomination and Remuneration Committee itself.

(g)To propose the remuneration policy for directors and senior managers to the Board, and to ensure compliance with the remuneration policy set forth by the Company.

(h)To report to the Board, before it holds its meeting, on those contracts of the personnel that include golden-parachute clauses, for those cases that imply dismissal or changes in control.

(i) To prepare and submit to the Board of Directors for approval the annual report on directors´ compensation.

(j) To advise in relation to the transactions that involve or may involve conflicts of interest, the transactions with related persons or those transactions that imply the use of corporate assets and, in general, about the matters included in Chapter IX of these Regulations.

(k) To draw up and keep up to date a contingency plan to fill in the vacancies of key positions within the Company and its Group.

(l) To ensure that when filling up any new vacancies and when appointing new Directors the recruitment process should conform to the prohibition of any manner of discrimination.

(m) To propose to the Board the individual remuneration of executive directors and the remaining terms and conditions of their employment agreements.

3.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 made

4.The Nomination and Remuneration Committee shall meet each time that the Board or its Chairman requests the issuing of a report or the adoption of proposals within the scope of its competences and, in any case, whenever is suitable for the successful performance of its functions. In any event, it shall meet once a year to prepare the information about the directors’ remuneration that the Board has to approve and to include in its annual public documentation.

5.The Nomination and Remuneration Committee shall report to the Board on the business transacted and the resolutions passed, informing the first Board of Directors held in plenary session after its meetings, of its activity and of the work done. Furthermore, a copy of the minutes of the Committee meetings shall be put at the Board members’ disposal.

Composition

The Executive Committee of INDITEX, S.A., in the meeting held on 27 October 2000, appointed the members of the Nomination and Remuneration Committee, resolving thus its initial composition.

The amendment to section 15 of the Board of Directors’ Regulations resolved by the Board in its meeting of 12 June 2012 seeks, among other goals, to maintain a consistency yardstick regarding the composition of the Nomination and Remuneration Committee, adapting its wording to the contents of Recommendation 54 of the Unified Good Governance Code of Listed Companies. Such Recommendation had already been put in practice by the Company.

Further to the resignation tendered on 12 June 2012 by Mr Francisco Luzón López to his offices as director and member of the Audit and Control Committee and of the Nomination and Remuneration Committee, it was resolved by the Board of Directors of the company on 17 July 2012, after report of the Nomination and Remuneration Committee, to appoint Mr José Arnau Sierra as ordinary member of the Nomination and Remuneration Committee. Further to the appointment of Mr Arnau, the number of independent directors sitting on the Nomination and Remuneration Committee remains way higher than the remaining non executive directors, as he is the only proprietary director in the Committee..

The composition of the Nomination and Remuneration Committee of INDITEX as at year-end is shown below:

Chairman	Mr Carlos Espinosa de los Monteros Bernaldo de Quirós
Ordinary Members	Ms Irene Ruth Miller
	Mr Nils Smedegaard Andersen
	Mr José Arnau Sierra
	Mr Emilio Saracho Rodríguez de Torres
	Mr Juan Manuel Urgoiti López de Ocaña
Secretary (non member)	Mr Antonio Abril Abadín

A brief résumé of the directors sitting on the Nomination and Remuneration Committee is provided in section B.1.3 of the Annual Corporate Governance Report, which is part of this Annual Report 2012.

All the above referred members of the Nomination and Remuneration Committee are independent directors, except for Mr Arnau Sierra.