[5.1] Governance and Sustainability System

Always in the lead of international best practices, Iberdrola’s former Corporate Governance System has evolved, based on ESG standards, with the contents being reordered to emphasis environmental performance, social commitment and best corporate governance practices. Particularly notable is the new pioneering Inclusion and Diversity Policy.

The purpose of the group, its raison d’être, is none other than:
To continue building together each day a healthier, more accessible energy model, based on electricity.

Corporate and governance structure

The Iberdrola group is structured on three levels that differentiate the functions of strategy, supervision and control of the group as a whole (attributed to the holding company), those of organization and coordination with regard to the countries (corresponding to the country subholding companies) and those of the administration and effective management of each of the businesses (within the purview of the head of business companies).

It is based on a system of checks-and-balances that avoids an accumulation of power:

• Iberdrola’s Board of Directors, made up of a large majority of independent directors (one of whom is the vice-chairman and lead independent director), focuses its activity on the determination, supervision and monitoring of the policies, strategies and general guidelines of the Iberdrola group. Especially important is the supervision of the development and application by the group companies of the new Governance and Sustainability System.
• The chairman of the Board of Directors & chief executive officer and the rest of the management team are responsible for the organisation and strategic coordination of the group.
• In the principal countries in which the group operates, organisation and strategic coordination is implemented through country subholding companies, which group together equity stakes in the head of business companies and centralise the provision of common services to the head of business companies.
• Country subholding companies have boards of directors, including independent directors, and their own audit and compliance committees, internal audit divisions and compliance units or divisions. Listed country subholding companies like Avangrid, Inc. and Neoenergia, S.A. have a framework of strengthened autonomy.
• The head of business companies are in charge of the day-to-day administration and effective management of each of the businesses. They also have boards of directors, which include independent directors, and specific management teams.

Corporate and governance structure

(1) Company listed on the New York Stock Exchange.
(2) Company listed on the New Market segment of BOVESPA (Brazil).

Ownership structure

Iberdrola has approximately 600,000 shareholders throughout the world, and none of them has a controlling interest.

Iberdrola in the vanguard of governance and sustainability

Strategy

The key elements defining Iberdrola’s governance and sustainability strategy are:

• Environmental performance.
• The promotion of diversity, inclusion, equal opportunity and excellence at all levels.
• Shareholder engagement.
• Active listening to the legitimate interests of the Stakeholders.
• Social dividend and contribution to the Sustainable Development Goals.
• Zero tolerance towards corruption and fraud.
• Prudent and balanced management of risks.

Continuous improvement of its corporate governance rules and practices

On corporate governance matters, the Company looks to the Good Governance Code of Listed Companies, updated by the CNMV in June 2020, and generally accepted practices in the international markets.

The aim of the Diversity and Inclusion Policy is to achieve a favourable environment that facilitates and enhances diversity and inclusion among the group’s professionals.

Governance and Sustainability System

Remuneration policy

Operation of the Board

Sustainable Development and Corporate Reputation

Ethics
Sustainable Development

Commitment to shareholders and investors

• The Iberdrola group has an industrial and financial model based on balanced growth, focused on the networks businesses, renewables and long-term contracted assets, focused on the achievement of targets that combine financial, environmental and social results.
• The Shareholder Engagement Policy is intended to understand the opinions and concerns of the shareholders in the areas of corporate governance and sustainable development, encourage their sense of belonging, and align their interests with those of Iberdrola.
• The company encourages shareholders’ participation throughout the year, especially at the General Shareholders’ Meeting.

All the resolutions of the 2020 General Shareholders’ Meeting were approved with a majority vote in favour of the Board of Director’s proposals.

Remuneration policy

• The current Director Remuneration Policy was approved by the shareholders at the General Shareholders’ Meeting.
• Director remuneration is aligned with strategic objectives and shareholder return.

Main activities of the Board of Directors

Key topics in 2020

The main objective of Iberdrola’s Board of Directors is to establish, supervise and implement the strategy of the company and its group; and to continuously review and update its Governance and Sustainability System, and particularly its corporate policies.