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corporate governance

GOVERNANCE STRUCTURE

Isavia is a publicly owned company owned by the Icelandic state. The operations of the company are in accordance with Act No. 153/2009 on the Merger of the Government-owned Limited Companies Flugstoðir and Keflavík Airport, Act No. 76/2008 on Establishing a Government-owned Limited company for the Running of Keflavík Airport, Act No. 102/2006 on the Establishment of a Public Limited company for Air Navigation Services and Airport Operations by the Icelandic Civil Aviation Authority, and the Aviation Act (Act No. 60/1998).

The company’s corporate governance is prescribed by Act No. 2/1995 on Public Limited Companies (August 2012), the company’s Articles of Association and Rules of Procedure of the Board.

The company’s Board refers to the Guidelines of Corporate Governance and complies with them in all major respects, although it is not legally bound to do so. The main deviations are that the company does not have a nomination committee, as the nomination for the company's board is with the Minister of Finance and Economic Affairs, who manages the state's share in the company. Two formal sub-committees – the Remuneration Committee and the Audit Committee – currently operate under the company’s Board.

Isavia's fiscal year is the calendar year. The company's annual accounts can be accessed at the Register of Annual Accounts as well as on the company's website www.isavia.is

No court rulings have been issued during the year in which the company is believed to have broken any laws or regulations.

Laws on the company can be accessed on the Alþingi's website, www.althingi.is, and articles of association and rules of procedure on the company's website www.isavia.is. Guidelines on corporate governance can be found on the Iceland Chamber of Commerce's website, www.vi.is.

Board of directors and CEO of Isavia
Isavia´s Board of Directors and CEO

ISAVIA BOARD OF DIRECTORS

The Board of Directors of Isavia consists of five members and five alternates, all of whom are elected at the Annual General Meeting for a term of one year. Board members are nominated by the Minister of Finance and Economic Affairs. The gender ratio among Isavia’s Board members and alternates is 40% women and 60% men. All Board members are considered independent in the sense of the Guidelines on Corporate Governance. All Board members have given the Board an account of their assets in other companies, and their participation in them does not have an effect on their work as Isavia Board members.

BOARD’S ACTIVITIES AND RULES OF PROCEDURE

The Board has established detailed Rules of Procedure defining its scope of authority and the divisions of tasks between it and the CEO. The current Rules of Procedure were approved at a meeting of the Board of Directors on 20. May 2020. They include the division of tasks between Board members, rules on the eligibility of politicians to take part in processing matters, procedure and minutes for meetings, rules on confidentiality, the obligation to provide information to the Board and the decision-making powers of the Board. The rules of procedure of the board are published on the company's website.

The Board of Directors shall constitute the supreme authority in the affairs of the company from one shareholders’ meeting to the next, in accordance with laws and the company’s Articles of Association. The Board’s main role is to manage the company between shareholders’ meetings and ensure adequate supervision of the accounts and disposal of the company’s property, as well as confirm the operating budget and investment plans and ensure compliance with them. The Board makes all major decisions concerning the company’s operations and ensures that the company is operated in accordance with the relevant laws and regulations.

Furthermore, the Board has the goal of promoting the company’s growth and results in the long term by formulating company policy in consultation with company management.

In the operating year 2020 - 2021, 19 board meetings were held. All board meetings were quorate and everyone attended most meetings. The Board's work plan for the next operating year is available after the Annual General Meeting. The Chairman of the Board chairs the meetings. In addition to the Board, the CEO, Deputy CEO and Chief Financial Officer attend Board meetings. The Deputy CEO writes the minutes. As a rule, the minutes are signed by the board, the CEO, and the meeting secretary.

THE BOARD’S PERFORMANCE ASSESSMENT

The Board regularly evaluates its performance, its practices and rules of procedure, company development, the performance of the CEO and the efficiency of sub-committees if present. The performance assessment is intended, among other things, to evaluate the strengths and weaknesses of the Board’s work and practices and take into consideration the components which the Board believes may be improved. The Board’s performance assessment was carried out during a meeting of the Board in March 2021.

INTERNAL MONITORING AND RISK MANAGEMENT

The Board has submitted a comprehensive risk policy for the company and defined the major operational risks. The main risks for the Group’s financial transactions are exchange rate risk, currency risk and indexing risk. A special risk committee is active and is authorised by the Board to determine the scope and nature of risks and profit analysis for projects and ventures that could have significant effects on operations and financial position. The Risk Committee, consisting of the CEO, Assistant CEO, Director of Finance together with experts on risk management, submits regular reports on risks for the company to the Board.

PricewaterhouseCoopers ehf. is Isavia´s internal audito. Internal auditing assesses and improves the function of risk management, monitoring activities and governance through systematic and disciplined work practices, thereby helping the company to achieve its goals. Internal auditing operates independently, does not make any decisions relating to the day-to-day activities of the company and is recruited by the Board.

Chief Officers are responsible for identifying, defining and assessing risks within their area of ​​responsibility as well as establishing appropriate management to minimize risk.

CODE OF conduct

Isavia’s Code of conduct applies to all employees and management of the company and is an integral part of all employment contracts. In addition, there is a separate section on disqualification in the Board’s Rules of Procedure. The Code of conduct is available to all employees on the intranet of the company and on the Isavia website.

SUB-COMMITTEES

Two sub-committees operate under the Board of Directors:

REMUNERATION COMMITTEE

The Committee consists of two members of the Board of Directors. The main tasks of the Remuneration Committee are to annually prepare a draft remuneration policy which is submitted to the Annual General Meeting, prepare proposals submitted to the AGM as regards the employment terms of Board members and prepare proposals for the Board as regards criteria for the wages and other employment terms of the CEO and the Chiefs of the subsidiaries. The Remuneration Committee monitors that the remuneration policy is followed, and that wages and other employment terms are in accordance with laws, regulations and best practices as current from time to time. The rules of procedure of the Remuneration Committee together with the company's remuneration policy can be found on the company's website.

AUDIT COMMITTEE

The Audit Committee is made up of three members: one of whom must be independent of the company and its employees, and two Board members. The main tasks of the Audit Committee involve the evaluation of monitoring environment of the company, analysis of the effectiveness of internal audits, the monitoring of the execution of auditing and the preparation of proposals for the selection of an external auditor in consultation with the Icelandic National Audit Office (INAO) according to Article 7 of Act No. 46/2016 on the Auditor General and the Auditing of Government Accounts. The Committee evaluates the independence of the auditor, the effectiveness of risk policies, risk willingness and risk management and ensures compliance with laws and regulations. The Audit Committee monitors working processes in the preparation of financial statements to increase the trust in and safety of financial information. Roles and rules of procedure can be found on the company's website.

CEO OF ISAVIA

The CEO is responsible for the management of all day-to-day operations in accordance with the policies and instructions of the Board. Day-to-day operations do not include measures which are unusual or extraordinary. He has decision-making powers regarding all the operational and financial issues of the company and manages its assets. He submits an account of the company’s operations and performance at Board meetings and answers to the Board for all day-to-day operations and compliance with the company’s Articles of Association, laws and regulations.

Born in 1972, Sveinbjörn Indriðason took an economics degree at the University of Iceland in 1998. He worked at the Icelandic Investment Bank in 1998-1999 and in Icelandair’s risk management unit in 1999-2005. He served as FL Group’s CFO in 2005-2008 and as COO/CFO of the software developer CLARA from 2011. He was Isavia's Director of Finance from 2013 until he was hired as Isavia's Chief Executive Officer (CEO) in June 2019.

COMMUNICATION ARRANGEMENTS BETWEEN SHAREHOLDERS AND THE BOARD

One shareholder, the Icelandic state, holds all shares, and the Minister for Finance has all shareholder rights. Shareholders’ meetings are the main venue for the formal provision of information to shareholders and hold the supreme authority of the company. The Chair of the Board and the CEO variously met the Minister or the employees of the Ministry of Finance last year.

The Board of Directors and CEO conduct themselves in accordance with the general policy on state ownership of limited liability and partnership companies. The company releases press releases on the company’s performance and other matters pertaining to its operation.

CORPORATE SOCIAL RESPONSIBILITY AND ETHICS

The Isavia Group has a corporate social responsibility policy and has supported the UN Global Compact Convention since 2016. By doing so, it commits itself to policies and practices that are in line with the ten United Nations Principles on Human Rights, Labor, the Environment and Anti-Corruption. The organization supports and works systematically on the United Nations Global Goals for Sustainable Development. The company's corporate social responsibility policy emphasizes a balance between the economy, the environment and society based on sustainability.

The company has established a code of ethics for the group's suppliers and they are set in accordance with the above ten main criteria of the UN Global Compact. The companies' suppliers are required to comply with the Code of Ethics as a minimum standard and to make the same demands on their suppliers. The company should be notified if there is a suspicion that the criteria are not being followed. Upon request, suppliers must be able to confirm compliance with this Code. The company's agreements contain provisions on the prohibition of pseudo-contracting, and the employment relationship shall be a principle in communication between employees and contractors. This is done to ensure that all employee taxes, by whatever name they are called, are paid and that the provisions of wage agreements are complied with.

Isavia's guiding principle is to keep the negative environmental impact of its operations to a minimum in harmony and co-operation with stakeholders. The company established an environmental policy in 2015 and has worked diligently towards the goals of the policy with an action plan in environmental and climate matters. The plan sets out a number of measures to reduce the negative environmental impact of the company's operations. The action plan is valid until the end of 2021. Efforts have been made to establish an environmental management system in accordance with the international standard ISO14001 from 2020 and will complete this work before the end of the first quarter of 2021. Keflavík Airport is a participant in the carbon certification system (ACI). Accreditation (ACA).

Isavia has been working systematically for years to promote gender equality and first received equal pay certification in 2018, which has been confirmed by the Gender Equality Agency. The company's position regarding equal pay certification is reviewed annually by external auditors, most recently in September 2020. There is no unexplained gender pay gap in the company. The company also has a gender equality plan that aims to increase general job satisfaction and improve work ethic among employees. The purpose of the equality plan is to ensure equality, equal status and equal rights for the sexes.

Isavia has a code of conduct that applies to all employees and management of the company that are part of their employment contracts.

The company ensures certain protection for employees who report breaches of law or other reprehensible conduct in the operation, according to Act no. 40/2020, on the protection of whistleblowers. An employee who has information or data on breaches of law or other reprehensible conduct in the group's operations must report this. A process has been put in place to make it easier for staff to provide such information.

Isavia has submitted a community report as part of the company's annual report since 2016. The report follows the criteria of the Global Reporting Initiative (GRI) as well as special provisions on airports. The report is submitted to the GRI database and to the United Nations as an annual progress report on commitments to UN Global.

GOVERNANCE DECLARATION 2021

The Board of Directors' statement is the Board's results for the past operating year, published on the website of Isavia ohf. The following corporate governance statement applies to the year 2020, which is published alongside the annual accounts for that year. With this governance statement, Isavia is following the Corporate Governance Guidelines issued by the Iceland Chamber of Commerce, the Confederation of Icelandic Employers and Nasdaq Iceland, e.g. with the aim of strengthening the company's infrastructure and increasing transparency.

A corporate governance statement is available on the company's website www.isavia.is.

Ikarus listaverk í Flugstöð Leifs Eiríkssonar