Corporate Governance - Annual Report 2022

Board of Directors
Corporate Practices Committee
Audit Committee
Chief Executive Officer and Management Team

Board of
Directors

The Board of Directors is the highest management body. It is currently composed of 12 male members, out of which 5 are related and 7 are independent, i.e., more than half of the percentage required by law. The average length of service as a Board member is 22 years, 8% of the members are between 30 and 50 years old, while 92% are over 50 years old. Additionally, 10 of the members belong to other committees in different companies, which indicates their broad experience in business management.

All members of the Board are chosen for their professional prestige and broad experience in the sector, which enables them to make strategic decisions and ensure the smooth running of the company. The Board meets quarterly, and may unanimously resolve matters out of session.

The Board of Directors plays a crucial role in the management of the company, ensuring its sustainable growth and the creation of value for all stakeholders. Its main functions include defining the company's strategy and goals, supervising management and results, appointing and evaluating senior management, and overseeing regulatory and ethical compliance.

In addition, we have a board member in charge of presenting relevant sustainability issues at the Board's meetings, which will promote the knowledge, skills and experience of the highest governance body on these issues.
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Chairman of
the Board

‍Fernando Senderos Mestre, Chairman of the Board and Executive President of the Company, is also the Chairman of the Executive Committee, which is responsible for directing the management, conduct and execution of the Company's business, subject to the strategies, policies and guidelines approved by the Board.

Corporate Practices
Committee

The Committee meets every three months, and additional meetings may be called when necessary. One of its most relevant functions is to issue its opinion for the approval of the Board of Directors on the appointment or removal of the Chief Executive Officer, and his respective compensation, as well as to propose and issue its opinion on the appointment and compensation policies of the Relevant Officers. In addition, the Committee is responsible for issuing its opinion and recommendation to the Board of Directors on relevant matters and related party transactions. It is currently composed of 3 Independent board members:

Valentín Díez Morodo
‍President
Ernesto Vega Velasco
Víctor Rivero Martín
Ramón F. Estrada Rivero
‍Secretary

Audit
Committee

Sessions are held every quarter and an additional session is held in December of each year, mainly dedicated to the review of the financial statements at the end of the fiscal year. This Committee is in charge of determining, implementing and evaluating the Company's internal control and internal audit system, and follows up on the main risks to which the Company is exposed. In addition, the Committee reviews and proposes, for the approval of the Board of Directors, the accounting policies and financial statements, verifying the administration and management of the company and implementing the resolutions adopted by the General Shareholders' Meeting. Likewise, the Committee evaluates and proposes to the Board of Directors for its approval the hiring of the legal entity that will provide external auditing services. It is currently composed of 3 independent board members:

José Manuel Canal Hernando
Presidente
José Manuel del Barrio Molina
Ernesto Vega Velasco
Ramón F. Estrada Rivero
Secretario

Chief Executive Officer and Management Team

Alejandro de la Barreda Gómez, Chief Executive Officer, is in charge of managing, conducting and executing the Company's business. He has broad powers to represent the Company, subject to the terms and conditions established by the Board of Directors and the Company's bylaws. In addition, he/she must submit, for approval of the Board of Directors, the business strategies, comply with the resolutions approved by the Shareholders' Meeting and the Board of Directors, disclose relevant information to the public, among other functions.

Together with the Chief Executive Officer, the Management Team is in charge of managing, conducting and executing KUO's business. This Committee is composed of the following members:

Alejandro de la Barreda Gómez
Chief Executive Officer
Ramón F. Estrada Rivero
Deputy Chief Executive Officer / General Counsel
Roger Patrón González
Deputy Chief Executive Officer and Aftermarket Director
Jorge F. Padilla Ezeta
Chief Financial Officer
Claudio Ángel Freixes Catalán
Pork Meat Director
Héctor Hernández-Pons Torres
Branded Food Director
Felipe de Jesús Varela Hernández
Synthetic Rubber Director
Sergio Paredes Castañeda
Polymers Director
Antonio Herrera Rivera
Transmissions Director

Conflict of Interest
Prevention

By law and bylaws, all Corporate Governance Bodies must perform their duties free of conflicts of interest. The Corporate Practices Committee is responsible for reviewing and evaluating transactions with related parties, which must be carried out without conflicts of interest, and is also in charge of establishing measures to prevent them.

We have policies that establish guidelines to ensure equitable compensation based on performance management results and in line with corporate strategy and the specific business.

The compensation of the General Management and other Relevant Executives is based on an analysis that is presented by the Human Capital Department to the Corporate Practices Committee for approval by the Board of Directors, based on the corresponding policies.

The base salary is determined by internal tabulators and depends on the evaluation level assigned to the position. There are short and long-term variable payment schemes to ensure the recognition and permanence of key workforce. Termination payments are made in accordance with the law. In addition, as part of our benefits, there is a contributory retirement benefit plan that provides benefits in addition to those required by law.

A living wage not only means paying a fair and sufficient amount to cover employees' basic needs, but also providing stability and economic security for them and their families. In addition, a living wage can increase employees' loyalty and commitment to the company, which in turn can lead to higher productivity and quality at work. It can also help reduce workforce turnover and the cost of training new employees.

We conduct periodic benchmarking studies with other companies in the industry and monitor best practices in order to arrive at the optimal pay for our employees.

The operation is managed in an integrated manner, and the total cost of operations, including the payment of salaries for the employees, is already included in each year's budget.

None of the employees are paid below minimum wage. 100% of the employees who belong to a collective bargaining agreement have wage agreements and the term of remuneration has been determined.

Business Ethics
and Transparency

We strive to do business in an ethical environment of intellectual honesty, integrity and transparency, consistent with our organizational values.

VALUES

INTEGRITY

“Conviction to do the right thing..”
‍We act in congruence between what we think, say, and do. We manage the company's resources responsibly and transparently. We express what we think and believe. We comply with ethical standards, bearing in mind the consequences of our actions.

INSTITUTIONALISM

“We consider the DESC Group's interests to be a priority when making decisions.”
‍We act in accordance with the DESC Group's mission, vision, and values, adhering to its systems and policies, guiding our actions, tasks, and responsibilities, both inside and outside the company, for the benefit of the organization, its strategy, and its stakeholders.

LEADERSHIP

“We are an example, both in words and actions.”
‍We are committed to sharing with our employees a clear vision of change, consolidating it with challenging purposes that inspire them to reach higher goals.

TEAMWORK

“Growing together.”
We are committed to collaborative work in order to achieve higher goals. We unite talents and creativity, generating synergies with our skills, competencies, and experience. We understand the needs and interests of others, we promote diversity and the ability to disagree, favoring collaboration.

INNOVATION

“We implement new ideas and improvements.”
We create value by transforming ideas into new processes, products and services that are appreciated by our stakeholders. We challenge incremental and disruptive improvement solutions with tolerance for risk and failure, as long as they result in visible learning.

We have a system to recognize personnel who exemplify and live the five organizational values. All employees can participate in the annual call to select a employee who best represents each value and serves as a role model. This person is named a "Value Ambassador".

In addition, we employ policies and practices that enable responsible business conduct and compliance with laws and regulations. In addition, our policies include combating bribery, extortion, and other forms of corruption; adhering to good fiscal practices; and following due diligence to identify, prevent and account for them. Among our most important codes and policies, the following stand out:

“Conviction to do the right thing..”‍We act in congruence between what we think, say, and do. We manage the company's resources responsibly and transparently. We express what we think and believe. We comply with ethical standards, bearing in mind the consequences of our actions.

“We are an example, both in words and actions.”‍We are committed to sharing with our employees a clear vision of change, consolidating it with challenging purposes that inspire them to reach higher goals.

“Conviction to do the right thing..”
‍We act in congruence between what we think, say, and do. We manage the company's resources responsibly and transparently. We express what we think and believe. We comply with ethical standards, bearing in mind the consequences of our actions.

“We are an example, both in words and actions.”
‍We are committed to sharing with our employees a clear vision of change, consolidating it with challenging purposes that inspire them to reach higher goals.