The Group's Audit Committee oversees how the management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group's Audit Committee is assisted in its oversight role by internal audit processes. Regular and ad hoc reviews of risk management controls and procedures are a part of the Company‘s working procedures, the results of which are reported to the Audit Committee. The Committee shall oversee the annual financial statements of the Company and the Group’s consolidated financial statements including non-financial information as well as the company‘s annual report. An amendment to the internal process to formally review the annual report by the audit committee in case an audit committee member will not be part of the board of the company was intended to be implemented in 2020 but the implementation is on the agenda in 2021. The Committee is responsible for the evaluation of the independence and the eligibility of both the Company's external auditor and auditing firm. The Committee shall make suggestions to the Board of Directors regarding the selection of the Company's auditor. The Audit Committee held six meetings in 2020.
Audit Commitee:
The purpose of the Remuneration Committee is to maintain oversight of the remuneration of the Executive Committee and senior management as well as to ensure that the structure of the remuneration components are aligned with the long-term interests of the shareholders.
The main tasks of the Remuneration Committee is to prepare the decision-making process of the Board with regards to the remuneration policy, including the determination of any performance related variable compensation, and setting the terms and conditions for remuneration for the CEO and members of the Board. The Remuneration Committee is also assigned to regularly review the remuneration policy and ensuring its adherence.
The Remuneration Committee also oversees the overall long-term development of remuneration and human resource matters to ensure that all remuneration practices are in accordance with laws, regulations and overall best practices. Furthermore, the Remuneration Committee seeks to formulate a point of view on any risks – operational, financial or otherwise – and if and how they may affect the organization.
The Remuneration Committee inquires about the results and outcomes of established human resource policies and procedures on a regular basis.
The objective of the Remuneration Policy is to make employment with Icelandair Group and its subsidiaries an attractive option for highly-skilled employees and thereby secure the Company's position as a leading competitor in its field. Pursuant to said objective the Company must be able to offer competitive salaries and other variable forms of payment, such as short-term cash incentives and equity-related long-term incentives.
In 2019 the Remuneration Committee approved a short-term incentive program for which the Executive Committee and senior managers were eligible to participate in based on their respective roles in the organization.
The purpose of the program is to align the interests of the management with those of the shareholders and mobilize the Company’s leadership to focus on the overall performance – both financial objectives and the execution of the Group´s strategy. The program is designed to encourage the management to increase shareholder value and reward operational performance, proper management and professional conduct. Performance outcomes are determined by a mixture of financial-, strategic-, and operational measures which take into account the participant´s role. Performance payouts based on this short-term incentive program are annual and capped at 25% of annual base salary.
Any compensation to the management under the short term incentive program is based on the sole discretion of the Remuneration Committee taking into account the factors above. Without questioning the value of the management’s contribution to the Company in 2020 the Remuneration Committee has decided that no payments will be made under the short term incentive plan for 2020 due to financial outcome of the year and further financial challenges resulting from the COVID-19 pandemic.
The international airline and aviation industry is a very regulated and highly unionized industry and Icelandair's operations are no exception therefrom. This operational set-up means that typically about half of the workforce's terms and conditions of employment – corrected for seasonality – is governed by collective wage agreements with the other half operating under the law of supply and demand.
In terms of the local Icelandic general labor market industry pay developments vis-à-vis the ground- and office staff is characterized by a complicated set up based on operational requirements of 24/7 opening functionality all year around.
According to Icelandair Group´s Remuneration Policy, the remuneration package for the President and CEO is comprised of a fixed and variable salary component and needs to be competitive with other CEO’s of publicly traded companies in the Icelandic stock market as well as other airlines in the same market. In addition, the terms of employment of the President and CEO shall take into account the financial and operating results of the Company from time to time.
As stated above, the variable remuneration of the President and CEO is an integral part of the overall Executive Committee remuneration policy which is linked to predetermined and quantifiable performance measures which are reviewed and approved by the Remuneration Committee and the Board each fiscal year.
The Remuneration Committee typically reviews the President's and CEO's performance measures and makes a proposal for appropriate changes to the Board of Directors to reflect a strategic or tactical directional change for the Group from time to time.
According to Icelandair Group´s Remuneration Policy, remuneration for the members of the Board of Directors and members of the Board’s sub-committees shall be based on the time spent by directors on the job and the responsibilities associated with the role. When determining remuneration to the directors of the Board, consideration shall be given to the remuneration paid to board directors of comparable companies. Members of the Board of Directors are not remunerated in shares, purchase or put options, pre-emptive rights, warrants or any other payments related to shares in the Company or the share price development in the Company.
The Remuneration Committee re-evaluates the remuneration of members of the Board of Directors annually taking into consideration, among other things, wage development within Icelandair, development of the general wage index as well as the Company's overall performance. Proposals of the Remuneration Committee on the remuneration of the members of the Board of Directors and its sub-committees, and any changes in the Remuneration Policy, are submitted to the Board of Directors which subsequently submits a proposal for a shareholders´ vote at the Annual General Meeting.
The Remuneration Committee is currently reviewing the current Remuneration Policy and the remuneration to the members of the Board of Directors. If any changes will be suggested, and approved by the Board of Directors, such proposals will be submitted to the Anna-ual General Meeting for the approval of shareholders.
Remuneration Committee Members
Icelandair Group operates a Nomination Committee which has an advisory role in the selection of members of the Board of Directors. The Committee presents its proposal to the Annual General Meeting or other Shareholders' meetings where election to the Board of Directors is on the agenda.
The Nomination Committee shall put forward its rationalized opinion concurrently to the notification of the AGM or as soon as possible in conjunction with other shareholder meetings. The Committee's opinion shall be made available to shareholders in the same way as other proposals to be submitted to the meeting. The Committee operates according to rules of procedures which are set by the Committee itself and approved by the Board of Directors. The Nomination Committee shall review its rules of procedure as needed and have any changes approved by the Board of Directors annually.
The Nomination Committee consists of three members. The Shareholders' meeting elects two members, one man and one woman, which are nominated by shareholders. Subsequently, the Board of Directors nominates one member.
All members shall be independent of the Company and its executives. The member nominated by the Board of Directors shall be independent of the Company's largest shareholders. The same criteria shall apply to the assessment of the independence of Committee members as to the assessment of the independence of Board Members according to The Guidelines on Corporate Governance issued by the Iceland Chamber of Commerce, the Confederation of Icelandic Employers and Nasdaq Iceland. The Nomination Committee held five meetings in 2020 and furthermore had meetings with Icelandair Group's management team and the largest shareholders.
Nomination Committee members:
The purpose of the Strategy Committee is to maintain oversight over the development and implementation of Icelandair Group’s strategy and the risks to it. In addition, the Committee serves as a forum for in-depth discussions on Icelandair Group’s strategy and relevant considerations between the Board of Directors, the Executive Committee, and functions responsible for strategy development and implementation.
The Strategy Committee was formed to foster closer involvement from the Board of Directors with Icelandair Group’s strategy development and implementation. As a whole, the Committee has extensive knowledge and experience of airline strategy and strategic implementation in addition to a strong network within the industry. As a result, it can provide valuable support to the Icelandair organization on strategic topics. The committee held ten meetings in 2020.
Strategy Committee members: