Corporate Governance Practices

LATAM Airlines Group S.A. is a listed joint stock company registered with the Superintendencia de Valores y Seguros (SVS), Chile’s stock market regulator, under Inscription N°306. Its shares trade on the Santiago Stock Exchange, Chile’s Electronic Stock Exchange and the Valparaíso Stock Exchange as well as on the New York Stock Exchange (NYSE) as American Depositary Receipts (ADRs)
LATAM Airlines Group’s corporate governance practices are regulated by Chile’s Securities Market Law (Nº 18.045) and its Corporations Law Nº 18.046 (“LSA”), including their associated norms, as well as other norms issued by the SVS, the legislation and regulation of the United States and that country’s Securities and Exchange Commission (SEC) as they apply to the issue of ADRs.
The corporate governance practices of LATAM Airlines Group are subject to constant review in order to ensure that its internal self-regulation processes are totally aligned with the regulation in force and the LATAM’s values.
LATAM Airlines Group’s decisions and commercial activities are underpinned by the ethical principles established in LATAM’s Code of Conduct.
The main bodies responsible for LATAM Airlines Group’s corporate governance are its Board of Directors and the Directors’ Committee (which also fulfills the functions of the Audit Committee required under the Sarbanes- Oxley Act of the United States), together with the Strategy, Finance, Leadership and Product, Brand and Frequent Flyer Program Committees created after the association between LAN Airlines and TAM. The main functions of these bodies are set out below.

BOARD OF DIRECTORS OF LATAM AIRLINES GROUP

LATAM Airlines Group’s Board of Directors has nine members and is the body responsible for analyzing and defining LATAM’s strategic vision, thereby playing a fundamental role in its corporate governance. All the Board seats come up for election every two years and, under LATAM Airlines Group’s statutes, directors are elected through cumulative voting.

Each shareholder has one vote per share and can use all his or her votes to support one candidate or divide them among any number of candidates. This arrangement ensures that a shareholder with more than a 10% stake can elect at least one director. The present Board of Directors was elected by the Ordinary Shareholders’ Meeting which took place on April 28th, 2015.

LATAM Airlines Group’s Board holds ordinary monthly meetings and extraordinary meetings whenever the Company’s affairs so require. Directors’ fees must be approved by vote at the Ordinary Shareholders’ Meeting. The Directors’ Committee usually meets monthly and its functions and powers are those established by the applicable legislation and regulation.

DIRECTORS’ COMMITTEE OF LATAM AIRLINES GROUP

Under Chilean law, listed joint stock companies must appoint at least one independent director and a Directors’ Committee when they have a market capitalization of at least 1,500,000 unidades de fomento (an inflation-indexed currency unit) and at least 12.5% of the voting shares are held by shareholders who individually control or possess less than 10% of these shares. Three of the nine Board members form a Directors’ Committee, which fulfills both the functions required under Chile’s Corporations Law and those of the Audit Committee required under the Sarbanes-Oxley Act of the United States and the corresponding SEC norms.

The Directors’ and Audit Committee has the functions established in Article 50 bis of Chile’s Corporations Law and the other applicable regulation. These include:

  • To examine the reports of LATAM Airlines Group’s external auditors, general balance sheets and other financial statements that LATAM Airlines Group’s administrators provide to shareholders and to express an opinion about these reports prior to their presentation for approval by shareholders.
  • To put to the Board proposals as to the external auditors and credit rating agencies to be used.
  • To examine internal control reports and any related complaints.
  • To examine and report on all matters regarding related-party transactions.
  • To examine the pay scale of LATAM’s senior management.

The requirements for directors’ independence are set out in Chile’s Corporations Law (Nº 18.046) and its subsequent modifications under Law Nº 19.705 on the relationship between directors and LATAM’s controlling shareholders.

A director is considered independent when he or she does not, in general, have ties, interests or economic, professional, credit or commercial dependence of a significant nature or size with or on the company, the other companies in the group of which it forms part, its controller or principal executives or a family relationship with the latter or any of the other types of ties specified in Law Nº 18.046.

Under US regulation, it is necessary to have an Audit Committee, comprising at least three Board members, that fulfills the independence requirements established under Rule 10A of the Exchange Act.

As of 31 December 2016, all the members of the Directors’ Committee, who also act as part of the Audit Committee, were independent directors as defined under Rule 10A of the Exchange Act. At that date, its members were Messrs. Ramón Eblen Kadis, Georges de Bourguignon Arndt and Juan Gerardo Jofré Miranda (chairman of the Committee). For the purposes of Chile’s Corporations Law (Nº 18.046), Ramón Eblen Kadis is not considered an independent director. Committee members have not changed in the last two years.

DIRECTORS’ COMMITTEE ANNUAL REPORT

In accordance with article 5°, subsection 8° of article 50 bis under the Corporations Law No. 18,046, the Directors’ Committee of LATAM Airlines Group S.A. issues the annual management for 2016.

I. Integration of the Directors’ Committee and Sessions

The members of the Directors’ Committee of the Company are Messrs. Gerardo Jofré Miranda, Georges de Bourguignon Arndt and Ramón Eblen Kadis. Messrs. Jofré and De Bourguignon are considered independent directors of the Company. Gerardo Jofré Miranda chairs the Directors’ Committee.The directors were appointed in the Ordinary Shareholders’ Meeting held on April 28, 2015, for a two-year period pursuant the bylaws of the Company.

II. Report of the Committee’s Activities.

During 2016, the Directors’ Committee held twenty-one sessions, in order to exercise its functions and fulfill its obligations pursuant to article 50 Bis under the Corporations Law No. 18,046, and also to undertake those other issues that the Directors’ Committee decided to review, revise or evaluate. Please find below the main topics covered.

Test and Review of the Balance Sheet and Financial Statements

The Directors’ Committee tested and reviewed the financial statements of the Company as of December 31, 2015, as well as the quarterly statements as of March 31, June 30 and September 30 of 2016, understanding the tests of the respective reports of external auditors of the Company. The External Auditor of the Company participated in their respective sessions of the Committee, for the purpose of providing the opinion related to the audit and to inform the relevant issues of the review, the main aspects of internal control and communications required by the regulators of External Auditor, and including in every occasion the confirmation of (i) didn’t experience any difficulties to carry out the audit, (ii) didn’t have any difference of opinion with the Management, and (iii) didn’t came up any facts that represented a threat to its independence.

Likewise, Ernst & Young (EY) in its capacity as external auditor of TAM S.A. and subsidiaries participated in the session of the Directors’ Committee held in September 30, 2016, with the purpose of presenting the main aspects of the external audit of TAM, the main focuses of its review process and internal control aspects.

Review of the Cash Generating Units Impairment Reports

In the session held on March 7, 2016, the Directors’ Committee examined and analyzed the impairment reports of the cash generating units of the Company for certain assets included in the Financial Statements as of December 31, 2015, in accordance with the reports issued by the management of the Company and by Deloitte, acting as the consulting firm, hired for the purpose, being present at the session.

In session held on August 1, 2016, the Directors’ Committee examined and analyzed the impairment reports of the cash generating units of the Company for certain assets included in the Financial Statements as of June 30, 2016, in accordance with the reports issued by the management of the Company and by KPMG, acting as the consulting firm, hired for the purpose, being present at the session.

In session held on July 4, 2016, Comptroller Area of LATAM presented to the Directors’ Committee a methodology developed internally to carry out the early evaluation of signs of deterioration. This new methodological tool makes it possible to determine the need to perform in depth the proof of impairment of certain assets of the cash generating units.

Systems of Compensation for Executives and Employees

In session held on January 25, 2016, the Directors’ Committee examined the systems of remunerations and compensation plans for managers, main executives and employees of the Company. This session examined the current remuneration policies and compensation plans of senior executives and the functioning of bonuses calculation. At the Directors’ Committee meeting held on September 30, 2016, the accounting treatment of the long-term incentive plan for executives was reviewed.

In session held on November 7, 2016, the Directors’ Committee reviewed the main topics discussed in the Leadership Committee during the year, which comprise the main leadership initiatives planned to be developed by the Company, the “Headcount Challenge” and the new LATAM Organizational Structure. In compensation matters, short-term incentive agreements and the long-term bonus program for executives and the performance evaluation of top executives were reviewed.

Review of Background Related to Related Party Transactions and Approval of Control Policy for Related Party Transactions

In sessions held on June 6, 2016 and June 29, 2016, the Directors’ Committee reviewed and approved a proposal for a Control Policy for Related Party Transactions applicable to LATAM and its subsidiaries, which was recommended to and approved in the last instance by the Company’s Board of Directors. This Policy considers the legal and accounting regulations related to the control and report of operations with related parties, the general policy of ordinary course of operations approved by the Board of Directors and informed by material fact, the controls associated with this type of transactions and the related information form that must be completed by the Company’s directors and executives. Additionally, the transactions that pursuant to the legal and
accounting regulation applicable to the Company were reviewed, which are considered operations with related parties, and was approved by the Committee.

Corporate Governance Practices

In order to comply with General Rule No. 385 of the Superintendence of Securities and Insurance
(“NCG 385”), in the sessions held on June 6, 2016, November 10, 2016, January 23, 2017 and March 6, 2017, the Directors’ Committee, analyzed and examined the corporate governance practices of LATAM for 2015, according to the questionnaire provided in Addendum I of General Rule No. 385. In those sessions the Committee evaluated corporate improvements to corporate governance practices of the Company, some of which were recommended to the Board of Directors for their implementation, such as training of Board members, annual planning and review of a plan for continuous improvement of the functions and organization of the Board of Directors, regular meetings with certain areas of the Company and implementation of procedures for the hiring of experts who advise the Board on specific matters.

Contracting of Additional Services from External Auditors

In the session held on April 1, 2016, the Directors’ Committee examined and evaluated the rules and guidelines for future selections of external audit services, since the tenders that have been made in the past, such as those carried out in the future, demonstrate the firm intention of LATAM Airlines Group to ensure the independence of its external auditors and the willingness to proceed with its evaluation, change, replacement or rotation, to the extent deemed necessary for the purpose of securing an adequate performance over time of external audit services, without prejudice to the legal regulations in Chile and abroad that it applies to the Company, approving a Policy for the Selection of External Audit Services, which was recommended to and approved in the last instance by the Board of Directors of the Company.

Sustainability Policy

In sessions held on June 6, 2016 and July 4, 2016, the Directors’ Committee reviewed the Sustainability Policy proposed by the Management, which was recommended to and approved by the Board of Directors of the Company. This Policy includes the objectives of LATAM in this area, the responsibilities assigned within the Administration to meet these objectives and the main guidelines, including international commitments, identification of stakeholders, goals and compliance.

Internal Audit

In ordinary sessions held on May 2, 2016, September 5, 2016 and December 6, 2016, the Directors’ Committee examined and reviewed the audit and internal control reports issued by the internal auditor of LATAM. In these sessions the audit work performed in 2016 was approved, and throughout the year informed of its main results. In session held on June 6, 2016, the Directors’ Committee reviewed the most relevant internal audit reports of LATAM Airlines Brazil issued as of April 2016.

Corporate Risk Management

In session held on May 2, 2016, the Directors’ Committee received an update on the progress of the corporate risk management plan in the Company, including the risks detected, the state of progress of the project in the LATAM Group countries, advances in the management of the “risk table” and in subsequent sessions of July 4, 2016 and November 7, 2016, specific risk analyzes were carried out as requested by the Committee.

Compliance

In ordinary sessions held on January 25, 2016 and August 1, 2016, the Directors’ Committee received training regarding the Compliance Program currently in force at the Company and its main contents, among which are the Code of Conduct, Policies and Procedures, Due Diligence of Third Party Intermediaries (TPIs), Crime Prevention Handbook, Continuing Compliance Counseling, Ambassadors Program, Hotline and internal investigations, risk assessment, certification and training.

Recommendations of the Directors’ Committee

On the other hand, the Directors’ Committee made the recommendations mentioned below to this annual management report, with the occasion of the appointment of external auditors of the Company and the private risk rating agencies for 2016.

Activities by Session of the Directors’ Committee Report

Notwithstanding the above, the Directors’ Committee met and held sessions in the opportunities mentioned below, where we present a summary of the matters discussed in each session.

1) Ordinary Session N°162 25/01/2016

• Deferred tax assets in TAM.
• Presentation of the Compliance area.
• Remuneration systems and compensation plan for LATAM Executives.
• Response letter to the Chilean Superintendency of Securities (SVS).

2) Ordinary Session N°163 07/03/2016

• Press release on financial results as of December 31, 2015 (“Press Release”).
• Analysis of the “Impairment” test of certain assets included in Financial Statements as of December 31, 2015.
• Deferred tax assets in TAM.
• Bidding for external audit services in 2016.

3) Sesión Extraordinaria N°42 15/03/2016
• Analysis of the document required by the general rule 385.

4) Extraordinary Session N°43 21/03/2016
• Review of Financial Statements as of December 31, 2015.

5) Extraordinary Session N°44 30/03/2016
• Presentations of proposals for external audit services.

6) Ordinary Session N°164 01/04/2016
• Proposition of External Auditors and Private Rating Risk Agencies for 2016.
• Policy for the selection of External Audit Services of LATAM and Subsidiaries.
• Annual Management Report of the Directors’ Committee.
• Annual Agenda of the Directors’ Committee.

7) Ordinary Session N°165 02/05/2016
• Reports of the Corporate Internal Audit.
• Updating information on Corporate Risk Management.
• Summary of requests made by the Directors’ Committee.

8) Extraordinary Session N°45 de fecha 11/05/2016
• Review of Financial Statements as of March 31, 2016.
• Summary of requests made by the Directors’ Committee.

9) Ordinary Session N°166 06/06/2016
• Review of the status of pending issues requested by the Committee.
• Presentation of the Internal Audit Reports on LATAM Airlines Brazil.
• Analysis of the proposal for presentation to the Board of Directors of the Corporate Risk Management.
• Analysis of the topics in charge of the Legal department included in the list of pending issues.
• Summary of requests made by the Directors’ Committee.

10) Extraordinary Session N°46 29/06/2016
• Analysis of the proposed control policy for transactions with related parties LATAM.

11) Ordinary Session N°167 04/07/2016
• Analysis of the proposed control policy for transactions with related parties LATAM.
• Model of early evaluation of signs of deterioration.
• SOX review, plan of the year.
• Corporate risk management, risk analysis Olympic Games.
• Presentation on Sustainability and DJSI (Dow Jones Sustainability Index).
• Summary of requests made by the Directors’ Committee.

12) Ordinary Session N°168 01/08/2016
• Analysis of the “Impairment” test of certain assets included in Financial Statements as of June 30, 2016.
• Letter received from the External Auditors.
• Presentation of the Revenue Accounting area.
• Presentation of the Compliance area.
• Summary of requests made by the Directors’ Committee.

13) Extraordinary Session N°47 04/08/2016
• Review of the investigation related to the notification to TAM Linhas Aéreas S.A. (“TAM”) by the Federal Revenue Secretariat of Brazil.

14) Extraordinary Session N°48 11/08/2016
• Review of Financial Statements as of June 30, 2016.
• Summary of requests made by the Directors’ Committee.

15) Ordinary Session N°169 05/09/2016
• Internal Audit Plan.
• PwC External Audit Plan year 2016.
• Presentation on one aspect of the agreement with the SEC / DOJ.
• Summary of requests made by the Directors’ Committee.

16) Ordinary Session N°170 30/09/2016
• Presentation of the firm of auditors EY on the revision of the Financial Statements of LATAM Airlines Brazil.
• Accounting treatment of the long-term incentive plan for executives.
• Compliance issues.
• Summary of requests made by the Directors’ Committee.

17) Ordinary Session N°171 07/11/2016
• Tax issues.
• Corporate Risk Management: LATAM Data Centers.
• Compliance issues.
• Leadership Committee.
• Summary of requests made by the Directors’ Committee.

18) Extraordinary Session N°49 10/11/2016
• Review of Financial Statements as of September 30, 2016.
• Summary of requests made by the Directors’ Committee.

19) Extraordinary Session N°50 10/11/2016
• Analysis of the Corporate Governance practices of the Company under the general rule N ° 385.

20) Ordinary Session N°172 06/12/2016
• Internal Audit Reports.
• Status of the “NOW” Project (LATAM Airlines Brazil).
• Status of progress SOX 2016 Review and internal control statutes.
• Letter received from the External Auditors.
• Legal and Compliance Issues.
• Summary of requests made by the Directors’ Committee.

21) Extraordinary Session N° 51 16/12/2016
• Review of Legal and Compliance issues

III. Remunerations and Expenses of the Directors’ Committee.

The Ordinary Shareholders Meeting of the Company, held on April 26, 2016, agreed that every member of the Committee receives a monthly allowance of the equivalent to 67 Unidades de Fomento for attending the Directors’ Committee sessions.

For the operation of the Directors’ Committee and its advisors, Corporations Law established that the expense budget has to be at least the same as the annual remuneration of the Committees’ members, and therefore in the aforementioned Ordinary Shareholders Meeting a budget of 2,412 Unidades de Fomento for 2016 was approved.

Therefore, the expenses of the Directors’ Committee are related with the monthly allowances for attendance to the sessions, without having any other expenses or outflows to inform.

IV. Recommendations of the Directors’ Committee.

IV.1 Proposal of External Auditors’ Appointment.

In session held on April 1, 2016, , In accordance with article 5°, subsection 8° of article 50 bis under the Corporations Law No. 18,046, the Directors’ Committee agreed to propose to the Board of Directors the external auditors that were suggested at the Ordinary Shareholders Meeting held on April 26, 2016. The above, having previously at the session of the Directors’ Committee dated March 30, 2016, reviewed the submissions of the audit firms participating in the tender process. In this regard, the Committee proposed to the Board of Directors the appointment of PriceWaterhouseCoopers Consultores, Auditores y Cía. Limitada (“PWC”) Ernst & Young Servicios Profesionales de Auditoría y Asesorías Limitada (“EY”) and KPMG Auditores Consultores Ltda (“KPMG”) as Auditors of the Company, in this order of priority, but notwithstanding the recommendation to maintain PWC as the Audit Company for 2016. The Director’s Committee recommendation to maintain PWC as the external auditor of the Company for 2015 is based on the following reasons and fundamentals:

(I) The Company has carried out a bidding process for the External Audit services for the years 2016, 2017 and 2018, which is subject for each calendar year to the decision of the respective LATAM Shareholders’ Meeting, all in accordance with article 5°, subsection 8° of article 50 bis under the Corporations Law No. 18,046. In this bidding process, the three firms mentioned above have participated. It is noted that for the aforementioned period, PWC was not asked to quote its external audit services for TAM S.A. and its subsidiaries. Only EY and KMPG were requested to make offers for external audit services for (a) LATAM Airlines Group S.A. and subsidiaries (excluding TAM S.A.), (b) TAM S.A. and subsidiaries, and (c) LATAM Airlines Group S.A. and subsidiaries and TAM S.A. and subsidiaries. In the case of TAM S.A. The decision on the election of the external auditor for each financial year corresponds to its respective board of directors and the tender in question does not contemplate the possibility of PWC being elected as the external auditor of TAM S.A. and subsidiaries.

(II) Concerning fees and hours and resources available in relation to LATAM Airlines Group S.A. and subsidiaries (excluding TAM S.A. which has a different auditing firm), there are differences between the three audit firms suggested to the shareholders of the Company, with PWC being the lowest bid in respect of audit services for LATAM Airlines Group S.A. and subsidiaries (excluding TAM S.A.). Likewise, it is considered that the professional level of the auditors of the three firms would be equivalent.

(III) All three audit companies have internal control systems that make us assume an adequate and equivalent level of independence when providing an audit service. Due to the above, even though PWC has been the external auditor of LATAM Airlines Group S.A. for the last twenty-four years, the independence of this audit company is guaranteed through the policy defined by PriceWaterhouseCoopers worldwide, with the change of the partner in charge each five years, which is in line with section f) of article 243 under the Securities Law No. 18,045. The current partner in charge of LATAM’s audit has been in the role for four years.

(IV) The quality of services provided by PWC to LATAM Airlines Group, doesn’t have had any observations or objections from the Company’s management or its Board of Directors.

(V) Since 2014, the external auditor of TAM S.A. and its subsidiaries is KPMG Auditores Independentes, being part of the KPMG global network. In this regard, TAM S.A. and subsidiaries represent an important portion of the balance sheet and financial statements of LATAM Airlines Group S.A., so there’s a second external audit firm, also among the most important worldwide, and in addition to PWC, would participate in the delivery of external audit services.

(VI) The interaction and coordination between the two external audit companies PWC and KPMG for the period 2014 and 2015, as external auditors of LATAM Airlines Group and TAM S.A., respectively, has been evaluated as positive.

(VII) On the other hand, and in accordance with the results of the aforementioned bidding process, the Board’s recommendation, in accordance with the recommendation of the Directors’ Committee, to the Board of Directors of TAM S.A., consists in the designation of EY as the external auditor of TAM S.A. and subsidiaries, replacing KPMG. This in consideration of the economic offer of EY and that this would allow in the future there are three auditing firms perfectly qualified to take charge of the external audit of LATAM.
IV.2 Proposal of Private Risk Rating Agencies.

The Directors’ Committee in session held on April 1, 2016 and in accordance with article 2) subsection 8° of article 50 bis under the Corporations Law No. 18,046, agreed to propose the Board of Directors the risk rating agencies to be suggested at the Ordinary Shareholders Meeting to be held on April 26, 2016. In this regard, the Committee agreed to propose the Board of Directors of the Company the appointment of Fitch Chile Clasificadora de Riesgo Limitada and Feller-Rate Clasificadora de Riesgo Limitada.

COMMITTEES OF THE BOARD OF DIRECTORS OF LATAM AIRLINES GROUP

In accordance with the shareholders’ agreement of 25 January 2012 between LATAM Airlines Group S.A. (previously LAN Airlines S.A.) and TEP Chile S.A., the Ordinary Board Session of August 3, 2012, established the following four committees to review, discuss and make recommendations to the Board about the issues related to their respective areas of responsibility:
(I) Strategy Committee, (ii) Leadership Committee, (iii) Finance Committee, and (iv) Brand, Product and Frequent Flyer Program Committee. In accordance with the said shareholders’ agreement, each subcommittee will comprise two or more directors of LATAM Airlines Group and at least one of their members must be a director elected by TEP Chile S.A.
The Strategy Committee will focus on corporate strategy, current strategic affairs and the three-year plans and budgets of the main business units and functional areas and high-level review strategies.
The Leadership Committee will focus on areas that include group culture, high-level organizational structure, appointment of the executive vice-president of LATAM Airlines Group (henceforth, “CEO of LATAM”) and those who report to this person, the philosophy of corporate compensations, structures and levels of remunerations and objectives for the CEO of LATAM and other key staff, the succession or contingency plan for the CEO of LATAM and evaluation of the performance of the CEO of LATAM.
The Finance Committee will focus on financial policies and strategy, capital structure, control of compliance policies, tax optimization strategy and the quality and reliability of financial information.
Finally, the Brand, Product and Frequent Flyer Program Committee will focus on brand strategies and brand construction initiatives for corporate brands and those of the principal business units, the principal characteristics of products and services for each of the principal business units, the strategy of the Frequent Flyer Program and its key characteristics and regular auditing of the brand’s performance.
In addition, by agreement of the Board of LATAM Airlines Group S.A., during the board of directors’ meeting No. 389 on June 10, 2014, a Risk Committee was formed with the purpose of supervising the implementation of the Risk management success factor, included in LATAM’s Strategic Plan, and particularly to oversee LATAM Airlines Group’s risk management of risks of LATAM Airlines Group and ensure a corporate risk matrix structuring.

RELATED-PARTY TRANSACTIONS

On August 2, 2016, the Board of Directors of LATAM approved a Related Party Transactions’ Control Policy applicable to LATAM and its subsidiaries, Under Chile’s Corporations Law, which establishes that all the operations of a publicly traded company with a related party must contribute to the social interest, be carried out under market conditions, in addition to meeting certain requirements of prior examination by the directors’ committee, authorization by the board of directors or shareholders meeting and disclosure, which are different from those that apply to a non-listed company. This policy includes the definition by the Board of Directors of those operations that are considered habitual, which was approved in a board session dated December 29, 2009 and was informed on the same date to the SVS through material fact. Operations indicated as usual may be executed without the requirements of prior examination and approval by the Board of Directors or Shareholders Meeting.

LATAM Airlines Group has carried out different transactions with its subsidiaries, including entities owned or controlled by some of its majority shareholders. In the normal course of LATAM’s business, different types of services have been provided to or received from related companies, including the rental and exchange of aircraft, cargo transportation and booking services.

LATAM Airlines Group’s policy is not to carry out transactions with or for the benefit of any shareholder or Board member or with any entity controlled by these persons or in which they have a significant economic interest, except when the transaction is related to LATAM and the price and other terms are at least as favorable for the LATAM as those which could be obtained from a third party under market conditions.

These transactions are summarized in the audited consolidated financial statements for the year ending on December 31, 2016.

PRINCIPLES OF GOOD CORPORATE GOVERNANCE

LATAM Airlines Group’s good corporate governance is the result of the interaction of different individuals and stakeholders.
Although all employees share responsibility for compliance with the high standards of ethics and adherence to regulation established by LATAM Airlines Group’s Board of Directors, it is the Board, the Directors’ Committee and the Company’s principal executives who are primarily responsible for LATAM Airlines Group’s good corporate governance. In line with the above, LATAM Airlines Group is committed to transparency and compliance with the ethics and regulatory standards established for this purpose by its Board of Directors.
PILLARS OF LATAM AIRLINES GROUP’S CORPORATE GOVERNANCE

Notwithstanding the responsibilities of the Company’s Board of Directors and its Directors’ Committee, LATAM Airlines Group’s administration has also taken a number of measures to ensure due corporate governance. These include principally:

1. Publication of the Code of Conduct for LATAM Airlines Group, unique for all of the Company’s employees, which seeks to ensure that all employees adhere to the highest standards of ethics, transparency and compliance with regulation required by LATAM Airlines Group.
The LATAM Group has an Ethics Complaints Channel (www.etica-grupolatam.com). This facility provide employees with a direct and private online channel through which to report any concerns in the knowledge that these will be properly processed or investigated without any risk of reprisal against the person reporting them.
2. Code of Ethics for Senior Financial Executives. This fosters honest and ethical conduct in the disclosure of financial information, compliance with regulation and avoidance of conflicts of interest.
3. Manual for Management of Market-Sensitive Information. This is required by the Superintendencia de Valores y Seguros and, since Law Nº 20.382 on Corporate Governance came into force, also by Chilean securities market legislation. LATAM Airlines Group, however, seeks to go further than these norms and regulates the criteria for disclosure of operations, periods of voluntary abstinence from the purchase and sale of LATAM’s shares, mechanisms for continuous disclosure of market-sensitive information and mechanisms for the protection of confidential information by the Company’s employees and executives.
4. Compliance Program. Managed by LATAM’s Compliance Area, which forms part of the Legal Vice-Presidency, in coordination with and under the supervision of the Board of Directors and its Directors’ Committee, this Program supervises compliance with the laws and regulation applicable to LATAM Airlines Group’s businesses and activities in the different countries in which it operates.

CORPORATE GOVERNANCE PRACTICES

On March 28, 2017, the Report on LATAM’s Corporate Practices which was approved by LATAM Airlines Group’s Board of Directors and prepared in accordance with General Norm N° 385, previously N° 341, issued by the Superintendencia de Valores y Seguros (SVS) on June 8, 2015, was dispatched to this same organism. The information required under this norm is as of December 31 of each year and must be presented by March 31 of the subsequent year.
The information submitted annually to the SVS shall refer to the following matters:

  • The functioning of the Board of Directors.
  • The relation between LATAM, its shareholders and the general public.
  • The replacement and compensation of main executives.
  • The definition, implementation and supervision of the company internal control policies and procedures and risk management.