LATAM Airlines Group: Flying forward

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By Claire Woffenden – c.woffenden@ethicalboardroom.com

 

LATAM Airlines Group, formed through the association of LAN Airlines and TAM Airlines in 2012, has a fleet of more than 300 aircraft and around 53,000 employees.

With business units in seven countries in South America – Argentina, Brazil, Chile, Colombia, Ecuador, Paraguay and Peru – much work has been made to standardise our policies and cultures so as to embed and consolidate a single LATAM Airlines Group corporate identity.

Governance structure

The companies comprising the LATAM Airlines Group have their own corporate governance structure, executive boards and bodies and operate with autonomy following the strategic guidance of the board of directors. Our current board of directors was elected at the ordinary general assembly of shareholders on 28 April 2015 for a term of two years, pursuant to the company by-laws. In the event of the resignation of one of its members, the board must be entirely replaced at the next assembly. The board is comprised of nine members, meets once a month and may hold extraordinary meetings in response to business needs.

In accordance with Chilean and US law, a committee of the board of directors has been created, which also performs the duties of the audit committee. This body, comprised of three members of the board of directors, is responsible for:

■   Examining reports of external auditors and other financial reports and issuing opinion, prior to presentations to shareholders

■   Evaluating and proposing external auditors and rating agencies to the board of directors

■   Analysing internal control reports on transactions with related parties

■   Examining and drafting reports on all transactions with related parties

Members of the executive board, comprised of vice presidents and directors, are heads of the departments of finance, personnel management, marketing, legal affairs, auditing, corporate functions and management oversight.

Risk management

Given the multinational nature of LATAM, we have given priority to proactive risk management with the belief that a broad and integral view of risk and its proper management is key to long-term success.

Since 2013, we’ve had a corporate risk manager, a position currently occupied by the vice president of finance. As one of our strategic pillars, risk management entails overall involvement in the decision-making process, based on a shared vision of risk management. With the support of the organisation, the corporate risk manager is responsible for providing a common methodology, to structure the risks, consolidate and report them.

The risk management team focuses on the risks that could affect the sustainability of the company or endanger the achievement of the strategic objectives. Among the objectives sought are:

■   Protect against events that could threaten business survival and see to their mitigation

■   Ensure that the impacts of risks are kept within acceptable limits for the company

■   Establish risk management as a practice that is integrated with decision making

In 2014, a new risk management team was set up, also led by our vice president of finance, with the mission of establishing a common methodology, consolidating and reporting to the board the risks to which the group is exposed. An emergency committee reports directly to the CEO.

Compliance and accountability

The aim of the compliance programme upgrade in 2014 was to raise the level of management to higher levels of responsibility. New policies were drafted and our belief in ethical conduct and respect for the law in all the countries where it operates was further strengthened. Internal policies meet the prerequisites of law applicable to companies listed on the securities exchanges of New York, Santiago and Sao Paulo, where shares are traded.

Representatives of each of LATAM´s legal affairs departments are also responsible for supporting our chief compliance officer in each country of operation and in Europe. Review and approval of new corporate policies are coordinated by the LATAM compliance team.

Training

We offer training in corporate governance, compliance and our code of conduct for all employees, as well as for third parties. The mandatory online course is based on prevention, detection and response to problems and failure to uphold the law, operational, corporate and information security and on ethical, anti-corruption and anti-trust principles. In addition, all executives are summoned for mandatory, in-person training in corporate governance and compliance.

Ethics hotline

Since 2015, we’ve had a single hotline for our companies and subsidiaries and can receive both anonymous as well as identified reports in accordance with local laws. Through this channel, all employees and partners can inform the compliance department concerning employment practices, discrimination and harassment, fraud, corruption or failure to uphold any other law or internal policy. As a way of ensuring that all reports are answered in a proper and confidential manner, this tool is operated by an outsourced provider.

Incidents will be analysed and forwarded to committees for investigation in each country. If an irregularity is confirmed, the committee for administration of the code of conduct, consisting of the human resources, compliance and legal departments, among others, will discuss what measures to take. The committee can decide upon a change of process to prevent future infractions or propose disciplinary measures.

Although the integration of LAN and TAM `has taken time, the association of these two companies has meant gains for all of us. Looking ahead, we must focus on continuing to work with the same passion and commitment to make LATAM Airlines Group one of the world’s three most important airline groups.