Corporate governance practices
The Corporate Governance Code recommended by the Bank of Russia interprets corporate governance as a notion embracing relationships between executive bodies of a joint-stock company, its Board of Directors, shareholders and other stakeholders. Corporate governance is a tool for identification of firm’s goals and ways to achieve these goals as well as for fostering efficient oversight of firm’s operations for shareholders and other stakeholders.
Core goals of corporate governance are:
- crafting of an effective system for protection and efficient disposal of shareholder’s resources;
- reduction of risks that investors are unable to evaluate and unwilling to accept and management of which by investors in the long run shall inevitably result in reduction of firm’s investment prospects and share prices.
Our corporate governance is premised on the principles, described below:
|Accountability:||Our bylaw stipulates accountability of the Company’s Board of Directors to all stockholders in line with the Russian laws and serves as guidance for the Board of Directors in formulating the strategy and administering executive bodies of the Company.|
|Fairness:||The Company is voluntarily committed to protect stockholder rights and enforce equal treatment of all stockholders. The Board of Directors affords all stockholders an opportunity of viable defense if their rights are disregarded.|
|Transparency:||The Company enforces just-in-time disclosure of reliable information regarding all corporate events or actions, including but not limited to its financial position, performance, ownership structure and management, and oversees that any stakeholder has an unhindered access to such information.|
|Responsibility:||The Company recognizes its liability to all stockholders of the Company.|
Its corporate governance practices kept upgraded, the Company keeps its fingers on the pulse of corporate governance trends evolving in Russia. The Company highlights the importance of the Corporate Governance Code, adopted and enforced by the Central Bank since 2014. Principles and recommendations of the Code set the bar high and serve as a guidemark for further development of corporate governance system by the Company. We also focus hard on regulatory requirements to reflect them in our corporate governance practices.
The corporate governance practice of OAO IDGC of Urals features the following positive aspects through the lens of the protection of stockholder rights:
- OOO RSM RUS, a known leader in auditor and advisory services operating in Russia since 1992, elected on a competitive basis, was hired to audit the Company’s RAS and IFRS financial statements [learn more at Section “Independent Auditor”];
- Many years of positive dividend history [learn more at Section “Investor and Shareholder Relations”];
- Information for the annual general meeting of stockholders is posted on the Company’s web-site [learn more at Section “Investor and Shareholder Relations”];
- The Company conducts a tender selection of its suppliers of goods and services in line with the Uniform Purchase Standards [learn more at Section “Supplier Relationship Management”].
The corporate governance practice of OAO IDGC of Urals features the following positive aspects through the lens of management and oversight bodies:
- Independent directors are elected to the Board of Directors [learn more at Section “Board of Directors”];
- Meetings of the Board of Directors are conducted regularly, attended by a sufficient number of participants and consistent with previously adopted action plan [learn more at Section “Board of Directors”];
- The Company has a formalized practice of inducting newly elected members of the Board of Directors [learn more at Section “Board of Directors”];
- The preparation procedure for meetings of the Board of Directors provides the Board of Directors members with the opportunity to properly prepare for a meeting [learn more at Section “Board of Directors”];
- We have set up 5 committees (Audit Committee, Personnel and Remunerations Committee, Strategy and Development Committee, Reliability Committee, Technological Connection Committee) to be governed by the relevant Regulations [learn more at Section “Board of Directors Committees”];
- The Company has set up a unit performing internal audit functions – Internal Audit Department – that is responsible to the Board of Directors [learn more at Section “Internal Control”];
- The Company has set up a unit, liable for key risk management functions [learn more at Section “Risk Management”].
The financial and non-financial information disclosure practice features the following positive aspects:
- The Company’s web-site is regularly maintained and updated with large quantities of useful information on the Company and its performance [learn more at www.mrsk-ural.ru];
- The Company discloses detailed information on its shareholder capital [learn more at Section “Investor and Shareholder Relations”];
- The Company discloses detailed information on members of the Board of Directors and Executive Board of the Company [learn more at Section “Corporate Governance”];
- The Company discloses all mandatory forms of financial (accounting) statements prepared under International Financial Reporting Standards (IFRS) and Russian Accounting Standards (RAS) [learn more at www.mrsk-ural.ru].
Corporate social responsibility and sustainable development of OAO IDGC of Urals features the following positive aspects:
- The Company has adopted bylaws regulating corporate social responsibility matters [learn more at www.mrsk-ural.ru];
- OAO IDGC of Urals has adopted the Corporate Ethics Code that envisages mission, values, principles of intracorporate conduct, principles of relations with stakeholders, conservation of resources and assets of the Company [learn more at www.mrsk-ural.ru];
- The Company implements corporate social projects for OAO IDGC of Urals employees and their families, people residing in regions where the Company operates as well as charity and sponsorship programs [learn more at Section “Human Resources Management”];
- The Company’s operations are certified for compliance with ISO 9001, 14001, 50001 and OHSAS 18001 [learn more at Section “Management Systems”].
Compliance with the principles of the Corporate Governance Code*
|Aspects||Principles, recommended by the Code||Principles complied with in full||Principles complied with in part||Principles that are not complied with by the Company|
|Rights of stockholders and equal treatment of stockholders in the exercising of their rights||13||11||2||0|
|Board of Directors||36||16 (+3)||11 (-3)||9|
|Remuneration system||10||8 (+1)||2 (+1)||0 (-2)|
|Risk Management and Internal Control System||6||6||0||0|
|Information disclosure, information policy||7||5||2||0|
|Significant and important corporate actions and events||5||5 (+1)||0||0 (-1)|
|Total||79||53 (+5)||17 (-2)||9 (-3)|
Examine the Appendix for more details on the Company’s compliance with the principles and recommendations of the Corporate Governance Code.
Assessment of corporate governance quality
In October 2017 the Company adopted the OAO IDGC of Urals’ Evaluation of Corporate Governance Efficiency Methodology. The Methodology was prepared pursuant to the Self-evaluation of Corporate Governance Efficiency in State-owned Companies Methodology, adopted by the decree. The Methodology’s structure intends to evaluate quality of corporate governance, incl. compliance with principles and recommendations, stated in the Bank of Russia’s Corporate Governance Code. In January 2018 the Company’s Internal Audit Department has conducted a self-evaluation of FY2017 corporate governance quality in line with the Methodology.
Total evaluation grade for 2017 is 77% of the target value or efficient corporate governance with minor weaknesses, several components/spheres need to be improved.
Striving for better corporate governance
The Company closely monitors the progress of corporate legislation and corporate governance practices in Russia. During 2017 the Company zeroed in on examining corporate governance novelties, principles and recommendations, best-in-class corporate governance practices and procedures; and on analyzing whether the Company could apply them in its corporate governance processes as well as on laying the groundwork before implementing new practices (crafting of process schedules and bylaw drafts, preparation of materials to be filed with the Board of Directors for review, etc.).
Company’s plans to develop its corporate governance practices during 2018:
- adoption of the Board of Directors and its Committees Performance Evaluation Methodology;
- implementation of the Board of Directors and its Committees performance evaluation procedure;
- evaluation of corporate governance quality by Company’s internal audit;
- revision of the Regulations on the Dividend Policy;
- revision of the Regulations on the Information Policy.