7.1.PAO TMK Board of Directors’ statement of compliance with the corporate governance principles set out in the corporate governance code recommended by the Bank of Russia to issuers of listed securities
The corporate governance system of PAO TMK incorporates all regulatory and listing requirements, as well as the best corporate governance practices and standards.
In 2011, TMK, as a company with a London Stock Exchange standard listing, adopted the Corporate Governance Code of PAO TMK (“TMK’s Corporate Governance Code”) and since then has published annual reports on its compliance with the Code’s provisions.
The reporting year saw many improvements in the Company’s internal documents; they were also reviewed and amended to bring them in line with the new and amended listing rules of MICEX Stock Exchange and the Corporate Governance Code recommended by the Bank of Russia (the “Russian Corporate Governance Code”). We have met all our commitments for 2015 undertaken in TMK’s 2014 Annual Report to implement the Code (http://report2014.tmk-group.ru/0610.html).
In June 2015, the Annual General Meeting of Shareholders approved a revised version of PAO TMK’s Articles of Association and revised versions of corporate regulations governing the activities of management bodies, including the Regulations on the General Meeting of Shareholders, Regulations on the Board of Directors, and Regulations on the Management Board. A revised version of the Regulations on the Revision Committee was approved at the same meeting.
We continued to improve corporate documents in the second half of 2015. In November, the Board of Directors approved revised versions of the Regulations on the Audit Committee of the Board of Directors and Regulations on the Internal Audit Department of PAO TMK. In addition, two new important documents were developed to enhance our corporate governance framework – the Internal Audit Policy of TMK Group and the Regulation on the Corporate Secretary of PAO TMK (approved by the Board of Directors on 27 January 2016). A revised version of the Regulations on the Nomination and Remuneration Committee of PAO TMK was also approved in January 2016.
Having adopted the above documents, PAO TMK now meets all the corporate governance requirements set out in the MICEX Stock Exchange listing rules for issuers whose shares are included in the highest level quotation list.
An external auditor was engaged in the reporting period to assess performance of the Board of Directors. Assessment results are used to improve procedures of the Board of Directors and its committees.
The implementation of the Russian Corporate Governance Code’s recommendations required an extra effort to revise the Company’s existing framework, and develop an action plan and timelines for the introduction of new procedures. This effort also helped us to identify certain gaps with best practices. The members of the Board of Directors and the Company’s management took a proactive approach when discussing the implementation of the Code in the MICEX Share Issuers Committee, at stock market conferences and during public discussions on the regulatory initiatives published on the Bank of Russia’s website.
Our approach views the Code primarily as a summary of the international best practices supporting Russian companies in their conscious effort to improve their corporate governance frameworks as and when required. Stimulated by the regulator, the process of adopting the Code’s recommendations should take into account the specifics and maturity level of the Russian stock market, as well as the issuers’ costs of implementing the recommendations.
For instance, the applicable MICEX Stock Exchange listing rules set stricter requirements/recommendations for the Corporate Secretary. This required reallocation of roles and responsibilities within the Company and separate regulations on the Corporate Secretary to formalise his/her status, functions, rights and duties, as well as requirements to nominees, appointment and removal procedures, and remuneration arrangements. The Regulations on the Corporate Secretary were approved by the Board of Directors in January 2016 and published on TMK’s website at https://www.tmk-group.ru/media_ru/files/51/tmk_pol_korp_sec2016.pdf
The corporate governance system of PAO TMK follows the guidelines set out in the Russian Corporate Governance Code. It is regulated by the Company’s internal policies, available on TMK’s website (http://www.tmk-group.ru/Documents) and outlined in TMK’s Corporate Governance Code (http://www.tmk-group.ru/media_ru/files/51/corp_gov_code_ru.pdf). In 2015, TMK’s corporate governance practices were in full compliance with the Company’s Corporate Governance Code.
This Report summarises the most significant aspects of TMK’s corporate governance model and practices, including the Report on the Company’s compliance with the principles and recommendations set out in the Corporate Governance Code (appended to this Annual Report). Compliance with the corporate governance principles set out in the Russian Corporate Governance Code was assessed in accordance with the Bank of Russia’s guidelines (Bank of Russia’s Letter No. IN-06-52/8 dated 17 February 2016).
When assessing the compliance, the Board of Directors applied the substance over form principle and concluded that the Company followed the vast majority of the Code’s recommendations (63 followed, 15 partly followed and 1 not followed).
The reasons for non-compliance with certain recommendations of the Code, the alternative options used in the Company, and our plans to implement the missing recommendations are detailed in the Report on the Company’s compliance with the principles and recommendations set out in the Code.
We reaffirm our commitment to the principles contained in the Russian Corporate Governance Code and will continue to make consistent efforts to fully implement them to the benefit of all stakeholders.
Chairman of the Board of Directors of PAO TMK