7.4.Board of Directors

PAO TMK’s Board of Directors is structured to ensure the balance of experience, skills and independence of directors, which enables the Board to manage the Company in an efficient and competent manner and make fair and independent judgements and decisions in line with the best interests of the Company and its shareholders. The Board of Directors is composed of individuals who have impeccable business and personal reputations and the appropriate balance of skills and expertise to enable them to discharge their respective duties and responsibilities effectively.

Members of the Board

Dmitry Pumpyanskiy, Chairman of PAO TMK’s Board of Directors, is included in the Top-25 list of Board of Directors Chairmen of Russian Companies, with the Company’s four independent directors, Mikhail Alekseev, Peter O’Brien, Alexander Shokhin and Oleg Schegolev, included in the Top-50 Independent Directors list in 2014 and 2015, as ranked by the Independent Directors Association (Russia).

Starting from 2006, the Company has maintained liability insurance for its directors and officers, in line with best practice in corporate governance. Liability insurance covers the insured persons against any possible damage caused by unintentional errors (or omissions) in the course of managing the Company. The terms and conditions of insurance contracts, including risk coverage, comply with the international practice of similar risk insurance.

In 2015, new members were elected to the Board of Directors. On 23 June 2015, the Annual General Meeting of Shareholders elected RUSNANO’s CEO Anatoly Chubais as a new member of the Board. RUSNANO holds a 5.4764% interest in PAO TMK. Elena Blagova, Deputy CEO for Special and New Projects of PAO TMK, left the Board of Directors.

The number of Directors on the Board remained unchanged and included eleven members as of the Annual Report date. No other changes occurred in the membership of PAO TMK’s Board of Directors in 2015.

As of the Annual Report date, five out of eleven directors were independent: they did not depend on the Company’s officials, affiliates, significant counterparties or competitors, or state agencies that might challenge their impartiality. The directors are independent in accordance with the criteria set out both in TMK’s and Russian Corporate Governance Codes. In particular, Paragraph 109 of the Russian Corporate Governance Code specifies that the Board of Directors may recognise a Director as independent even if the Director has a relationship with the issuer. Alexander Shokhin, who has been on the Board of Directors for over seven years, is recognised as independent because he has an established reputation in the investment community, and independence of his position does not raise any doubt.

The independent status is to be confirmed by the Nomination and Remuneration Committee each time a Director is elected to the Board. An external auditor has also confirmed that the Company’s independent directors meet the independence criteria.

As of 31 December 2014, following the Annual General Meeting of Shareholders of 23 June 2015, PAO TMK’s Board of Directors was composed as follows:

PumpyanskiyDmitry

Chairman of the Board of Directors, non-executive director.

Born in 1964. Graduated from Kirov Urals Polytechnic Institute in 1986. PhD in Technical Sciences, Doctor of Economics. Founder and beneficial owner of TMK. Has been with TMK since 2002, sitting on the Board of Directors since 2004, and Chairman of the Board of Directors since 2005. Mr Pumpyanskiy was awarded a second class Medal of the Order for Merit to the Fatherland, a Forth class Order for Merit to the Fatherland and Order of Honour, is a Russian Government prize winner in Science and Technology, was conferred an Honorary Metallurgist title and pronounced the winner of the 6th Director of the Year National Award in Chairman of the Board: Contribution to the Development of Corporate Governance category in 2011. At present, extensively involved in public activities aimed at promoting the Russian metals industry. Fields of interest: metals industry economics and physics of metals. Authored four monographs and over 70 scientific papers.
Principal place of employment:

President of Sinara Group.
Relevant experience:

Member of the Management Board of the Chamber of Commerce and Industry of the Russian Federation, Chairman of the Board of Trustees of the Russian Ski-Jumping and Nordic Combined Federation, Chairman of the Supervisory Board of the Ural Federal University, member of the Board of Directors of Sinara – Transport Machines, SKB-Bank and Non-profit Organisation Foundation for Development of the Centre for Elaboration and Commercialisation of New Technologies, member of the Board of Trustees of the ISTOKI Endowment Fund, President of the Regional Employers’ Association – Sverdlovsk Regional Union of Industrialists and Entrepreneurs (Employers), Chairman of the Board of Directors of Sinara Group, member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, member of the Supervisory Board of Non-Profit Partnership Russian Steel. Formerly, Board member at various industrial and financial companies, CEO at TMK, top executive at Russian metals and pipe companies.

Directly holds 0.0066% in the authorised capital of TMK
AlekseevMikhail

independent director, Chairman of the Nomination and Remuneration Committee, member of the Audit Committee. Member of the Board of Directors since 2011.

Born in 1964. Graduated from the Moscow Finance Institute in 1986 and completed a postgraduate degree programme there in 1989, Doctor of Economics.
Principal place of employment:

Chairman of the Management Board at UniCredit Bank.
Relevant experience:

Chairman of the Board of Directors of RN Bank, member of the Board of Directors of PAO Aeroflot and PAO TMK, member of the Management Board of BARN B.V. (the Netherlands), member of the Board of the Association of Regional Banks of Russia, Chairman of the Supervisory Board of UniCredit Leasing, member of the Management Board of the Russian Union of Industrialists and Entrepreneurs. Formerly, member of the Board of Directors at Rostelecom, member of the Strategy Committee of OAO TMK, member of the Board of Directors of MICEX, a number of financial companies, member of the Board of the Association of Russian Banks, Chairman of the Board and CEO of Rosprombank, Senior Vice President and Deputy Chairman of the Management Board of Rosbank, Deputy Chairman of the Management Board of ONEXIM Bank, Board member at Intersectoral Commercial Bank (Mezhkombank), Deputy Head of the General Directorate of the Ministry of Finance of the USSR.

Holds no shares in TMK.
KaplunovAndrey

Executive Director.

Has been with TMK since 2001, member of the Board of Directors since 2005. Born in 1960. Graduated from the Moscow Finance Institute in 1982 and later completed a postgraduate degree programme there, PhD in Economics. Commended by the Ministry of Industry and Trade of the Russian Federation.
Principal place of employment:

First Deputy CEO of TMK.
Relevant experience:

Member of the Management Board of PAO TMK, Chairman at TMK’s Russian pipe plants and TMK Trade House, member of the Board of Directors of Sinara Group, Deputy Chairman of the Board of Directors of SKB-Bank, Board member at the Big Pension Fund, member of the Board of Trustees of the Sinara Mini-Football Club (Sverdlovsk Regional Sports Non-Governmental Fund). Formerly, Director of the HR and Development at Inkombank and Rosbank, Vice President of Guta-Bank, Deputy Head of the Currency and Finance Department at Zarubezhneft, Associate Professor at the Economic Theory Department of the Moscow Finance Institute.

Holds 0.011 % in the authorised capital of TMK.
O’BrienPeter

independent director, Chairman of the Audit Committee, Member of the Board of Directors since 2012.

Born in 1969. Graduated from Duke University (USA) in 1991 and obtained an MBA from Columbia University Business School in 2000. Took a course in AMP (Advanced Management Program) at Harvard Business School in 2011. In 2008, Mr O’Brien won the National Award of the Independent Directors Association in the Contribution to the Improvement of Corporate Transparency special category.
Relevant experience:

Member of the Board of Directors of T Plus, Chairman of the Board of Directors of TransFin-M. Formerly, Member of the Board of Directors and Chairman of the Audit Committee at IGSS, member of the Supervisory Board of the European Pension Fund, Chairman of the Board of Directors at RusRailLeasing, member of the Board of Directors and Chairman of the Audit Committee at HRT Partipacoes, member of the Management Board, Vice President, Head of the Group of Financial Advisors to the President of Rosneft, Executive Director of Morgan Stanley in Russia, Vice President at Troika Dialog Investment Company, officer at the Press Center of the US Department of the Treasury.

Holds no shares in TMK.
PapinSergey

non-executive director, member of the Board of Directors since 2005, member of the Nomination and Remuneration Committee.

Has been with TMK since 2002. Born in 1955. Graduated from Donetsk Polytechnic Institute in 1977. Mr Papin was awarded a Badge of Honour and a certificate of merit from the Ministry of Industry and Energy of the Russian Federation.
Principal place of employment:

Vice President, member of the Board of Directors of Sinara Group.
Relevant experience:

Member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, member of the Boards of Directors of Kalugaputmash, Ural Locomotives, Burgas Resort, Arkhyz – Sinara and Sinara – Transport Machines. Formerly, member of the Boards of Directors of Intourist-Sinara, Lyudinovsky Locomotive Plant, Ural Rolling Stock Manufacturing Plant, Deputy CEO for External and Special Projects at TMK, Vice President of Inkombank and Guta-Bank.

Directly holds 0.007% in the authorised capital of TMK.
ForesmanRobert Mark

independent director, member of the Nomination and Remuneration Committee, member of the Board of Directors since 2012.

Born in 1968. Graduated from Bucknell University (USA) in 1990 and Harvard University Graduate School of Arts and Sciences in 1993. Obtained a certificate from the Moscow Power Engineering Institute in 1989.
Principal place of employment:

Managing Director of Barclays PLC, Barclays Country Manager for Russia.
Relevant experience:

President of Barclays Capital in Russia; formerly, member of the Supervisory Board of Vnesheconombank’s VEB Capital, Deputy Chairman of the Management Board at Renaissance Capital, member of the Supervisory Board of Evrofinance Mosnarbank, Chairman of the Management Committee for Russia and CIS at Dresdner Kleinwort Wasserstein, Head of Investment Banking for Russia and CIS at ING Barings. Worked for the International Finance Corporation on private equity transactions and project financing.

Holds no shares in TMK.
KhmelevskiyIgor

non-executive director, member of the Audit Committee. Has been with TMK since 2003, member of the Board of Directors since 2004.

Born in 1972. Graduated from the Ural State Law Academy and Shadrinsk State Pedagogical Institute in 1995, awarded a certificate of merit from the Ministry of Industry and Energy of the Russian Federation.
Principal place of employment:

Vice President at Sinara Group.
Relevant experience:

Member of the Board of Directors of Sinara Group, Director of Bravecorp Limited, Tirelli Holdings Limited and Sinara Capital Management. Formerly, Director of Fudberg Holding Ltd, TMK Global AG and TMK Steel Limited, Member of the Administrative Board of TMK-Artrom S. A., Deputy CEO for Legal Practice at TMK, Head of the Legal Department at Sinara Group.

Holds no shares in TMK.
ChubaisAnatoly

non-executive director. Member of the Strategy Committee.

Born in 1955. Graduated from the Saint Petersburg State University of Engineering and Economics in 1977.
Principal place of employment:

Председатель Правления ООО «УК «РОСНАНО».
Relevant experience:

Member of the Board of Directors of RUSNANO Management Company (until 10 February 2014), member of the Board of Directors of RUSNANO, member of the Board and the Committee on Innovation Policies and Innovative Entrepreneurship of the Russian Union of Industrialists and Entrepreneurs. Sits on management bodies and boards of trustees at a number of commercial and not-for-profit organisations. Three times commended by the President of Russia (1995, 1997 and 1998).

Holds no shares in TMK.
SchegolevOleg

independent director, member of the Strategy Committee, member of the Board of Directors since 2012.

Born in 1962. Graduated from the Moscow Finance Institute in 1984.
Relevant experience:

First Vice President at Russneft, First Deputy Chairman of the Management Board and First Deputy CEO at Itera, Executive Director at Slavneft, Chairman and Board member of various oil & oilfield service companies, Deputy Head of the Department for Long-Term Planning of the Fuel and Energy Complex at the Ministry of Energy of the Russian Federation, chief expert, deputy head, head of a department at Sibneft (now Gazprom Neft).

Member of the Supervisory Board of the Independent Directors Association of Russia.

Holds no shares in TMK.
ShiryaevAlexander

Executive Director.

Has been with TMK since 2003, member of the Board of Directors since 2005. Born in 1952. Graduated from the Sverdlovsk Institute of National Economy in 1991. Mr Shiryaev was awarded by the Sverdlovsk Region with a second class Badge of Merit and an Honorary Metallurgist title.
Principal place of employment:

CEO of PAO TMK.
Relevant experience:

Chairman of the Management Board of TMK, member of the Board of Directors at TMK’s Russian pipe plants, Chairman of the Board of Orsky Machine Building Plant, member of the Board of Sinara Group and TMK Trade House. Formerly, Deputy CEO for Development and CEO at Sinara Group, Chief Financial Officer at TMK, CEO at Uralshina.

Holds 0.016% in the authorised capital of TMK.
ShokhinAlexander

independent director, Chairman of the Strategy Committee. Member of the Board of Directors since 2008.

Born in 1951. Graduated from Lomonosov Moscow State University in 1974, Doctor of Economics, Professor. Mr Shokhin was awarded with third and fourth class Orders for Merit to the Fatherland, Order of Honour, second class Order of Holy Prince Daniel of Moscow and a medal in commemoration of the 850th Anniversary of Moscow. In 2008, he won the National Award of the Independent Directors Association in the Independent Director category.
Principal place of employment:

President of the Russian Union of Industrialists and Entrepreneurs.
Relevant experience:

President of the Russian Union of Industrialists and Entrepreneurs, President of the National Research University Higher School of Economics, member of the Board of Directors of Eurasia Drilling Company Limited, member of International Advisory Board and Senior Advisor at the Russian Office of Bank of America Merrill Lynch. Formerly, member of the Strategy Committee of TMK, member of the Board of Directors of Russian Railways, member of the Boards of Directors of Baltika Breweries, Fortum, TNK-ВР Limited, Lukoil, Burovaya Kompaniya Eurasia, member of the Public Chamber of the Russian Federation, Chairman of the Supervisory Board at Renaissance Capital Investment Group, deputy of the State Duma (three convocations), Minister of Labour and Employment and Minister of Economy, Head of the Russian Agency for International Cooperation and Development, worked as Deputy Head of the Russian Government twice, former Russia’s representative to the IMF and World Bank.

Holds no shares in TMK.

As of 31 December 2015, the members of the Board of Directors held no interests in affiliated companies and did not enter into PAO TMK shares acquisition/disposal transactions (changes in the shareholdings of the members of the Board of Directors in the authorised capital of PAO TMK were due to the issuance of additional shares); there is no conflict of interest.

KurbatovMaxim

Secretary of the Board of Directors (Corporate Secretary).

Born in 1967. Graduated from Kirov Urals Polytechnic Institute, the Academy of National Economy under the Government of the Russian Federation and the Moscow State Law Academy. Has been with TMK since 2002. Headed the CEO’s Executive Office and the Corporate Governance function. Has been the Secretary of the Board of Directors since 2005.

Activities of the Board of Directors in 2015

In 2015, the Board of Directors held 40 meetings, including eight meetings in person.

The most significant issues discussed at the Board meetings were as follows:

Investment programme for 2016
TMK’s target organisational structure for 2016
Consolidated budget for 2016
Management accounts and consolidated financial statements
Adjustments to the business plan for 2015–2020
Market situation and sales programme for 2016
Performance of the Company’s divisions in 2014
Recommendations for the General Meeting of Shareholders on the dividend payout for 2014 and interim dividend payout for 1H 2015.

Remuneration to the members of the Board of Directors

In accordance with Russian laws (Article 64 of the Federal Law on Joint Stock Companies), members of the Board of Directors may be remunerated, if so resolved by the General Meeting of Shareholders. TMK shareholders have adopted the following principles and procedures outlined in the Regulations on the Board of Directors with respect to its remuneration:

Only non-executive directors are entitled to remuneration for the performance of their duties
The remuneration is to be fair and is to match long-term interests of shareholders
The remuneration to be paid includes:
— A fixed base remuneration of the Chairman or a member of the Board payable on a monthly basis in the amount of 1/12 of the fixed annual amount
— Additional remuneration for the performance of the duties of the Chairman or a member of a Board Committee payable every six months in the amount of 1/2 of the approved annual additional remuneration.

Prior to the Annual General Meeting of Shareholders, the Board of Directors had 5 independent directors, 3 non-executive directors and 3 executive directors. After the Annual General Meeting of Shareholders, the Board of Directors comprises of 5 independent directors, 4 non-executive directors and 2 executive directors.

In 2015, the members of the Board of Directors received a total of USD 2.30 m in remuneration, including USD 2.13 m as remuneration for their work in management bodies and USD 0.17 m as reimbursement of expenses incurred.