Corporate Governance Principles
BOARD OF DIRECTORS’ STATEMEN OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES
Federal Grid Company has always paid significant attention to improving its corporate governance system. It is crucial for us that the corporate standards we implement eventually contribute to the delivery of our strategic objectives, to strengthening confidence in the Company and improving its investment attractiveness, so we strive to meet the highest standards in this area.
For Federal Grid Company, the reporting year was marked by a number of significant events including those related to the implementation of the ‘road map’ on introducing key provisions of the Corporate Governance Code into the Company’s practice. This work included an extensive revision of the Company’s Articles of Association and key internal documents, as well as the implementation of new elements in the Federal Grid’s corporate governance practice, in particular the position of a Corporate Secretary.
Following the results of the work performed, Federal Grid Company conducted a self-assessment of the Company’s corporate governance quality, as well as a review for its compliance with principles and recommendations of the Russian Corporate Governance Code.
Based on the results of the self-assessment and analysis of the Federal Grid’s corporate governance system and practice the Board of Directors of Federal Grid Company has every reason to declare high quality of corporate governance of the Company and its compliance with most of recommendations of the Russian Corporate Governance Code.
Chairman of the Board of Directors
of Federal Grid Company
Assessment of Federal Grid Corporate Governance Quality
In 2015, the Federal Grid’s corporate governance system has undergone some significant changes resulting from the implementation of key recommendations of the Russian Corporate Governance Code1. Following the implementation of the corporate governance development plans, the Company has conducted a self-assessment in accordance with the Corporate Governance Self-Assessment Methodology for State-Owned Companies (approved by the Order of Rosimuschestvo No. 306 dated 22 August 2014).The corporate governance quality assessment have been conducted, among other things, with respect to compliance with the principles and recommendations set out in the Russian Corporate Governance Code. 1 Approved by the Board of Directors of the Bank of Russia on 21 March 2014 and recommended for application by the Letter of the Bank of Russia “On the Corporate Governance Code” No. 06-52/2463 dated 10 April 2014
Results of 2015 Self-Assessment of Corporate Governance Quality in Federal Grid Company
|Component||Вес Weighting in the overall score||Number of questions||Actual score||Degree of compliance|
|2||Board of Directors||37%||56||150||74%|
|4||Transparency and Disclosure||25%||15||113||84%|
|5||Risk Management, Internal Control
and Internal Audit
|6||Corporate Social Responsibility and
WHAT NEW DEVELOPMENTS WERE IMPLEMENTED DURING THE FIRST YEAR OF THE IMPLEMENTATION OF THE 'ROAD MAP' FOR IMPROVING THE CORPORATE GOVERNANCE SYSTEM OF FEDERAL GRID COMPANY?
“The Federal Grid’s Corporate Governance Code was among the first documents we updated under the ‘road map’ thus confirming the Company’s intention to develop corporate relations in accordance with the principles of the Russian Corporate Governance Code.
Almost all key internal documents of our Company were revised in line with recommendations of the Code. In addition, we committed to conduct an annual performance evaluation of the Board and its committees facilitated by an external consultant.
Such evaluation was already performed at the beginning of 2016. Based on the results achieved, the consultant developed recommendations that will serve as clear guidelines for our further work.
One of the most significant structural changes aimed at the developing corporate governance was the establishment of a separate internal audit function that reports administratively to the Chairman of the Management Board and functionally – to the Board of Directors. A separate structural unit for internal control and risk management was also established.
In the reporting year, we generally implemented all activities scheduled by the ‘road map’ for that period. This allows us to steadily move forward and open new opportunities.”
Following the Methodology’s approaches, six components have been assessed, all carrying a certain weight within the overall evaluation.
When conducting the assessment, a number of key assumptions were taken into account, including non-applicability of certain provisions of the Corporate Governance Code due to the absence in the structure of the Federal Grid Group, under the latest consolidated financial statements, of the controlled legal entities meeting the materiality criteria defined by the Code.
In addition, the Company has reviewed its corporate governance practices’ compliance with the principles and recommendations of the Russian Corporate Governance Code based on the Recommendations of the Bank of Russia on reporting compliance with the Corporate Governance Code principles and recommendations1.
Being a company whose Global Depository Receipts are traded on the London Stock Exchange, Federal Grid Company strives to achieve high international standards in corporate governance, including the compliance with the UK Corporate Governance Code.1 Letter of the Bank of Russia No. IN-06-52/8 dated 17 February 2016
Full Report on Federal Grid’s compliance with the Corporate Governance Code principles and recommendations, as well as the Report on compliance with main principles of the UK Corporate Governance Code are available in the в Appendix 3 to the annual report
Key Elements of the Corporate Governance System (Model) of Federal Grid Company
|Mechanisms to ensure and protect shareholder rights||
|Governance and control structure||
|Risk management and internal control||
|Corporate culture and ethics||
For further details of the key elements of the Federal Grid’s corporate governance system, see the Company’s Articles of Association and internal documents available on our website www.fsk-ees.ru in section Investors/Corporate Governance /Corporate Documents
Full details on the Federal Grid’s corporate governance system are available in section CORPORATE GOVERNANCE REPORT of this annual report
Improving the Corporate Governance System in 2015
In order to implement the Russian Corporate Governance Code recommendations, the Company developed and the Board of Directors approved (Minutes No. 255 dated 16 March 2015) an Action Plan (‘road map’) covered all aspects of the Federal Grid’s corporate governance system and practice.
All commitments made within the ‘road map’ have been fully met by the Company.
- ВIn June 2015, the Annual general Meeting of Shareholders approved an updated version of the Articles of Associations, updated versions of the Regulations on the General Meeting of Shareholders, Board of Directors, Management Board, Audit Commission, the Regulations on Remunerations and Compensations to Members of the Board of Directors and on Remunerations and Compensations to Members of the Audit Commission
- Following the update of the above documents, the Board also approved new Regulations on the Board committees and on remunerations to committee members
- A position of Corporate Secretary was established, and the Board approved Regulations on the Corporate Secretary
- The Federal Grid’s Information policy was updated, including with regard to new requirements of the Bank of Russia to securities issuers
When implementing measures envisaged by the ‘road map’, the Company continued to review and update the other internal documents as required by the recommendations of the Russian Corporate Governance Code, including the Regulations on the Investment Committee, Risk Management System, Internal Audit.
Gorporate Governance Rating
The results of the Company’s efforts to improve its corporate governance system were positively assessed by experts of the Russian Institute of Directors – an external independent consultant of Federal Grid Company that has been monitoring the corporate governance practice of the Company since 2012 and assigns a National Corporate Governance Rating (NCGR).
NEW CORPORATE GOVERNANCE CODE OF FEDERAL GRID COMPANYRead more
In 2015, the Board of Directors approved a new version of the Federal Grid’s Corporate Governance Code.
A revised document has a better structure within which the Company has declared the main corporate governance principles, defined key participants of its corporate governance system, their roles, working environment and terms of engagement.
Taking into account the recommendations of the Russian Corporate Governance Code, the Code of Federal Grid Company has covered an extended range of issues concerning the rights of shareholders, specified principles of Board structure and composition, independence criteria of Board members, set out the basic provisions relating to the Corporate Secretary and to the ensuring of transparency of the Company’s activities.
Among the major achievements of Federal Grid Company experts noted the following:
- Improving the balance of the Board of Directors by increasing the number of independent directors
- Establishing the position of Corporate Secretary
- Expanding the role of the Board of Directors with regard to monitoring and reviewing the effectiveness of the Company’s internal audit function
After the Annual General Meeting 2016, the Federal Grid’s corporate governance practice will be reevaluated under the updated NCGR methodology.
Plans for 2016
- Assessing corporate governance systems of Federal Grid subsidiaries using the Guidelines for self-assessment of corporate governance quality in state-owned companies
- Drafting, where appropriate, standard internal documents on corporate governance issues for the needs of subsidiaries
- Developing/updating and approving organisational and administrative documents on safeguarding insider information
- Improving organisational and administrative documents that regulate disclosure, and adjusting them in line with the recent changes in the Russian legislation