Annual report and accounts 2012

Corporate governance statement

Severstal identified corporate governance excellence as a crucial element in helping the company position itself as a new breed of Russian business that is able to engage with stakeholders globally. We demonstrate our commitment to the highest standards of corporate governance by implementing the world’s best practices of corporate relations in our dealings with shareholders and with respect to transparency and quality of disclosure and reporting.

Severstal’s corporate governance system underwent major changes in preparation for the company’s London listing at the end of 2006. Looking forward, Severstal is determined to continue to develop and evolve in its corporate governance practices, thus continuing the process it began in 2006.

What are the governance initiatives we have implemented at Severstal?

We have continued to build on the corporate governance initiatives instigated in 2006 in Severstal’s everyday operations. Our corporate governance evolution is strengthened by the processes and controlled procedures that we have put in place:

These are as follows:

  1. separate Chairman and CEO,
  2. Chairman meeting independence criterion at appointment,
  3. independent non-executive senior independent director,
  4. Board consists of ten members – 50% of the board are independent non-executives in accordance with the Russian and UK Corporate Governance Code,
  5. audit committee consisting of three members, all of whom are independent non-executives,
  6. remuneration and nomination committee chaired by independent non-executive senior independent director,
  7. introduction of company Corporate Governance Code,
  8. adoption of the company’s new charter and Regulations on Board Committees,
  9. instigation of insider dealing regulations.

The following initiatives further complement the above processes:

  1. quarterly statements of Internal Audit and Risk Management to the Audit Committee prepared on the basis of International Financial Reporting Standards,
  2. new policy of information transparency (Severstal complies with the applicable laws of the Russian Federation and international corporate governance standards and ensures a high level of interaction between all company shareholders, the Board of Directors and management),
  3. participation of auditor in all the meetings of Audit committee, separate meetings between auditor and Audit committee members and its chairman,
  4. separate regular meeting between independent directors and with company CEO,
  5. formal annual evaluation of board’s performance at both external and internal levels,
  6. non-scheduled site visits from Chairman and Board members.

What corporate governance code do we observe?

Since the formation of its corporate governance standards, Severstal continues to follow the requirements of:

  1. Severstal Corporate Governance Code – available at www.severstal.com,
  2. the UK Corporate Governance Code, 2012 (former the Combined Code on Corporate Governance of the Financial Reporting Council) – available at www.frc.org.uk, and
  3. recommendations of the Corporate Conduct Code (2002) issued by the Federal Commission for the Securities Market of Russia – available at www.fkcb.ffms.ru.

What corporate governance principles are we adhering to?

Severstal’s Corporate Governance Code has been prepared following the recommendations of the earlier Code of Best Practice set out in section 1 of the Financial Reporting Council’s Code on Corporate Governance, and is based on the following main principles:

  • solid commitment to full alignment with shareholders’ interests,
  • unified, well-shaped business structure supported by a focused corporate strategy,
  • disciplined merger and acquisition strategy supported by a qualified majority of Board members,
  • reliance on a stable, deep-rooted and incentivised management team,
  • industry-leading disclosure practices and transparent corporate reporting,
  • solid platform for delivering superior, long-term returns to all our shareholders.

Along with the Corporate Governance Code and Charter of the company, the activities of Severstal’s management and supervisory bodies, as well as insider activities, are also governed by a set of internal corporate documents, such as:

  • General Shareholders Meeting Regulations (2006),
  • Board of Directors Regulations (2008),
  • Board Committees Regulations (2008),
  • Internal Audit Commission Regulations (2006),
  • General Director Regulations (2006), and
  • Insider Information Regulations (2011).

The full set of the company’s documents is available online at www.severstal.com. All the principles and rules presented in the company’s documents are largely compliant with the UK Combined Code of Corporate Governance, 2012. Severstal has a ‘standard listing’ for its depository receipts on the London Stock Exchange.

Moreover, Severstal complies with the Russian corporate governance law requirements and meets the corporate governance mandatory requirements of MICEX for Russian listed ‘B’ companies, such as: composition of the Board of Directors, formation of Board Committees, evaluation of the auditor’s opinion, set of internal documents etc.

Severstal is a member of the Russian Institute of Directors, the leading expert and resource centre for corporate governance, established by the largest Russian issuer companies to develop, incorporate and monitor standards of corporate governance in Russia.

How are we structured to ensure good, strong governance?

1 Audit Committee members: Martin Angle (Chairman), Ronald Freeman, Peter Kraljic

2 Remuneration and Nomination Committe members: Rolf Stomberg (Chairman), Christopher Clark, Alexey Mordashov

Governance calendar for 2012

Overall calendar of General Meetings of Shareholders, Board and its committees are shown below:

Governing bodiesJanFebMarAprMayJunJulAugSepOctNovDec
AGM     V      
EGM   V    V  V
In-person Board   VV  V  V 
Audit Committee   VV  V  V 
Remuneration and Nomination
Committee
   V   V  V