Annual Report & Accounts 2013
Severstal Annual Report 2013 Home > Governance > Corporate governance statement > The Board of Directors
 

The Board of Directors

What is the role of our Board of Directors and what are its key responsibilities?

Severstal’s Board of Directors is responsible for the general management and performance of the company’s operations, including the discussion, review and approval of its strategy and business model, and closely monitoring its financial and business operations both by segment and as a whole.

The Board’s main objective is to run the company in a way that increases shareholder value in the medium and long term. Short-term financial and operational issues, such as debt levels and costs, also receive close attention.

The Board’s decisions are based on the best interests of all stakeholders. This can mean making difficult decisions in complex situations.

The Board is also responsible for disclosure and dissemination of information about the company’s operations, for implementing the company’s information policy and for matters dealing with the company’s insider information.

The Board has authority in decisions concerning major aspects of Severstal’s activity, except in matters within the competence of the GMS.

The Board’s activity is regulated by Russian law, the company’s Charter (2013) and Regulations for the Board of Directors (2008).

Key responsibilities of our Board of Directors:

  1. The company’s strategic direction,
  2. The review of consolidated budget and submission of appropriate recommendations,
  3. The review of appointment and compensation policy applicable to the company’s senior executives and the issue of recommendations regarding such policy,
  4. The approval of issues relating to calling and holding the GMS, which fall within its competence under the applicable law,
  5. The dividend policy,
  6. The placement of the company’s bonds and other issued securities in cases provided by law,
  7. The approval of the price (estimated value) of assets, the price of placement and redemption of issued securities,
  8. Internal Audit Commission and auditor fees,
  9. The recommendation of dividend amounts for approval of the GMS,
  10. The use of the emergency fund and other funds of the company,
  11. The opening of the company’s branches and representative offices and their liquidation,
  12. The approval of the company’s registrar and contract relations with it,
  13. The approval of transactions with interested parties (as this term is defined in accordance with Russian law) with the value of each transaction up to two per cent of Severstal assets’ book value on the date such a transaction is agreed,
  14. The approval of transaction amounts exceeding 10 per cent of Severstal assets’ book value on the date such a transaction is agreed,
  15. The approval of transactions to acquire: (i) shares or participation interests, or rights to manage such shares or participation interests, (ii) fixed or intangible assets if the amount of the transaction specified in sub-clauses (i) or (ii) exceeds the equivalent of US$500 million,
  16. The approval of the company’s Corporate Governance Code and internal documents regulating Board Committees’ activity and insider relations.

Who is on our Board?

According to the company’s Charter, Severstal’s Board comprises ten members. Our Board has a strong independent element. Its current structure represents a balance between the Chairman (Christopher Clark), five Independent Non-Executive Directors including the Chairman, who met the independence criteria on his appointment as required by the UK Corporate Governance Code, 2012 (Christopher Clark, Rolf Stomberg, Martin Angle, Ronald Freeman and Peter Kraljic), one Non-Executive Director (Mikhail Noskov) and four Executives (Alexey Mordashov, Vadim Larin, Alexey Kulichenko and Vladimir Lukin). Severstal strongly believes that maintaining such a balance on the Board is a prerequisite for good decision-making and governance.

The proportion of Independent Non-Executive Directors on the Board guarantees equal regard for the interests of all shareholders. The Board considers all of its Independent Non-Executive Directors to be independent, in line with the UK Corporate Governance Code, 2012.

Details of our individual Directors can be found in their biographies.

Board composition

  
Executives40%
Non-Executives60%
Independent50%
Male100%
Female0%

The Board reviews the independence of all Independent and Non-Executive Directors annually, and has determined that all such directors are independent and have no cross-directorships or significant links, which could materially interfere with them exercising their independent judgment. The company’s Independent and Non-Executive Directors play a leading role in corporate accountability and governance through their membership and participation in the Audit Committee and the Remuneration and Nomination Committee.

How are the roles of Chairman and CEO clearly differentiated?

The roles of the company’s Chairman and CEO are separate and their responsibilities are clearly defined in the company’s organisational documents and are regulated by law.

Christopher Clark is Severstal’s Chairman of the Board of Directors. The Board Chairman is elected from among its members by a majority vote.

The Board Chairman’s role is to:

  • Lead the Board and with other members of the Remuneration and Nomination Committee lead the recruitment of new directors,
  • Ensure constructive relations between executive and non-executive directors,
  • Ensure that all Board members are able to maximise their contribution to the Board,
  • Provide strategic insight from his wide-ranging business experience and contacts built up over many years,
  • Provide a sounding Board for the CEO on key business decisions and challenge proposals where appropriate,
  • Preside over the GMS,
  • Meet with shareholders on governance matters and be an alternative point of contact to the CEO for shareholders on other matters. Alexey Mordashov is Severstal’s CEO. As required by Severstal internal documents, the company’s CEO cannot be elected as the Board Chairman, which is in line with the UK Corporate Governance Code, 2012.

The CEO’s role is to:

  • Lead the business and the rest of the management team,
  • Lead the development of the company’s strategy with input from the rest of the Board,
  • Lead the management team in company acquisitions and new build decisions,
  • Ensure organisation, status and accuracy of the company’s accounting practices and the timely provision of appropriate authorities with financial reports,
  • Bring matters of particular significance or risk for discussion and consideration of the Board if appropriate,
  • Be the principal public face of the company with shareholders, customers, suppliers and the industry in general,
  • Cooperate with the company’s trade unions to protect the interests of the company’s employees and communicate with state and municipal authorities.

Why our Board is the right team to deliver the long-term success of the business?

The Severstal Board, which comprises ten members, has a majority of Independent Non-Executive Directors, whose role is to properly challenge the management team. Their ability to act as a check and balance is underlined by the high calibre nature and broad experience of our Non-Executive Directors.

Severstal’s Chairman is Christopher Clark, who previously had a career spanning about 40 years at Johnson Matthey plc, the specialty chemicals and precious metals Group. Christopher previously chaired RusPetro plc, an independent oil and gas producer conducting oil exploration and production activities in the Krasnoleninsk field in Western Siberia, one of the largest oil producing regions in Russia. He earlier chaired Associated British Ports, Urenco Limited and Wagon plc.

Severstal’s Senior Independent Director is Rolf Stomberg. Rolf is chairman of the nomination and remuneration committee and HSE on Severstal’s Board, and was previously a senior executive with BP for more than 30 years as well as a director of medical technology group Smith & Nephew. Rolf is chairman of the supervisory Board of LANXESS, a global chemical company.

The other independent directors are: Martin Angle, a highly respected investment banker, who has Board level experience at a number of listed companies; Ronald Freeman, who was Head of the Banking Department of the European Bank of Reconstruction and Development; and Peter Kraljic, who had a highly distinguished career at McKinsey over 32 years where he held a number of senior positions.

What have we done in 2013 to set best corporate governance standards?

In June 2013, Ronald Freeman participated in the St. Petersburg International Economic Forum. The Forum represents a unique opportunity for global leaders to address topics at the forefront of the world agenda. Ronald Freeman took part in the panel discussion on Enhancing Russian Corporate Governance Standards.

In November 2013, Christopher Clark and Alexey Mordashov led Severstal’s senior management team in London at the company’s annual Capital Markets Day. Severstal’s presenting team updated investors and banking analysts on the delivery of the company’s strategy and objectives, as well as the outlook for the global steel and steel-related mining markets. The team demonstrated that Severstal is well positioned to continue its outperformance, helped by further internal efficiencies and prudent cash management. This included an asset structure aligned with the strategic priorities, further progress in implementing the Business System of Severstal and continued targeted investments. More details are available on www.severstal.com.

In December 2013, the Grand Ceremony of 2013 National Director of the Year award took place in Moscow hosted by the Association of Independent Directors, the Russian Union of Industrialists and Entrepreneurs, Moscow Stock Exchange and PwC.

Christopher Clark, Chairman of Severstal’s Board of Directors, was recogni sed as one of the best three Chairmen in Russia. He was recogni sed as one of two laureates in the Best Chairman of the Board of Directors category at the National Director of the Year awards ceremony.

When receiving the award, Christopher Clark commented: “I would like to thank the hosts and sponsors of this wonderful ceremony. It is an excellent idea that we are glad to promote. I believe it is a privilege and achievement for us to take part in this annual ceremony.”

Mr. Clark emphasised that a high level of confidence and willingness to challenge are integral personal characteristics of the Independent Director. Therefore, independence is both a mindset and a specific decision-making approach.

Along with Christopher Clark, Severstal’s Corporate Secretary, Oleg Tsvetkov, who won the award in the Best Corporate Secretary category in 2008, was also present at the awards ceremony. This year he has announced the winners in this category.

Severstal’s Independent Directors have previously won numerous laureates in the Director of the Year award category, in particular:

  • 2012 - all five of the company’s Independent Board members and its Corporate Secretary were named amongst the 50 best Independent Directors, the 25 Best Chairmen of the Board of Directors, and the 25 best Corporate Secretaries. More details are available at www.severstal.com and www.directorgoda.ru.
  • 2011 – Ronald Freeman, Independent Non-Executive Director and Member of the Audit Committee, was honoured as one of the best in the Independent Director category
  • 2008 – Rolf Stomberg, Senior Independent Director, was nominated as one of the best in the Independent Director category

What is the process for appointing new people to the Board?

Each member of the company’s Board must be an individual.

Members of the Board shall:

  • Act conscientiously and responsibly in the best interests of all shareholders and the entire company,
  • Be possessed of appropriate professional skills,
  • Devote sufficient time to the performance of their duties as a member of the Board so as to work efficiently,
  • Once elected, give up representation of the interests of any group of persons in relation to the company, and act only in the best interests of all shareholders and the entire company, and
  • Disclose in good faith full information about their interest in any transactions the company intends to enter into.

Our Board members are elected by the company’s shareholders through cumulative voting at the GMS, for a term of office until the next AGM.

At cumulative voting, the votes of each shareholder are multiplied by the number of persons to be elected to the company’s Board. A shareholder may give all of its votes to one candidate or distribute them between two or more candidates. Candidates with the greatest number of votes are considered elected. If a Board member elects to terminate their term of office the whole body of the Board is to be re-elected at a GMS. Those elected to the company’s Board may be re-elected an unlimited number of times.

Directors new to the Board are given background information on the company when they take office. This includes details of the company’s operations and procedures, as well as information on what is required from them in their role according to the company’s internal documents. This includes Severstal’s Corporate Governance Code, applicable corporate governance law, and descriptions of best practice to help ensure their early effective contribution to the company.

What has the Board done during 2013?

Meetings of the Board of Directors are held in person or in absentia when necessary.

Board meetings are convened by the Board Chairman at the Board’s own initiative, at the request of the company’s Board member, Internal Audit Commission, Auditor, executive body or shareholder (s) possessing in aggregate at least two per cent of the company’s voting shares.

In 2013, Severstal’s Board of Directors held 4 meetings in person and 42 meetings in absentia.

These are the key issues reviewed by the Board in 2013:

  • Board recommendations with the list of candidates to the company’s Board, Internal Audit Commission and auditor for approval by the company’s shareholders at the GMS.
  • Proposals from the company’s shareholders with items to the GMS’s agenda and candidates to the company’s Board, Internal Audit Commission and Auditor for approval by the company’s shareholders at the GMS.
  • Issues relating to convocation and conducting of the company’s GMS.
  • Recommendations to the GMS on the amount of dividends to be paid-out.
  • Election of the Board Chairman, Senior Independent Director and members of the Board Committees.
  • Approval of the Auditor’s fee for 2013.
  • Approval of the company’s financials for FY2012, 1 Q2013, 1 H2013 and 9 M2013.
  • Issues relating with operating results of the company’s divisions.
  • Issues relating with the issue of the company’s bonds.
  • Approval of the company’s Corporate Governance Code and Regulations for the company’s Board Committees. 
  • The company’s budget for 2014.
  • Liquidation of the company’s representative office in Tolyatti.
  • Transactions with interested parties.

The attendance of the company’s directors at the meetings of the Board and its committees during 2013 is shown below:

Member of the BoardNumber of Board in-person meetings possibleNumber of Board meetings attendedAudit Committee meetings attended (out of 4 meetings)Remuneration and Nomination Committee meetings attended (out of 3 meetings)Health, Safety and Environmental Committee meetings attended (out of 2 meetings)
Christopher Clark444*32*
Rolf Stomberg444*32
Martin Angle4443*-
Ronald Freeman4443*1*
Peter Kraljic4443*2
Alexey Mordashov44-3-
Mikhail Noskov442*--
Vadim Larin421*-2
Vladimir Lukin421*-2
Alexey Kulichenko444*--

* this means that the specified Director is not a member of that Committee, although he attended the meeting at the invitation of the Chairman of the Committee.

Moreover, Independent Non-Executive Directors meet separately during the year. There were four such meetings in 2013.

Board and Committee members have direct and continuous access to Board and Committee materials via a electronic system, which also serves as an archive for Board and Committee materials – and as a way to vote in Board meetings where members are able to participate remotely.

How do we ensure we have an effective Board?

The Board makes an annual self-evaluation of its performance based on the individual contribution of each Board member, and on an external evaluation once every three years, as required by the UK Corporate Governance Code, 2012.

The Board performed a self-evaluation of its performance for 2013 based on the individual contribution of Board members. The self-evaluation questionnaire was designed to identify the Board’s strengths and areas for development.

The performance evaluation questionnaire contained three categories of questions: Board composition and structure, Board meetings and core processes, and Board engagement in the Company’s business issues. It found that there was a positive dynamic in Board performance during 2013, driven by the active participation of Independent Directors in Board and Board committees’ activities. The Board members singled out several strong characteristics of the Board in 2013, including the appropriate number of Board members, the fact that the Board is complemented effectively by the Committees as well as a clear set of policies, procedures and guidelines for the Board’s operation, appropriate frequency and logistics of the Board meetings, objective and independent functioning of the Board without undue influence from the company’s management. It concluded that the board was good value to the management team.

The Board underlined some areas for improvement, including more effective succession management and the dedication of more time to identifying its own improvement opportunities.

What is the role of our Senior Independent Director?

Rolf Stomberg is Severstal’s Senior Independent Director, Chairman of the Remuneration and Nomination Committee and Health, Safety and Environmental Committee.

The Senior Independent Director’s role is to:

  • Work with the Chairman on the Board evaluation,
  • Lead the evaluation of the Chairman,
  • Meet major shareholders,
  • Chair meetings of the Independent and Non-Executive Directors when the Chairman is not present.

Details of Rolf Stomberg’s biography can be found on the page Board Composition.

What is the role of our Corporate Secretary?

The Corporate Secretary ensures Severstal’s compliance with the requirements of applicable law, the company’s Charter and internal documents regulating the needs and interests of the company’s shareholders. The Corporate Secretary is responsible for safeguarding the rights and interests of shareholders, as well as establishing transparent and effective regulations to secure the rights of shareholders.

The Corporate Secretary’s role is to:

  • Facilitate activities of the Board and its committees,
  • Keep the Board and its committees informed on governance matters,
  • Facilitate the induction of new directors to the Board,
  • Arrange preparation and holding of the company’s GMS,
  • Ensure disclosure of information as required by the applicable law,
  • Assist in the ongoing development of the company’s policies,
  • Ensure communication with the company’s shareholders, GDR holders as well as Russian and Foreign stock market regulators.

Before January 2014 the Corporate Secretary of Severstal was Oleg Tsvetkov (PhD, MBA). Oleg was awarded the ‘Corporate Governance Director – Corporate Secretary’ (2008) award and headed the list of Directors on Corporate Governance 2010–2013 in the steelmaking sector. Since 20 January 2014 the Corporate Secretary of Severstal became Artem Bobulich.

What is our remuneration and compensation policy for the Board?

By the decision of the GMS, Board members may be paid remuneration during execution of their duties, and any expenses incurred in connection with their functions as Board members may be reimbursed. The amount of such remuneration or compensation is to be approved by the decision of the GMS only. Should any Board member decide to resign before their term of office expires, such a Board member is paid pro rata in proportion to the term of office that expired prior to resignation. The Board Chairman receives an annual special incentive fee, the amount of which is also subject to approval by the GMS.

We reimburse our Board members’ expenses incurred in connection with the performance of their duties as Board members, including transport, accommodation and mailing costs, as well as costs relating to the translation of company documents or materials that they are provided with.

What is our share capital structure?

Severstal share capital comprises ordinary shares with a nominal value of RUB 0.01 each. The authorised share capital of Severstal as of 31 December 2013 comprises 837,718,660 issued and fully paid shares.

All Severstal shares carry equal voting and distribution rights. There are no restrictions or limitations on voting rights for holders of Severstal shares and GDRs.

Equity capital structure as at December 31, 2013Share, % Shareholders equity capital
Alexey Mordashov *79.17%
Institutional investors and employees20.83%
Total100%

* Through participating in Severstal’s privatisation auctions and other purchases, Alexey Mordashov (the ‘Majority Shareholder’) had purchased shares in Severstal such that as at 31 December 2013 he controlled indirectly 79.17 % of Severstal’s share capital.

What are the recent changes to the company’s Charter?

Severstal’s Charter and any other internal documents regulating the activities of the Company’s bodies, can be amended or adopted in a new edition by the resolution of the GMS only, as required by the applicable law of Russia and the company’s Charter. Decision on the company’s Charter amendment or its adoption in the new edition is taken by a ¾ qualified majority shareholder vote at the GMS.

On 13 June 2013, the AGM approved the company’s Charter in the new edition.

On 06 December 2013 the Board approved the liquidation of the company’s representative office in Tolyatti and introduction of respective amendments to the company’s Charter.

The new edition of the Charter and Charter Amendments are available at www.severstal.com.

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