Annual Report & Accounts 2013
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Corporate governance statement

Severstal remains strongly committed to high standards of corporate governance. This is central to the businesses long term sustainability and continued strong performance of the business in a manner as well as vital for maintaining investor confidence.

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 develop and evolve in its corporate governance practices, 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. This evolution is being strengthened by the processes and procedures that we have put in place:

These are as follows:

  1. A separate Chairman and CEO,
  2. Appointing a chairman who met the criteria for independence at appointment
  3. Putting in place an independent non-executive senior director,
  4. Having a board that consists of ten members – 50 per cent of the Board consists of independent non-executives in accordance with the Russian and UK Corporate Governance Code,
  5. An audit committee consisting of three members, all of whom are independent non-executives,
  6. A remuneration and nomination committee chaired by an independent non-executive senior director,
  7. The introduction of company Corporate Governance Code,
  8. The adoption of the company’s new charter and Regulations on Board Committees,
  9. The 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 Standards for the Professional Practice of Internal Auditing (Standards),
  2. A 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. The participation of the independent auditor in all the meetings of the Audit committee, as well as separate meetings between the auditor and Audit committee members and its chairman,
  4. A separate regular meetings of independent directors with the company CEO,
  5. A formal annual evaluation of the Board’s performance at both external and internal levels,
  6. Non-scheduled site visits by the 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. The 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 from 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 one 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,
  • A unified, well-shaped business structure supported by a focused corporate strategy,
  • A 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,
  • A 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 internal 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 (2013),
  • 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 Corporate Governance Code 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: the composition of the Board of Directors, the formation of Board Committees, the evaluation of the auditor’s opinion, a set of internal documents.

Severstal is a member of the Russian Institute of Directors, the leading expert and resource centre for corporate governance, established by the largest Russian 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 (in red independent non-executive Board members)
2 Remuneration and Nomination Committe members: Rolf Stomberg (Chairman), Christopher Clark, Alexey Mordashov
3 Health, Safety and Environmental Committee members: Rolf Stomberg (Chairman), Peter Kraljic, Alexey Mordashov, Vadim Larin, Vladimir Lukin

Governance calendar for 2013

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

Governing bodiesJanFebMarAprMayJunJulAugSepOctNovDec
AGM     V      
EGM        V  V
In-person Board V  V  V  V 
Audit Committee V  V  V  V 
Remuneration and Nomination
Committee
 V     V  V 
Health, Safety and
Environmental Committee
       V  V 
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