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Board of Directors composition Corporate Governance Statement
General Meeting of Shareholders The Board of Directors The Board Committees The Audit Committee The Remuneration and Nomination Committee Health, Safety and Environmental Committee Sole Executive Body Supervisory Bodies of the CompanyRisk management framework
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.
Key responsibilities of the Board of Directors:
The Board’s activity is regulated under Russian law, the company’s Charter (2015) and Regulations for the Board of Directors (2014).
What has changed in the membership of the Board of Directors in 2015?
Following Severstal’s focus on ensuring leading standards of corporate
governance, the company’s shareholders elected three new Independent
Non-Executive Directors to the Board of Directors at the AGM held on 25 May
2015, they are:
These appointments coincided with the retirements of Christopher Clark, Independent Non-Executive Chairman, Rolf Stomberg, Senior Independent Director, and Martin Angle, Independent Non-Executive Director, each of whom had served on the company’s Board for almost nine years since Severstal’s IPO on the London Stock Exchange in 2006 and made immense contributions to the success of the company.
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 (Alexey Mordashov), ﬁve Independent Non-Executive Directors (Sakari Tamminen, Philip Dayer, Alun Bowen, Vladimir Mau and Alexander Auzan), two Non-Executive Directors (Alexey Mordashov and Mikhail Noskov) and three Executive Directors (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 corporate 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, 2014.
Details of our Directors can be found in their biographies.
The Board reviews the independence of all Independent 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 Non-Executive Directors play a leading role in corporate accountability and governance through their membership and participation in the Board committees.
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.
Alexey Mordashov is 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:
The Chief Executive Ofﬁcer’s role is to:
Following the resolution of the company’s shareholders dated 10 September 2014, the powers of Severstal’s CEO were transferred to a new managing company, Severstal Management, effective from 1 January 2015. Find more information on Severstal’s managing company in ‘Sole Executive Body’ section below.
Why our Board is the right team to deliver long-term success to the business?
The Severstal Board, which comprises ten members, has half being Independent Non-Executive Directors, whose role is to challenge the management team. Their ability to act as a check and balance is underlined by the high calibre and broad experience of our Independent Non-Executive Directors.
Severstal’s Chairman is Alexey Mordashov, who has worked for Severstal since 1988. Alexey stepped down as CEO of Severstal Management and was elected as Chairman of the Board of Directors on 26 May 2015. In his new role Alexey is focusing on strategic planning, hiring and development of the key personnel, development of the Business System of Severstal and corporate culture. Alexey is actively involved in quarterly performance reviews, and setting targets for the annual and strategic business plans.
Severstal’s Senior Independent Director is Sakari Tamminen. Sakari is Chairman of the Nomination and Remuneration Committee on Severstal’s Board. Sakari has extensive relevant experience at Board level in steel and metals companies including being the President and CEO of the Finnish steel and metal construction company Rautaruuki Corporation from 2004 to 2014.
The other Independent Non-Executive Directors are: Philip Dayer, who has an impressive ﬁnancial background and signiﬁcant experience of advising international companies, including the CIS; Alun Bowen, who had an outstanding career at KPMG over many years and has relevant experience both at Board level and in advisory roles, including being a member of the Supervisory Board of Eurasian Bank JSC; Vladimir Mau, the Rector of The Russian Presidential Academy of National Economy and Public Administration, has extensive experience in economic advisory roles, was the advisor to the Russian Prime Minister from 1992-1993 and was also deeply involved in implementing economic reform in Russia; and Alexander Auzan, Dean of the Faculty of Economics in Lomonosov Moscow State University and founder of the National Projects Institute, one of Russia’s leading economists and is currently a member of the Presidential Economic Council.
What have we done in 2015 to communicate with our shareholders?
In October 2015, Sakari Tamminen and Vadim Larin led Severstal’s senior management team in London at the company’s ﬁfth annual Capital Markets Day. The speakers outlined Severstal’s commitment to its strategy and how it is enabling the company to remain resilient in this volatile market environment. They emphasised the following areas of Severstal’s strategy: maintaining high proﬁtability, deploying prudent CAPEX, and further enhancing customer care. As can be seen from the company’s ﬁnancial results for 2015, Severstal continues to be one of the most proﬁtable steel companies globally. The management also stressed that health and safety continues to be a key focus of the company. They commented that in 2015, the company reduced its Lost Time Injury Frequency Rate (“LTIFR”) over the previous year and made signiﬁcant investments in improving working and living conditions of the personnel and residents of the regions in which the company operates. Concluding the event, management reiterated the company’s strategic targets and reiterated to those present that they remain rigorously focused on delivering value to shareholders.
What is the process for appointing new Directors to the Board?
Each member of the company’s Board must be an individual.
Members of the Board should:
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 his votes to one candidate or distribute them between two or more candidates. The 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 has to be re-elected at a GMS. Those elected to the company’s Board may be re-elected an unlimited number of times.
New directors to the Board participate in an induction programme 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 2015?
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 2015, Severstal’s Board of Directors held four meetings in person and 20 meetings in absentia.
These are the key issues reviewed by the Board of Directors in 2015:
The attendance of the company’s directors at the in-person meetings of the Board and its committees during 2015 is shown below:
1 New Board members elected at the company’s
AGM on 25 May 2015
Moreover, Independent Non-Executive Directors meet separately as a group during the year. There were four such meetings in 2015.
The Board and Committee members have direct and continuous access to Board and Committee materials via an 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 carries out an annual self-evaluation of its performance based on the individual contribution of each Board member, and has an external evaluation once every three years, as required by the UK Corporate Governance Code, 2014.
The Board recognised that an external valuation of board effectiveness, in accordance with the UK Corporate Governance Code was due to be carried out in 2015. However, in view of the fact that there have been major changes in the composition of the Board in the last 12 months, it was decided that more value would be gained from carrying out the next external evaluation in 2016.
What is the role of our Senior Independent Director?
Sakari Tamminen is Severstal’s Senior Independent Director and Chairman of the Remuneration and Nomination Committee.
The Senior Independent Director’s role is to:
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:
Artem Bobulich has been the Corporate Secretary of PAO Severstal since 20 January 2014. Artem Bobulich (year of birth: 1983) has been working in the company’s Corporate Secretary Team of the Legal Affairs Directorate since 2007. He graduated from the Cherepovets State University with foreign philology specialisation and Moscow State Law Academy.
Activity of the Corporate Secretary is governed by the company’s Regulations for the Corporate Secretary approved by the Board of Directors on 22 July 2015. Please refer to www.severstal.com for more information.
What is our remuneration and compensation policy for the Board?
By the decision of the GMS, Board members may be paid a remuneration during the execution of their duties, and be reimbursed for expenses incurred in connection with their functions as Board members. The amount of such remuneration or compensation is subject to approval by 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.
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 2015 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.
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 governing 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. Decisions on amending the company’s Charter or its adoption in a new edition are taken by a qualiﬁed majority shareholder vote at the GMS.
In order to bring the company’s Charter in line with the Russian law and MICEX rules, the AGM approved a new edition of the Company’s Charter on 25 May 2015.
The new edition of the Charter is available on www.severstal.com.