Corporate Governance

The Role of the Board

The Board is responsible for the general management of the Company and has exclusive power to:

  • Determine the business priorities of the Company;
  • Convene Annual and Extraordinary General Shareholders’ Meetings, excluding cases mentioned in paragraph 8 of Article 55 of the Federal Law On Joint-Stock Companies;
  • Approve the agenda of the General Shareholders’ Meeting;
  • Determine the effective date when making a list of people who are entitled to participate in the General Shareholders’ Meeting, and other questions related to the preparation and holding of the Company’s General Shareholders’ Meeting that, according to provisions of Chapter VII of the Federal Law On Joint-Stock Companies, are the purview of the Board of Directors;
  • Adopt the agenda of the General Shareholders’ Meeting;
  • Increase the Company’s charter capital through the distribution of additional shares bound by the number and categories/types of authorised shares;
  • Place bonds and other emission securities in cases stipulated by the Federal Law On Joint-Stock Companies;
  • Determine the price (monetary value) of assets, and the price of emission securities to be placed or repurchased in cases stipulated by the Federal Law On Joint-Stock Companies;
  • Purchase shares, bonds and other securities placed by the Company in cases provided for by the federal Law On Joint-Stock Companies;
  • Appoint executive bodies of the Company and establish conditions for the early termination of their authorities, elect the Chairman of the Executive Board and appoint the members of the Executive Board;
  • Establish the level of remuneration and bonuses to be paid to the Chairman and members of the Executive Board;
  • Recommend the level of remuneration and bonuses to be paid to the members of the Revision Committee and determine the level of compensation for the Company’s auditor;
  • Recommend the level of any dividend payments and the payment procedure;
  • Use the reserve fund and other funds of the Company;
  • Approve the Company’s internal documents; exceptions to this include those documents which, according to the Federal Law On Joint-Stock Companies, the General Shareholders’ Meeting must approve, and any other internal documents which have to be approved by the Company’s executive bodies;
  • Create branches and other representative offices;
  • Approve major transactions in cases specified in Chapter X of the Federal Law On Joint-Stock Companies;
  • Approve transactions specified in Chapter XI of the Federal Law On Joint-Stock Companies;
  • Approve the Company’s registrar and its contract conditions, as well as the termination of this contract;
  • Determine the Company’s participation in other organisations, except in cases stipulated in subparagraph 18 of paragraph 1 of Article 48 of the Federal Law On Joint-Stock Companies;
  • Approve the Company’s strategic plans for a period exceeding three (3) years;
  • Approve the Company’s plans, annual budgets and investment programmes;
  • Approve CAPEX exceeding ten million US dollars ($10,000,000), or the rouble equivalent of this amount, if such CAPEX items were not provided for in the relevant approved annual budget;
  • Approve the terms of the share option programmes for the Company’s employees;
  • Approve mergers and acquisitions which exceed ten million US dollars ($10,000,000) in value, or the rouble equivalent of this amount, if such transactions were not provided for in the relevant approved annual Company budget;
  • Action any other issues as provided for by the Federal Law On Joint-Stock Companies.

Federal law prohibits the Board of Directors from acting on issues that fall within the exclusive remit of a General Shareholders’ Meeting.

The Company Charter requires a majority of the directors present at a Board meeting to vote for an action in order for it to be approved. The exception to this is when the Board is voting on a major transaction, when Russian legislation requires a unanimous vote. A Board meeting is considered to be duly assembled and legally competent to act when a majority of the Board members are present.

Board of Directors meetings are held in accordance with the annual schedule and as necessary, but not less than 5 times a year. The Board met 12 times during 2014.

Corporate Secretary

The Board of Directors elects a Corporate Secretary to support its activities and organise its work flow for the same term that the Board of Directors serves. The activities of the Corporate Secretary are governed by the respective regulation approved in 2013.

Chief Executive Officer

The Company’s Chief Executive Officer (CEO) is responsible for the day-to-day operations of the Company, with the exception of matters that fall within the exclusive remit of the Company’s General Shareholders’ Meeting, the

Board of Directors and the Executive Board.

The CEO also acts as Chairman of the Executive Board.

The CEO organises the implementation of decisions of the Company’s General Shareholders’ Meeting, the Board of Directors and the Executive Board.

The CEO acts in the name of the Company without warrant and represents the interests of the Company, conducts transactions, approves personnel, issues orders and provides direction to all employees of the Company.

The CEO is elected by the Board for a period of up to five years. His contract is signed by the Chairman of the Board of Directors and authorised by the Board. Contract conditions are approved by the Board of Directors.

Only upon approval of the Board of Directors may the CEO combine his position with other executive roles in the management of other organisations.

If the CEO is not able to carry out his responsibilities, the Board of Directors has the right to make a decision on the early termination of his powers and assign a new CEO.

Executive Board

The Company’s Board of Directors approves both the size of the Executive Board and the people who are to serve on the Executive Board after receiving proposals from the Chairman of the Executive Board. The size of the Executive Board must be optimal for constructive business discussions, as well as timely and effective decision-making.

The authority of the Executive Board is determined by the Company’s Charter.

The Executive Board is authorised to:

  • Approve prospective plans, as well as the business priorities of the Company and its subsidiaries;
  • Review the results of the activities of the Company’s subsidiaries;
  • Approve incentive programmes for employees of the Company and its subsidiaries;
  • Consider and adopt decisions on the signing of collective contracts and agreements by the Company and its subsidiaries;
  • Consider other issues, presented for consideration by a member of the Executive Board. The Executive Board has the right to summon the Company’s officials for reporting, acquire technical, economic, business and other information on the Company’s activities, as well as information on the activities of its subsidiaries, and to fulfill other duties within its area of competence.

Internal Control/Risk Management

The Board of Directors holds overall responsibility for ensuring that the Company maintains an adequate system of internal control and risk management, and for reviewing its effectiveness.

Internal control is also carried out by the Revision Committee, the activities of which are governed by the Company’s Charter and the Regulation on the Revision Committee. The Committee oversees and coordinates audits of the Company’s financial and economic activities. Its principal duties are to ensure that the Company’s activities comply with the applicable Russian legislation, do not infringe on shareholders’ rights, and that accounting and reporting do not contain material misstatements. The members of the commission are elected for one year at the General Shareholders’ Meeting and may not include the Chief Executive Officer or other members of the Board.

Cherkizovo Group’s Code of Corporate Governance was incorporated on January 11, 2010. On December 14, 2011, a special anonymous hotline for Company employees was set up.

Audit Committee

In 2014, the members of the Audit Committee were Mr Musheg Mamikonian, Mr Samuel Lipman and Mr Marcus Rhodes, who chairs the Committee. As a chartered accountant and a former E&Y audit partner, Marcus Rhodes possesses relevant financial experience.

The Audit Committee maintains a formal agenda of items that are to be considered at each Committee meeting and within the annual audit cycle.

The exclusive responsibilities of the Audit Committee are to:

  • Evaluate the candidates for the position of the Company’s independent auditor and provide the results of that evaluation to the Board of Directors;
  • Evaluate the conclusions of the Company’s independent auditor;
  • Evaluate the efficiency of the Company’s current internal control and risk management procedures, preparing suggestions for their improvement;
  • Analyse the approval system for nonstandard operations and develop suggestions on how these could be improved for the Board of Directors.

The Audit Committee is required to:

  • Provide the Board of Directors with the results of their assessment of candidates for the position of independent auditor and prepare their recommendations on which candidate should be appointed as the Company’s independent auditor;
  • Prepare recommendations regarding the amount of compensation to be paid to the Company’s independent auditor based on the nature and extent of their services;
  • Hold a competitive selection process for the position of independent auditor, if such as process is to be held;
  • Analyse and discuss with the independent auditor any major issues that appear in the course of auditing the Company’s financial accounts prior to the accounts being published;
  • Evaluate the opinions of the independent auditor and analyse management’s comments around these before providing these opinions to the General Shareholders’ Meeting (provided in the form of information materials for the AGM);
  • Check transactions made by affiliated persons of the Company;
  • Ensure the consistency of financial reporting prepared in accordance with international standards (IFRS, US GAAP);
  • Consider any breaches detected by the Internal Control Department, which controls the internal control procedures of the Company’s financial and economic activity and evaluates the efficiency of the internal control, risk management and corporate governance systems, and evaluate such breaches;
  • Review annual reports from the Internal Control Department;
  • Evaluate internal control and risk management procedures, and develop and provide the Board of Directors with suggestions and recommendations on how these could be improved;
  • Analyse and develop suggestions for the Board of Directors on how the Company’s approval system for nonstandard operations could be improved;
  • Prepare conclusions, either in response to requests by the Board of Directors or on their own initiative, for different issues within its remit, and annually provide the Board of Directors with reports on the work of the Audit Committee during the previous year;
  • Review reports, opinions and other documents from the Revision Committee regarding any breaches detected within a certain period;
  • Provide conclusions about breaches detected in the period under review for consideration at the Board of Directors’ meetings and suggest solutions for their elimination and future prevention;
  • Approve the work plans of the Internal Control Department;
  • Develop special tasks or projects for the Internal Control Department as necessary;
  • Analyse the activity and organisational structure of the Internal Control Department and take measures to avoid or eliminate unnecessary restrictions in its activity by either managing entities, Company officials or other Company personnel;
  • Discuss press releases regarding profits, financial results and the Company’s outlook, which are provided to analysts and rating agencies;
  • Take any other actions necessary for the Audit Committee to function effectively.

Personnel and Remuneration Committee

In 2014, the members of the Personnel and Remuneration Committee were Mr. Musheg Mamikonian, Mr. Marcus Rhodes and Mr. Vitaliy Podolskiy, who served as the Committee’s Chairman.

The Committee adheres to a formal list of issues within its area of responsibility that must be discussed at each meeting during the financial year.

The Committee’s main objective is to propose and issue recommendations to the Company’s Board on issues including:

  • The Company’s HR policy;
  • Adopting base performance targets to reward the Company’s Board of Directors, members of the Executive Board and the Chief Executive Officer (the Company’s management bodies).

The main tasks of the Committee include first examining, and then issuing recommendations to the Board on the following areas of policy:

  • Corporate recruitment;
  • Remuneration paid to members of the Company’s management bodies;
  • The human resources policy of the Company’s affiliates and subsidiaries;
  • Formation of the Executive Board;
  • Appointment of the Company’s Chief Executive Officer, Chairman of the Executive Board, and members of the Executive Board;
  • Recruitment and nomination of independent directors;
  • Determining remuneration paid to the Company’s key executives;
  • Corporate management structure;
  • Employee training policy, including for key executives;
  • Other issues as decided by the Board or instructed by the Board Chairman;

 

Investments and Strategic Planning Committee

In 2014, the members of the Investments and Strategic Planning Committee were Mr. Sergei Mikhailov, Mr. Samuel Lipman, Mr. Evgeny Mikhailov and Mr. Musheg Mamikonian, who served as the Committee’s Chairman.

The Committee adheres to a formal list of issues within its area of responsibility that must be discussed at each meeting during the financial year.

The Committee’s main objective is to propose and issue recommendations to the Company’s Board on a number of issues, including:

  • The Company’s priority activities;
  • The Company’s development strategy; its strategic goals and objectives, both long-term and annually, and the Company’s long-term investment programmes;
  • In accordance with the above-mentioned goals the Committee is also responsible for:
  • Considering and then making recommendations to the Board on issues related to the Company’s strategic planning and investment policy;
  • Evaluating the efficiency of interaction between the Company’s structural units, whose responsibilities, according to the Company’s internal documents, include the management of strategic planning and investment processes, together with the Board, and issuing recommendations to the Board based on this evaluation;
  • Evaluating the efficiency of the Company’s long-term performance and issuing recommendations to the Board to improve the Company’s development strategy and specific business direction. This evaluation is based on the need to raise corporate efficiency and takes a range of factors into account, including product and market trends, as well as the performance of the Company and its competitors;
  • Working together with the Company’s Chief Executive Officer, Executive Board, and other specialised business lines.