Appendix to the Annual Report of Mechel PAO for the accounting period of 2020
REPORT
on Compliance with the Principles and Recommendations of
the Corporate Governance Code
Statement of the Board of Directors of Mechel PAO on compliance with the Corporate Governance Principles prescribed by Code of Corporate Governance
Mechel PAO is using the model of corporate governance (hereinafter referred to as the "Model") built up in compliance with the requirements of the legislation of the Russian Federation to the securities issuers whose shares are in the MOEX quotation list of A level. The Model of Corporate Governance of the Company ensures the effectiveness of the system of Corporate Governance, meeting the interests of the shareholders and compliance with the high standards of information disclosure. The Model also implies creation and support of the effective system of risks management and of the internal control, clear distinguishing between the domain of activities and powers of each governance body of the Company, employing a mechanism of evaluating the performance by them of their functions and duties.
In accordance with the Charter of Mechel PAO the following are the governing bodies of the Company:
- General Shareholders' Meeting;
- Board of Directors;
- Management Board;
- Chief Executive Officer.
The current activities of the Company are governed by its sole executive body (Chief Executive Officer) and by its collegial executive body (Management Board). The Chief ExecutiveOfficer and the Management Board shall report to the General Shareholders' Meeting of the Company.
The Charter of the Company does not provide for bodies of control over financial and economic activities. Considering that the Company has an effective internal audit system and the Board of Directors' Audit Committee, which consists of independent directors, the current version of Mechel PAO's Charter does not provide for an audit commission.
The current version of Mechel PAO's Charter does not provide for an audit commission. The audit of financial and economic activities is carried out by an auditor on the basis of an agreementwith him in accordance with the legal acts of the Russian Federation.
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Description of the methodology that was used by the Company to evaluate the compliance with the Corporate Governance Principles prescribed by Code of Corporate Governance:
The evaluation of the compliance by the Company with the Corporate Governance Principles prescribed by Code of Corporate Governance was performed in accordance with the Recommendations of the Code of Corporate Governance (letter of the Central Bank of the Russian Federation No. ИН-06-52/8 dd. February 17th 2016 ). The table enclosed contains the explanations of the main reasons, factors and (or) circumstances resulting in the Company's incompliance or partial compliance with the Corporate Governance Principles prescribed by Code of Corporate Governance and the description of the mechanisms and tools of corporate governance that are used by Company instead of (to replace) the ones recommended by Code of Corporate Governance as well as the planned (proposed) actions and measures to improve the model and practices of corporate governance and the timelines for the implementation of such measures and activities.
The Company is in compliance with the most of the Corporate Governance Principles recommended by Code of Corporate Governance, mainly the following:
- Equal and just attitude to all the shareholders is ensured when they are exercising their rights related to participation in corporate governance;
- The shareholders are provided with equal and just opportunities to participate in the profit of the Company by way of dividends;
- Equitable treatment of shareholders is ensured in respect of all types of shareholders (holders of shares of one category (class), including minority (minor) shareholders and foreign shareholders) and equal attitude of the Company towards them;
- Reliable ways of registering and monitoring rights for shares are ensured as well as a possibility of a free and unhindered alienation of shares by shareholders;
- The shareholders are provided with information and documents in accordance with the principles of equal and unhindered access;
- The Board of Directors is an effective professional governance body of the Company that is authorized to make independent objective judgements and to make decisions on behalf of the Company and its shareholders;
- the Board of Directors consists of a sufficient number of independent directors;
- BoD members are duly informed and act in good faith and reasonably in the interests of the Company, with due diligence and care;
- BoD Sub-committees have been established for the purpose of preliminary consideration of the most important questions related to the activities of the Company;
- a subdivision was established to perform functions of the Corporate secretary of the Company, including the following: effective current interactions with the shareholders, coordination of the activities of the Company related to the protection of shareholders' rights and interests, ensure the effective work of the Board of Directors;
- payment of remuneration to BoD members, executive bodies and other key management staff of the Company is performed in accordance with the remuneration policy followed by Company; the level of the remuneration paid by Company is sufficient to attract, motivate and retain the staff with necessary competencies and qualification;
- the incentive system for BoD members provides for the correlation between the financial interests of BoD directors and long-term financial interests of the shareholders.
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No. | Corporate governance principles | Criteria for assessment of compliance with the | Status of | Explanations of deviation from the criteria for assessment of | ||
corporate governance principles | compliance with | compliance with the corporate governance principles | ||||
the corporate | ||||||
governance | ||||||
principle | ||||||
1.1 | The Company shall ensure equal and fair treatment of all shareholders as regards their implementation of the right to participate in the company management. | |||||
1.1.1 | The Company creates the most favorable | 1. The Company's internal document approved by the | Compliance | |||
conditions for the shareholders to participate in | General Shareholders' Meeting regulating the procedures for | |||||
the meeting, conditions for development of the | the General Shareholders' Meeting is publicly available. | |||||
sound stance on the agenda issues of the | 2. The Company provides accessible way of communication | |||||
General Shareholders' Meeting, coordination | with the Company such as "hotline", e-mail or Internet | |||||
of own actions, as well as the chance to voice | forum allowing the shareholders to share their opinion and | |||||
own opinion on the issues under consideration. | send questions with regard to the agenda while preparing for | |||||
the general meeting. The above actions were taken by the | ||||||
Company shortly before each general meeting held in the | ||||||
reporting period. | ||||||
1.1.2 | The procedure of notifying of the general | 1. The notice of the General Shareholders' Meeting is | Compliance | |||
meeting and the materials to be submitted for | available (published) on the Internet website no less than 30 | |||||
the general meeting gives a chance for the | days before the general meeting. | |||||
shareholders to be duly prepared for | 2. The place of the meeting and the documents necessary for | |||||
participation in the meeting. | accessing the premise are specified in the notice of the | |||||
meeting. | ||||||
3. The shareholders were provided with the access to the | ||||||
information about who proposed the agenda issues and who | ||||||
nominated the candidates to the Board of Directors and the | ||||||
Revision Commission of the Company. | ||||||
1.1.3 | When preparing for and holding the general | 1. In the reporting period, the shareholders had a chance to | Criterion 1) is complied with partially: In view of COVID-19 related | |||
meeting the shareholders had a chance to | ask questions to the members of the executive bodies and the | restrictions, the annual general shareholders in 2020 was in form of absent | ||||
receive the information about the meeting and | members of the Board of Directors of the Company shortly | voting. Such form does not provide for the personal presence of both, the | ||||
related materials freely and in a timely manner, | before and during the General Shareholders' Meeting. | Partial compliance | shareholders and the executive bodies of the Company, and members of the | |||
ask questions to the executive bodies and | 2. The Board of Directors' stance (including special opinions | Board of Directors of the Company, as well as broadcasting the meeting | ||||
members of the Board of Directors, network | entered into in the minutes) on each agenda issue of the | . Nevertheless, the Company provides its shareholders with an opportunity | ||||
among themselves. | general meeting held in the reporting period was included | of asking their questions: on the eve of the shareholders' meeting, the | ||||
into the materials to the General Shareholders' Meeting. | questions can be sent to our corporate e-mail address mechel@mechel.com; | |||||
3. The Company provided the shareholders, who were | ir@mechel.com; | |||||
entitled to the same, with access to the list of persons entitled | On the website of the Company (in the materials for the shareholders | |||||
to participate in the general meeting starting from the date | meetings) there is information that representatives of the Investor Relations | |||||
when the Company received it, in all general meeting held | Department of the Company will be able to answer questions from | |||||
in the reporting period. | shareholders by phone: + 7-495-221-8888, and by email: ir@mechel.com | |||||
1.1.4 | The shareholder's right to request convocation | 1. In the reporting period, within 60 days after the end of the | Compliance | |||
of the general meeting, nominate candidates to | relevant calendar year the shareholders had a chance to | |||||
the governing bodies and submit proposals for | submit proposals for inclusion into the agenda of the annual | |||||
inclusion into the agenda of the general | general meeting. | |||||
meeting was not associated with the needless | 2. In the reporting period, the Company did not refuse to | |||||
complexities. | accept proposals for the agenda or nominations to the | |||||
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governing bodies because of misprints or other minor | |||||||
deficiencies in the shareholder's proposal. | |||||||
1.1.5 | Each shareholder had a chance to freely | 1. The internal document (internal policy) of the Company | Compliance | ||||
exercise the voting right in the simplest and the | contains provisions stating that each participant of the | ||||||
most convenient way for him or her. | general meeting can request a copy of a bulletin filled in by | ||||||
them and certified by the Tabulation Commission before the | |||||||
end of the relevant meeting. | |||||||
1.1.6 | The procedure of the general meeting | 1. There was sufficient time for reports on the agenda issues | Criterion 1: In view of COVID-19 related restrictions, the annual | ||||
established by the Company provides equal | and time for their discussion at the General Shareholders' | general shareholders in 2020 was in form of absent voting. | |||||
opportunity for all those present at the meeting | Meeting in the form of a meeting (joint presence of | Criterion 2) is complied with partially: In view of COVID-19 related | |||||
to voice their opinion and ask questions they | shareholders) in the reporting period. | Partial compliance | restrictions, the annual general shareholders in 2020 was in form of absent | ||||
are interested in. | 2. Candidates to the governing and supervision bodies of the | voting. Such form does not provide for the personal presence of both, the | |||||
Company were available for answering the shareholders' | shareholders and the nominees to the governing and supervision bodies of | ||||||
questions at the meeting where their nominations were put | the Company. | ||||||
to vote. | Criterion 3) is not complied with: During the accounting period directors | ||||||
3. When making decisions related to preparation and holding | did not consider a possibility of using telecommunication means to provide | ||||||
of the General Shareholders' Meetings, the Board of | the shareholders with a remote access to general shareholders' meetings | ||||||
Directors considered the issue on the use of the | during the accounting period due to the meeting held in absentia for the | ||||||
telecommunication means for providing the shareholders | reasons specified in clause 1. | ||||||
with the remote access to participate in the general meetings | . But the Company provides the shareholders with a possibility of sending | ||||||
in the reporting period. | their questions on a remote basis to the corporate e-mail address of the | ||||||
Company mechel@mechel.com; ir@mechel.com. | |||||||
Starting from 2020 the Company provided the shareholders with a | |||||||
possibility of taking part in the general shareholders' meeting by electronic | |||||||
voting during shareholders' meetings. | |||||||
On the website of the Company (in the materials for the shareholders | |||||||
meetings) there is information that representatives of the Investor Relations | |||||||
Department of the Company will be able to answer questions from | |||||||
shareholders by phone: + 7-495-221-8888, and by email: ir@mechel.com | |||||||
The shareholders are provided with an equal and fair opportunity to participate in the company revenue by receiving dividends. | |||||||
1.2 | |||||||
1.2.1 | The Company developed and implemented a | 1. The Company developed and disclosed the dividend | Compliance | ||||
transparent and clear method of determining | policy that is approved by the Board of Directors. | ||||||
the dividends and their payment. | 2. The relevant provisions of the dividend policy include the | ||||||
consolidated indicators of the financial statements while the | |||||||
Company's reporting indicators are used in the Company's | |||||||
dividend policy to determine the size of dividends. | |||||||
1.2.2 | The Company does not make any decisions on | 1. The Company's dividend policy contains clear | Non-compliance | The dividend policy followed by Company uses differential approach in | |||
dividend payment when such a decision, | instructions on financial/economic circumstances when the | respect of dividends payment. Decision making on dividends payment | |||||
without formally breaching the restrictions | Company should not pay dividends. | directly depends on the financial/economic conditions in a certain | |||||
established by the laws, is economically | accounting period and the Charter of the Company contains information | ||||||
unfeasible and can lead to false representation | related to the amount of annual fixed dividend to be paid per one privileged | ||||||
of the Company's activities. | share of the Company that is to be announced and paid provided that the net | ||||||
profit of the Company is sufficient to pay the dividend. The amount of the | |||||||
fixed dividend to be paid per one common share of the Company is not | |||||||
defined by the dividend policy of the Company and by the Articles of | |||||||
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Association of the Company. | ||||||||
The Company plans to consider the issue of bringing the Regulation on | ||||||||
dividend policy in line with the recommendations of the Corporate | ||||||||
Governance Code (recommended by the Central Bank of the Russian | ||||||||
Federation), in part of the description of the mechanism for determining the | ||||||||
amount of dividends paid on ordinary shares, as well as defining clear | ||||||||
indications of financial / economic circumstances in which the Company | ||||||||
should not pay dividends in the following financial year. | ||||||||
1.2.3 | The Company does not allow for deterioration | 1. In the reporting period, the Company did not take any | Compliance | |||||
of dividend rights of the existing shareholders. | actions leading to deterioration of the dividend rights of the | |||||||
existing shareholders. | ||||||||
1.2.4 | The Company is committed to prevent the | 1. In order to prevent the shareholders from using other ways | Compliance | |||||
shareholders from using other ways of | of receiving profit (income) at the Company's expense in | |||||||
receiving profit (income) at the Company's | addition to dividends and disposal value, the methods of | |||||||
expense in addition to dividends and disposal | control that ensure timely identification and procedure of | |||||||
value. | approving transactions with entities affiliated (associated) | |||||||
with the existing shareholders (entities having the right to | ||||||||
dispose of the votes attached to the voting shares) are | ||||||||
established in the Company's internal documents in cases | ||||||||
when the law does not formally recognize such transactions | ||||||||
as related-party transactions. | ||||||||
The system and practice of corporate governance ensure equal conditions for all shareholders owning shares of similar category (type), including minority (minor) shareholders and foreign | ||||||||
1.3 | ||||||||
shareholders and their equal treatment by the company. | ||||||||
1.3.1 | The Company created conditions for fair | 1. Within the reporting period the procedures for the | Compliance | |||||
treatment of each shareholder by the governing | management of potential conflicts of interests for the | |||||||
and supervision bodies of the Company, | existing shareholders are efficient and the Board of Directors | |||||||
including conditions ensuring prohibition of | gave due consideration to the conflicts among the | |||||||
abuse on the part of the major shareholders | shareholders, if any. | |||||||
with regard to the minority shareholders. | ||||||||
1.3.2 | The Company does not take any actions that | 1. There are no any quasi treasury shares or they were not | Compliance | |||||
cause or may cause artificial redistribution of | included in the voting during the reporting period. | |||||||
the corporate governance. | ||||||||
1.4 | The shareholders are provided with reliable and efficient ways of share rights accounting, as well as the opportunity of free and unhindered alienation of shares owned by them. | |||||||
1.4.1 | The shareholders are provided with reliable | 1. Quality and reliability of the activities of the company's | Compliance | |||||
and efficient ways of share rights accounting, | registrar for maintaining the register of the security holders | |||||||
as well as the opportunity of free and | meet the needs of the Company and its shareholders. | |||||||
unhindered alienation of shares owned by | ||||||||
them. | ||||||||
2.1 | The Board of Directors carries out the company strategic management, determines the main principles and approaches to organization of the risk management and internal control system in the | |||||||
company, supervises the activities of the Company's executive bodies, as well as implements other key functions. | ||||||||
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Mechel PAO published this content on 28 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 May 2021 14:42:01 UTC.