Corporate governance framework and structure

Letter from the Board of Directors

Aware of its key role in the corporate governance framework, the Board of Directors of MMC Norilsk Nickel highlights the Company’s commitment to the highest relevant standards and best practices.

The Board of Directors views compliance with key principles and recommendations of the Corporate Governance Code as an efficient tool to improve corporate governance and ensure long-term sustainable growth.

Corporate governance framework

Governance structure

General Meeting of Shareholders

This is the supreme corporate body of the Company.

Competencies:

• amending the Charter;
• restructuring and liquidating the Company;
• changing the authorised capital;
• splitting or consolidating the Company's shares;
• electing the Company's President and members of the Board of Directors and Audit Commission and approving the auditor;
• approving annual reports and by-laws regulating the Company’s corporate bodies;
• distributing annual profit;
• paying dividends.

It takes place no sooner than three and no later than six months following the end of the preceding financial year.

Extraordinary general meetings of shareholders may be convened by the Board of Directors or at the request of the Audit Commission, the independent auditor, or shareholders owning at least 10% of the Company’s voting shares.

Except for the cumulative voting to elect members of the Board of Directors, each voting share is counted as one vote at the General Meeting of Shareholders.

Board of Directors

This is a collegial governance body in charge of strategic management of the Company and oversight of its executive bodies' activities.

Members of the Board are elected at the Annual General Meeting of Shareholders for a period extending until the next Annual General Meeting of Shareholders.

Chairman of the Board of Directors

The Chairman is responsible for day-to-day operation of the Board of Directors, convening and chairing its meetings, making arrangements for minute-taking, and chairing the General Meetings of Shareholders.

Independent directors

Independent directors are those having sufficient professional skills, experience and independence to act on their own and make impartial and reasonable decisions that are not influenced by the Company's executive bodies, particular groups of shareholders or other stakeholders.

The Company adheres to international standards and recommendations set out in the Corporate Governance Code of the Bank of Russia relating to the required number of independent directors. As at 31 December 2018, five of the Company's Board members met the director’s independence criteria as defined by the Moscow Exchange, and one director was deemed independent by resolution of the Board of Directors.

Committees of the Board of Directors

Committees are ancillary bodies set up by the Board of Directors. Their function is to provide preliminary review of critical matters and advice to facilitate the Board's decision-making.

The Board of Directors has set up four committees:

• Audit and Sustainable Development Committee;
• Strategy Committee;
• Budget Committee;
• Corporate Governance, Nomination and Remuneration Committee.

President

The President is the sole executive body in charge of the day-to-day operations of the Company. The President is elected at a General Meeting of Shareholders for an indefinite period and acts as the Chairman of the Management Board.

The President reports to the Board of Directors and the General Meeting of Shareholders.

Management Board

This is a collegial executive body in charge of the day-to-day management of the Company within its scope of authority as set out in the Charter and the implementation of resolutions adopted by the General Meeting of Shareholders and the Board of Directors.

Members of the Management Board are elected by the Board of Directors for an indefinite period.

Corporate Secretary

This is a corporate officer whose duties include managing shareholder relations, making the necessary arrangements to protect their rights and interests, and providing efficient operating support to the Board of Directors. The Corporate Secretary reports to the Board of Directors.

Pursuant to the Charter, the Corporate Secretary is appointed by the Board of Directors for a three-year term.

Audit Commission

The Audit Commission controls the Company's financial and business transactions.

It performs annual internal audits of the Company’s financial and business operations, as well as other internal audits as it may see fit or as requested by the General Meeting of Shareholders, the Board of Directors or any shareholders owning at least 10% of the Company’s stock.

Members of the Audit Commission are elected at an Annual General Meeting of Shareholders for a period extending until the next Annual General Meeting of Shareholders. Members of the Audit Commission shall not simultaneously serve on the Company’s Board of Directors or hold other positions in the Company's corporate bodies.

Independent auditor

This is an audit firm commissioned to audit accounting/financial statements of the Company and provide an independent opinion regarding their accuracy.

The auditor is approved by the Annual General Meeting of Shareholders.

In 2018, the Annual General Meeting of Shareholders approved JSC KPMG as an independent auditor for both IFRS and Russian accounting standards.

Internal Control and Risk Management Unit

This unit is in charge of improving the risk management and internal control framework, detecting and preventing any waste, misuse or misappropriation of funds or assets of the Company and its subsidiaries, as well as any other wrongdoings and theft, ensuring accuracy of metrics and measurement standards and combating illegal activities, such as money laundering and terrorism financing.

Internal Audit Department

This department is in charge of independent audits, including assessment of the risk management and internal control framework of the Company and its subsidiaries.

Achieving excellence in corporate governance

Nornickel continuously improves its corporate governance framework and adopts best global practices, keeping in mind their significant impact on the Company's sustainable development and valuation. Strengthening of corporate governance is seen as an integral part of the Company’s effort to achieve operating excellence. The process is under constant supervision of the Board of Directors and executive bodies. The Bank of Russia’s Corporate Governance Code serves as the main benchmark for improving the corporate governance framework. In the reporting year, the Company sought broader implementation of the Code’s principles and recommendations:

• the Board of Directors assessed independent directors listed in the annual report for compliance with independence criteria;
• measures were taken to enhance risk management and internal controls;
• the Company invited an external independent consultant to assess the Board of Directors performance.

In 2018, the Company invited an independent consultant to evaluate the performance of its Board of Directors.

Pursuant to the recommendations set out in the Bank of Russia’s Corporate Governance Code, the Company jointly with the Registrar introduced e-voting using the Shareholder’s Personal Account to allow remote participation in the meetings of shareholders. The service was first available at the Extraordinary General Meeting of Shareholders in September 2017. In 2018, the Company actively promoted e-voting among its shareholders. At the Extraordinary General Meeting of Shareholders in September 2018, over 30% of votes were collected through the service. Nornickel will be further developing e-voting to engage the shareholders in corporate activities and help them exercise their governance rights.

The Company reiterates its commitment to improving corporate governance to boost its efficiency and competitive edge. In doing so, it will rely primarily on principles and practices that are valued most by the investment community and have proved effective for large companies.

The following documents saw updates to reflect changes in the applicable laws on preventing unauthorised use of insider information and market manipulation:

• Regulation on the Procedure to Access Insider Information, Confidentiality Protection, and Supervision of Compliance with Laws on Preventing Unauthorised Use of Insider Information and Market Manipulation;
• list of insider information.

To streamline and bring internal audits up to date with international standards for the practice of internal auditing, the Board of Directors drafted and approved following documents:

• Guidelines for Assessing the Corporate Risk Management Framework;
• Guidelines for Assessing Internal Controls.

Corporate governance improvements had a positive effect on Nornickel’s ESG scores assigned by MSCI and Sustainalytics, and placed the Company among Top 20 in the TopCompetence’s National Corporate Governance Index 2018 for adherence to best practices.