The Russian Institute of Directors has confirmed the National Corporate Governance Rating (NCGR) of Sistema PJSFC (“Sistema” or the “Corporation”) at 8: “Advanced corporate governance practice”.
The NCGR of 8 (out of 10) is assigned to companies that follow most of the recommendations of the Russian Corporate Governance Code, comply with the requirements of Russian laws and abide by a significant number of recommendations of international best practice in corporate governance.
Sistema’s corporate governance practice was monitored from November 2019 to December 2020. A number of corporate events took place during this time, including those reflecting the Corporation’s progress in implementing ESG (Environmental, Social and Governance) principles, in particular:
1. The Board of Directors approved the new version of the Corporate Governance Code, which takes into account Sistema’s principles in the area of sustainability and responsible investment. The Code also included new provisions on material corporate actions and corporate conflicts.
2. The Board of Directors of Sistema approved the Sustainability Policy, which defines the principles and key areas of the Corporation’s activities in the area of sustainability and responsible investment. The Policy defines the functions and responsibilities of Sistema’s governance bodies and functional units in the area of ESG.
3. On 27 June 2020, the Annual General Meeting of Sistema’s shareholders was held in absentia. Shareholders were given the opportunity to vote online. There was also an online conference when shareholders had the opportunity to ask questions to the Corporation’s management.
4. The Annual General Meeting of shareholders resolved to increase the number of members of Sistema’s Board of Directors to 12. Independent directors make up 50% of elected members of the Board of Directors, which is in compliance with the Listing Rules of the Moscow Exchange and the recommendations of the Russian Corporate Governance Code.
5. The Board of Directors formed the Committees of the Board of Directors in accordance with the requirements of the Listing Rules of the Moscow Exchange. The Audit, Finance and Risk Committee includes four independent directors and one non-executive director. The Audit, Finance and Risk Committee is chaired by an independent director. Four independent directors and two non-executive directors were elected to the Nomination, Remuneration and Corporate Governance Committee, which is also chaired by an independent director.
In addition, the Russian Institute of Directors noted the following positive aspects in Sistema’s corporate governance practice:
The Corporation’s Board of Directors efficiently carries out the function of strategic management and has a large number of in-person meetings, which provides an opportunity for joint and comprehensive discussion of agenda items;
The practice of selecting external auditors in an open tender and regular rotation of the audit firm’s partners (Deloitte);
Annual assessment of the Board of Directors’ performance;
Management’s remuneration includes short-term and long-term components;
The Corporation has a succession pool of candidates for senior executive positions;
Sistema has a structural unit for internal audit functions, which reports to the Board of Directors;
Comprehensive regulation of conflicts of interest of members of the Board of Directors and practice of D&O liability insurance;
The Board of Directors regularly reviews risk management reports and assesses the effectiveness of the risk management system;
Prompt disclosure of financial statements in accordance with RAS and IFRS, including interim IFRS reporting and management commentaries;
English version of the corporate website with a substantial amount of information for international investors;
Implementation of corporate social responsibility projects for all groups of stakeholders through the corporate charitable foundation with strategy approved by the Corporation’s Board of Directors.