Remuneration and compensation policy
CALCULATION OF REMUNERATIONS DUE TO THE BOARD OF DIRECTORS
The Annual General Meeting of Stockholders, conducted on 18.06.2015, adopted Amended and Restated Regulations of Remunerations and Compensations due to the Board of Directors at IDGC of Urals (OAO)3.In compliance with the Regulations remunerations comprise a lump sum payment for participation in the Board activities and additional payment from the net profit if Company’s market value increases during the Board’s tenure.
The exact amount of remunerations due to each Board member for the service shall be calculated, factoring the total number of Board meetings conducted during the previous corporate year and number of attended meetings. The basic amount of remunerations (Rbase) shall be set upon the annual RAS revenues of the Company. The following increments shall be added to the remunerations: 30% for the Board Chair, 20% for the Chair of a Board Committee, 10% for a membership in a Board Committee. Increments for the Chair and/or membership in a Board Committee shall not be paid in case there were less than three Board meetings during the corporate year. Overall remunerations and increments shall not exceed Rbase. Remunerations shall not be paid to a Board member, if such member missed more than 50% of Board meetings (conducted during his service).
Additional remunerations, due to each Board member, for the increased market value of the Company shall total 0.0175 per cent of increased market value of the Company (IMC), calculated for a period between his/her election and election of a new Board. IMC remunerations shall be paid only if average monthly traded value of the Company’s common shares during the Board’s tenure totals at least RUR 1.5 mn. Overall remunerations, paid to the Board members, shall not exceed 5% of RAS annual net profit. Remunerations shall be paid within 60 days since the annual general meeting. Remunerations shall not be charged and paid to the Board Chairperson and members, subject to legal restrictions or prohibition of any allowances from businesses.
Meeting-related expenses of a Board member shall be reimbursed in compliance with Company’s trip reimbursement rates existing at the moment when a meeting was conducted. Compensations shall be paid within three business days since the filing of documents certifying incurred costs.
CALCULATION OF REMUNERATIONS DUE TO THE EXECUTIVE BOARD AND GENERAL DIRECTORS.
The system of Key Performance Indicators (KPI system) was established by the Board of Directors on 31.03.2016 (77). The KPI composition and calculation methodology were revised twice during the reported period by the Board of Directors on 29.04.2016 and 28.12.2016 (78, 79) in the pursuance of the Government Directive (80) regarding a range of KPIs (“Total Shareholder Return”, “Return on Invested Capital”, “Reduction of per-unit opex” and “Efficiency of innovative activities”). The list of key performance indicators and targets, set for 2016 by the above-mentioned Board of Directors’ resolutions, are presented in the figure below:
|The list of KPIs||FY2016 targets|
|Bulk power supply failure plateauing||plateauing|
|Plateauing of casualties||plateauing|
|Solvency and liquidity||E/D ≥ 0.67 и MCLR ≥ 1|
|The list of KPIs||FY2016 targets|
|TSR||> 44,29 + 0,01|
|ROIC||≥ target, calculated in line with Company’s forecasts set by the business plan prepared under International Financial Reporting Standards (IFRS)|
|Reduction of per-unit opex||≥ 10%|
|Energy losses||≤ 7,98|
|Service reliability||≤ 1|
|Reduction of per-unit investment costs||≤ 1|
|Compliance with the facility launch schedule||≥ 95%|
|Compliance with connection terms||≤ 1,1|
|Labor efficiency||≥ 1,072 RUB/burden-hour|
|Purchases from small- and medium-size businesses||≥ 10% for purchases only from small- and medium-size businesses and ≥18% for purchases from small- and medium-size businesses (including contracts stipulating sub-contracting small- and medium-size businesses)|
|Efficiency of innovative activities||≥ 90%|
At the time of report preparation, the Board of Directors has not approved real KPI values, with due regard to the timeline of the reports used for their calculation. The FY2016 values cannot be compared with the previous periods due to the revised methods used for setting targets and calculating real KPIs. The KPI system enforced by the Company is coupled with variable remuneration of the management: each indicator has its own weight, quarterly and annual remunerations are to be paid as long as the relevant KPIs are completed.
Total remunerations and/or compensations due to each governing body:
|Type of remunerations, RUB thous.||Board of Directors||Executive Board|
The table represents remunerations of the Board of Directors paid to all directors serving on the Board during the reported period. No compensations were paid to the Board of Directors and Executive Board.