Corporate Governance

The corporate governance model implemented by PJSC Gazprom ensures protection of the shareholders’ rights and legitimate interests, their fair treatment, transparent decision-making, openness of information, professional and ethical accountability of the Board of Directors members, other officials of the Company and its shareholders, as well as development of the business ethics system.

Corporate Governance Structure

The key entities of PJSC Gazprom corporate governance are management and control bodies: the General Shareholders Meeting, the Board of Directors, the Management Committee, the Chairman of the Management Committee, the Audit Commission.

The Audit Committee of the PJSC Gazprom Board of Directors and the Nominations and Remuneration Committee of the PJSC Gazprom Board of Directors were established for preliminary review of the most important matters pertaining to PJSC Gazprom operations and falling within the competence of the Board of Directors.

In 2017, the Commission on Strengthening Financial Discipline for Domestic Gas Supplies of the PJSC Gazprom Board of Directors was established in order to provide additional coordination of the efforts aimed at improving the situation with payments for the gas supplied.

The Department of the Management Committee Administration performing the internal audit functions provides an objective assessment of the internal control system performance and develops recommendations regarding its improvement.

The external auditor performs independent audit of the Company financial and business operations.

The Company has the corporate secretary institute. The functions of the corporate secretary in scope recommended by the Corporate Governance Code of the Bank of RussiaThe Corporate Governance Code was approved by the Board of Directors of the Bank of Russia on March 21, 2014, and recommended for application by joint-stock companies whose securities are admitted to public trading are distributed across several organizational units of the Company in accordance with the regulations governing their activities and approved by the Board of Directors.

PJSC Gazprom’s Corporate Governance Structure
GRI 102-18

The supreme corporate governance body of the Company is the General Shareholders Meeting held annually. Other General Shareholders Meetings, except the annual one, are extraordinary. The PJSC Gazprom Board of Directors performs general management of the Company activities and defines its development strategy. The Chairman of the Management Committee and the Management Committee administer day-to-day operations of the Company, arrange implementation of the resolutions of the General Shareholders Meeting and the Board of Directors and act on behalf of the Company and its shareholders.

The key corporate governance principles of the Company are formalized in the Corporate Governance Code of Gazprom Public Company.

GRI 102-22

The Board of Directors performs general management of PJSC Gazprom activities acting on behalf of the Company and its shareholders and reporting to the General Shareholders Meeting. As of December 31, 2018, the Board of Directors consisted of 11 members, three of whom were independent directors.

For more details on the composition of the Board of Directors of PJSC Gazprom see Annual Report

GRI 102-24

The numerical composition of the PJSC Gazprom Board of Directors, election of its members and early termination of their powers fall within the competence of the General Shareholders Meeting. The composition of the Board of Directors is in compliance with the listing rules of the Russian stock exchangesPJSC Moscow Exchange, PJSC St. Petersburg Exchange for shares included in the first (highest) level of quotation lists.

Independence of the members of the Board of Directors is established in accordance with the criteria for establishing independence of the members of the Board of Directors (nominated members of the Board of Directors) set forth in the Code of the Bank of Russia and Appendix 4.1. to the Listing Rules of PJSC Moscow Exchange.

In 2018, the PJSC Gazprom Board of Directors considered the issue On recognizing certain nominated members of the PJSC Gazprom Board of Directors to be independent nominated members of the Board of Directors. During the review of that issue, it was resolved to deem nominated members of the PJSC Gazprom Board of Directors Timur Kulibayev, Viktor Martynov and Vladimir Mau to be independent nominated members of the Board of Directors.

The procedure for nominating and selecting the members of the Board of Directors is transparent, it takes into account the diverse opinions of the shareholders and ensures that the composition of the Board of Directors is in compliance with the legislation. The members of the Board of Directors are elected by the General Shareholders Meeting for the period till the next annual General Shareholders Meeting.

For more details on the procedure for election of the members of the Board of Directors see Articles of Association of PJSC Gazprom and Regulation on Board of Directors

GRI 102-25

PJSC Gazprom takes steps to prevent and eliminate the conflict of interest. Pursuant to the Regulation on the PJSC Gazprom Board of Directors and the PJSC Gazprom Code of Corporate Ethics:

  1. The members of the Board of Directors shall not use, in course of their activities, their position and the received information on the Company operations to promote their personal interests or permit other persons do that.

    Members of the Board of Directors shall refrain from the actions that result or could result in a conflict of interest.

    Should a member of the Board of Directors be involved in a conflict of interest, he/she shall notify the Board of Directors accordingly by sending the notice to the Chairman of the Board of Directors. The notice shall provide information on the fact of the conflict of interest and the reasons for such conflict arising.

    The Chairman of the Board of Directors shall forward the received notice of the conflict of interest to all members of the Board of Directors before the resolution is passed on the matter where the member of the Board of Directors has a conflict of interest.

    The member of the Board of Directors may refrain from voting on the matter where he/she has a conflict of interest. When required by the nature of the matter considered or the specific features of the conflict of interest, the Chairman of the Board of Directors may offer to the member of the Board of Directors having a conflict of interest not to attend the consideration of the appropriate matter.

    Should the member of the Board of Directors having a conflict of interest refrain from voting or attending the meeting of the Board of Directors during consideration of the agenda item subject to the conflict of interest that should be reflected in the Minutes of the Board of Directors meeting.

  2. Within two months after the date when the members of the Board of Directors became or should have become aware of the circumstances, by virtue of which they may be deemed interested in performance of transactions by the Company, they shall notify the Company of:

    • the legal entities, in respect of which they, their spouses, parents, children, siblings and half siblings, adoptive parents and adoptees and/or their controlled entities are controlling persons or may issue mandatory instructions;
    • the legal entities, in which governance bodies they, their spouses, parents, children, siblings and half siblings, adoptive parents and adoptees and/or their controlled entities hold office;
    • actual or proposed transactions they are aware of, if they could be deemed interested persons in respect of such transactions
  3. The interested party transaction does not give rise to a conflict of interest, if requirements of Chapter XI of the Federal Law On Joint-Stock Companies are adhered to in respect of such transaction.

    Information on participation of the members of the Company Board of Directors in the governance bodies of other organizations is disclosed in PJSC Gazprom quarterly reports, the information on related parties (third parties) is disclosed in the consolidated financial statements prepared in accordance with the IFRS.

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Meetings of the Board of Directors are convened by the Chairman of the Board of Directors in accordance with the approved work plan of the Board of Directors, as well as on his/her own initiative, upon request of a member of the Board of Directors, the Management Committee, the Chairman of the Management Committee, the Auditing Commission, the auditor of the Company or the official responsible for organization and performance of the internal audit (the head of the organizational unit that is responsible for organization and performance of the internal audit). In 2018, 53 meetings of the Board of Directors of the Company were held, incl. 13 meetings in praesentia, 40 meetings in absentee ballot form. In course of the said meetings, 142 resolutions were passed, including 51 resolutions passed at meetings in praesentia, 91 resolutions passed by absentee ballot.

The structure of the issues considered at the meetings of the PJSC Gazprom Board of Directors by lines of business in 2018, %

Financial, economic and investment activities

27

Strategic development

32

HR policy

18

Improving corporate governance

21

Audit

2

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The procedure for calculating the remuneration amounts payable to the members of the Board of Directors is set forth in the Regulation on the Procedure for Establishing the Remuneration of the Members of the OJSC Gazprom Board of Directors, approved by Resolution of the OJSC Gazprom Board of Directors No. 2523 dated April 15, 2015. The remuneration comprises three parts: base, supplementary, and bonus part which is segregated in a separate segment and is based on achieving the target corporate key performance indicators (KPIs).

Pursuant to the resolution of the General Shareholders Meeting, remunerations may be paid to the members of the Board of Directors during their term in office. The amount of such remunerations is established pursuant to the resolution of the General Shareholders Meeting. In 2018, the remuneration paid to the members of the Board of Directors of PJSC Gazprom for participation in the activities of the governance body amounted to RUB 210,708,000.

The members of the Board of Directors holding public office and government jobs do not receive any remuneration.

For more details on the system of remuneration of the members of the governance bodies see Annual Report

GRI 102-28

PJSC Gazprom performs regular independent assessment of the current corporate governance maturity level engaging experts from third-party specialized organizations.

In 2017, the independent experts (JSC KPMG) carried out a comprehensive independent audit of the corporate governance practices at PJSC Gazprom. Pursuant to the audit findings, the numerical and qualitative composition of the Company Board of Directors is fully in line with the scale and the specific features of PJSC Gazprom operations and enables the Board of Directors to perform its functions in full.

In 2018, internal assessment (self-assessment) of the activities of the PJSC Gazprom Board of Directors and its committees was held in form of a survey covering the following areas: composition and structure, organization of activities, key functions of the Board of Directors and its committees. The current performance of the Board of Directors and its committees was highly acclaimed by the members of the Board of Directors.

Information on the corporate ethics values, principles, standards and norms is provided in Appendix

Information on risk management and internal control is provided in Appendix