Corporate governance report

Corporate Governance Guidelines

The Group uses an efficient and transparent governance system based on compliance with the requirements of Russian law, Russian and international best practices and the principles set forth in the Group’s Corporate Governance Code. In addition to the Corporate Governance Code, the Group’s corporate governance regulations are enshrined in its other corporate documents – the Charter, the Regulation on the General Meeting, the Regulation on the Board of Directors, the Regulation on the Managing Board, the Code of Business Conduct, the Regulation on Anti-corruption Policy and the Regulation on the Ethics and Anti-Corruption Commission.

The Group’s corporate governance system is based on the following principles regulating its corporate relations:

  • Shareholders shall have an opportunity to exercise rights relating to their shareholding in the Group
  • Minority and majority shareholders shall receive equal and fair treatment
  • The Board of Directors shall strategically manage the Group’s activities and effectively control the activities of its executive bodies; members of the Board of Directors shall be accountable to shareholders
  • Executive bodies shall carry out day-to-day management of the Group’s business in such a way as to maintain long-term, stable development and allow shareholders to receive benefits from these activities; executive bodies shall be accountable to the Board of Directors and shareholders
  • Full and reliable information about the Group shall be disclosed in a timely fashion in order to allow shareholders and investors to make informed decisions
  • The Group’s financial and economic activity shall be controlled effectively in order to protect the legitimate interests of shareholders and other interested parties

The Group continually improves its corporate government system. At Acron’s annual general meeting held on 29 May 2014, the Group’s shareholders approved its amended Charter and Regulation on the General Meeting.

Acron’s amended Charter and Regulation on the General Meeting are available here

Management Structure

Management Structure

General Meeting

The general meeting is the Group’s supreme governing body and acts within the scope of authority established by Russian law. Resolutions of the general meeting are binding for the Board of Directors, Managing Board, Chief Executive Officer and all employees of the Group. The annual general meeting elects the Board of Directors and the Internal Audit Team, approves the auditor, annual report, annual financial statements (accounts) and profit allocation report, including payment (declaration) of dividends for the fiscal year, and handles other matters within the scope of the general meeting’s authority.

Acron’s general meeting held on 29 May 2014 approved its Annual Report and RAS financial statements (accounts), profit allocation report and amount of dividends to be paid from retained earnings for previous years. It also approved the Group’s amended Charter and Regulation on the General Meeting and the auditors for RAS and IFRS financial statements, elected the Board of Directors and an internal audit team and established the amount of remuneration to independent members of Acron’s Board of Directors.

Acron’s extraordinary general meeting held on 16 September 2014 approved a related-party transaction.

Further information on the procedure for preparing, convening and holding the general meeting is available here

Board of Directors

Acron’s Board of Directors performs general management of the Group’s business in accordance with the Federal Law On Joint Stock Companies, Acron's Charter and the Regulation on the Board of Directors. The Board of Directors defines the Group’s strategy and priorities, considers matters related to its financial activity and internal control, approves annual and long-term business plans and major transactions, passes resolutions on investment programmes and handles other issues within the scope of its competence. Additionally, the Board of Directors ensures that the Group’s internal control system and risk management system function effectively.

The Board of Directors consists of seven individuals. Acron’s annual general meeting held on 29 May 2014 elected one independent director, one executive director and five non-executive directors to the Board of Directors.

Alexander Popov has served as Chairman of the Board of Directors since 2008. In 2014, the Board of Directors included the following members:

  • Alexander Popov, Chairman of the Board of Directors
  • Vladimir Gavrikov, Deputy Chairman of the Board of Directors
  • Igor Belikov, Independent Director
  • Egor Gissin, Member of the Board of Directors
  • Alexander Dynkin, Member of the Board of Directors
  • Viktor Kochubey, Member of the Board of Directors
  • Valery Shvalyuk, Member of the Board of Directors

In 2014, the Board of Directors held 20 meetings (one meeting was held in person and the other 19 were absentee votes).

Curricula vitae of the Board of Directors members are available in following chapter Board of Director of Annual Report

Attendance at Board of Directors Meetings and Meetings of Board Committees

Name Independence   Board of Directors Audit Committee Strategic Planning and Corporate Governance Committee Nomination and Remuneration Committee
Alexander Popov   20/19   4/4  
Vladimir Gavrikov   20/20   4/4 3/3
Igor Belikov * 20/19 6/6   3/3
Egor Gissin   20/20     3/3
Alexander Dynkin   20/19   4/4  
Viktor Kochubey   20/19 6/4    
Valery Shvalyuk   20/20 6/6    

Board of Directors Results

In 2014, the Board of Directors addressed the following matters:

  • Nominations to the Board of Directors and Acron’s internal audit team
  • Selection of Acron’s auditors
  • Approval of Acron’s amended Charter
  • Approval of Acron’s draft amended Regulation on the General Meeting
  • Election of the Chairman of Acron’s Board of Directors, appointment of a secretary of Acron’s Board of Directors, formation of Acron’s sole and collegial executive body, election of members to the Board’s Committees
  • Consideration and approval of proposals for the general meeting agenda
  • Convening of Acron’s annual general meeting, approval of documents regulating its preparation and holding
  • Convening of Acron’s extraordinary general meeting, approval of documents regulating its preparation and holding
  • Approval of Acron’s 2013 annual financial statements (accounts)
  • Payment of dividends on Acron’s outstanding ordinary shares (from retained earnings for previous years) in monetary form, in the amount of RUB 152 per one ordinary share
  • Approval of major and related-party transactions
  • Resolutions on issuing securities
  • Resolutions on the powers of the Board of Directors

Approval of Major and Related-party Transactions

In 2014, the Group executed 787 transactions classified as related-party transactions under the Federal Law On Joint Stock Companies. Most of these were transactions with Acron Group’s subsidiaries, and are treated as related-party transactions for formal reasons. All of these transactions were approved by the Board of Directors and/or Acron’s general meeting as transactions that may be executed by Acron in the future in the ordinary course of business. In the reporting year, the Board of Directors approved one major transaction.

Further information on these transactions is available in Appendix 2 of the Annual Report.

Independent Member of the Board of Directors

The Group’s Independent Director is also the Chairman of the Board’s Audit Committee and Nomination and Remuneration Committee. In this capacity, he forms the draft work plan for each committee, arranges discussion on these drafts with committee members and manages the approval process. Upon approval of work plans, the Chairman organises meetings of the Board’s committees to discuss the matters addressed in approved working plans. While preparing the meetings, the Chairman interacts with members of the relevant committees and members of the management team responsible for reporting at committee meetings, provides them with materials on how international and leading Russian corporate governance practices recommend implementing the specific corporate governance practices presented for discussion at the committee meetings. He also provides them and other committee and management team members with materials that may help them when discussing matters on the committee agenda and monitoring implementation of adopted resolutions. As committee Chairman, the Independent Director shall ensure that important matters included in committee work plans are discussed only at committee meetings held in person. The Independent Director cooperates with the Chairman of the Board of Directors on a regular basis and monitors implementation of committee resolutions.

The Group’s Independent Director participates in meetings of the Board of Directors. The presence of an actively involved Independent Director on the Board of Directors contributes to developing a more objective view on the status of Company’s corporate governance and adopting balanced resolutions with equal consideration for the interests of minority and majority shareholders. The Independent Director’s efforts help to create a clear-sighted assessment the Group’s existing system of risk management, internal controls and compliance with the Group’s Corporate Governance Code, as recommended by the Central Bank of the Russian Federation and Acron’s Code of Business Conduct. Acron’s management appreciates the Independent Director’s contribution and listens to his opinions when adopting managerial resolutions.

Corporate Secretary

At present, the role of Corporate Secretary is performed by several of the Groupa’s business units (securities circulation division, legal department, investor relations division and secretary of the Board of Directors), along with their officers, to ensure the efficient functioning of general meetings and the Board of Directors, cooperation with shareholders and coordination of the Group’s efforts to protect the rights and interests of its shareholders.

In order to further improve its corporate governance system and protect the rights and interests of Acron’s shareholders, in 2015 Acron’s Board of Directors plans to consider appointing a sole person to function as Corporate Secretary and coordinate the activity of various business units in the Group.

Board of Directors Committees

The Board of Directors includes three committees: the Audit Committee, the Strategic Planning and Corporate Governance Committee and the Nomination and Remuneration Committee. These committees play an important role in the corporate governance system, ensuring preliminary consideration and preparation of recommendations for the Board of Directors regarding strategic matters within the Board’s competence. The activities of the Board’s committees are subject to Regulations on the committees approved by the Board of Directors and disclosed on Group’s website.

Audit Committee

Focus areas for the Audit Committee:

  • Assessing the effectiveness of the internal control and risk management system
  • Analysing significant issues related to independent audits of the Group’s financial accounts
  • Providing a preliminary assessment of the auditor’s report on the Group’s accounts and consideration of accounting principles applied by the Group
  • Compliance with applicable law and the listing rules of Russian and international stock exchanges
  • Managing IT risks
  • Preparing recommendations on the selection and remuneration of an external auditor
  • Monitoring the remedy of violations identified during the course of internal control procedures or an independent audit

The Audit Committee members are Igor Belikov, Viktor Kochubey and Valery Shvalyuk. Independent Director Igor Belikov serves as the Chairman of the Audit Committee.

Audit Committee track record

In 2014, the Audit Committee held six meetings and addressed the following matters:

  • Efficiency of the Group’s existing internal control and risk management system (based on 2013 results) and paths to pursue for the internal audit department in 2014
  • Compliance with applicable law and the listing rules of Russian and international stock exchanges (based on 2013 results)
  • Managing Acron’s IT risks
  • Acron’s auditors
  • Results of KPMG auditor report on Acron’s 2013 RAS financial statements and Baker Tilly Russaudit auditor report on Acron’s 2013 IFRS financial statements
  • Review of Acron’s internal audit team
  • Approval of the Audit Committee’s work plan for 2014–2015
  • Review of Acron Group’s executive reports on management of risks related to compliance with environmental laws
  • Review of Investor Relations Division’s report on Acron’s compliance with regulatory requirements related to GDR listing at the London Exchange
  • Assessment of the effectiveness of Acron’s existing Regulation on Internal Audit

Strategic Planning and Corporate Governance Committee

The Strategic Planning and Corporate Governance Committee reviews and prepares recommendations for the Board of Directors regarding the following matters:

  • Convening shareholder meetings and agendas
  • Determining priority areas for the Group’s operations
  • Detecting and assessing strategic goals and risks
  • Performing preliminary study of important investment and loan policy issues
  • Performing preliminary study of issues related to the Group’s securities transactions (shares and bonds issue and buyback)
  • Performing preliminary study of matters related to year-end profit distribution and utilisation of the Group’s funds
  • Increasing/decreasing authorised capital, participation in or withdrawal from other entities
  • Assessing the Group’s corporate governance system

The Strategic Planning and Corporate Governance Committee members are Alexander Dynkin, Vladimir Gavrikov and Alexander Popov. Alexander Dynkin serves as Chairman.

Strategic Planning and Corporate Governance Committee track record for 2014

In 2014, the Strategic Planning and Corporate Governance Committee met four times and attended to the following matters:

  • Making recommendations to the Board of Directors on holding the general meeting
  • Making recommendations to the Board of Directors on holding the extraordinary general meeting
  • Making recommendations on Acron’s profit and loss distribution for 2013 according to accounting statements
  • Making recommendations on payment of dividends on Acron’s outstanding ordinary shares (from retained earnings for previous years)
  • Approving the Group’s Annual Report 2013
  • Making recommendations on approval of Acron’s draft Charter and Regulation on general meeting as amended
  • Making recommendations on determining the price (market value) of an additional issue of Acronit shares to be purchased for the purpose of approving a related-party transaction

Nomination and Remuneration Committee

Focus areas for the Nomination and Remuneration Committee:

  • Preparing recommendations identifying priority issues related to human resources policy, incentives, salary and remuneration, and evaluating the Group’s existing practice in this area
  • Outlining criteria for selection and preliminary assessment of nominees to the Board of Directors, the Internal Audit Team, the collegial executive body and the chief executive of the Group
  • Preparing recommendations on business conduct and corporate culture, and evaluating the Group’s existing practice in this area
  • Preparing recommendations on remuneration of and compensation for the members of the Board of Directors, chief executive and members of the collegial executive body
  • Assessing the performance of the chief executive, members of the collegial executive body and the Internal Audit Team

The Nomination and Remuneration Committee members are Igor Belikov, Vladimir Gavrikov and Egor Gissin. Igor Belikov serves as its Chairman.

Nomination and Remuneration Committee track record for 2014

In 2014 the Nomination and Remuneration Committee met three times and attended to the following matters:

  • Practical implementation of the Group’s Code of Business Conduct and Regulation on Anti-Corruption Policy
  • The Group’s incentive and professional development policy with respect to key management personnel (based on 2013 results)
  • Recommendations for the Board of Directors on remuneration and compensation of its members

Further information on how the Audit Committee, Strategic Planning and Corporate Governance Committee and Nomination and Remuneration Committee are formed, their activities and the rights and obligations of their members is available here

Chief Executive Officer

The chief executive officer (CEO) is the Group’s sole executive body, elected by the Board of Directors and accountable to the Board of Directors and the general meeting.

The chief executive officer administers the Group’s day-to-day business in accordance with Russian law, Acron’s Charter and the Regulation on the Managing Board and organises and ensures implementation of resolutions passed by the general meeting, the Board of Directors and the Managing Board.

Vladimir Kunitsky has served as Acron’s CEO since 2011.

Managing Board

The Managing Board is the Group’s collegial executive body acting under the Acron’s Charter and Regulation on Managing Board. The members of the Managing Board are elected by the Board of Directors upon recommendation by the CEO and/or members of the Board of Directors and are accountable to the general meeting.

The key areas for the Board in 2014:

  • Considering and making recommendations on key matters of day-to-day business
  • Coordinating the implementation of resolutions passed by the general meeting and the Board of Directors, approving forward-looking plans for operations
  • Establishing the Group’s operating programme and business plans, coordinating operation of business units
  • Arranging implementation of the social development programme

The Managing Board holds regular meetings. The procedure for holding Managing Board meetings is established by the Regulation on the Acron Managing Board.

The Regulation on the Acron Managing Board is available here

The Managing Board is composed of six members. Vladimir Kunitsky has served as the Board’s Chairman since 2011.

In 2014, Alexander Popov left the Managing Board. On 12 September 2014, the Board of Directors elected the following persons to the Managing Board:

Vladimir Kunitsky, Chairman of the Managing Board

Oscar Valters, Deputy Chairman of the Managing Board

Irina Raber, member of the Managing Board

Ivan Antonov, member of the Managing Board

Alexei Milenkov, member of the Managing Board

Dmitry Khabrat, member of the Managing Board

Managing Board track record for 2014

In 2014, the Board held sixteen meetings (fourteen meetings were held in person and two were held as absentee votes). The key areas for the Board in 2014 were:

  • Reviewing and approving Acron Group’s CAPEX budget
  • Reviewing and approving Acron Group’s estimates for scheduled repairs
  • Continuous monitoring of Acron Group’s investment programme implementation in 2014
  • Passing resolutions to introduce cost-reduction measures and improve the Group’s operating and financial efficiency
  • Passing resolutions aimed at improving the efficiency of employees at Acron Group and its subsidiaries

Directors and Officers Liability Insurance (D&O)

Since 2013, Acron has carried liability insurance for members of executive bodies and other officers and employees in order to engage the most professional specialists in the Group’s management. The insurer's liability is limited to USD 75 mn. The insurance covers officers (employees) of Acron and all subsidiaries, including most subsidiaries located in foreign jurisdictions.

Remuneration and compensation of members of the Board of Directors and the Managing Board

In accordance with the Group’s practice, only independent directors (members of the Board of Directors) are remunerated in the amount determined by the general meeting for participating in a management body. Other members of the Board of Directors and the Managing Board may be remunerated under labour contracts executed with them as with the Group’s employees, holding other officers, or under civil law contracts (if such labour or civil law contracts were executed). The Group also compensates all members of the Board of Directors for reasonable expenses related to the performance of their duties, in actual and documented amounts.

A total of RUB 434,728,000 in remuneration was paid to members of the Board of Directors and the Managing Board in 2014.

Remuneration of members of the Board of Directors
(‘000 RUB)*

Remuneration 2014 2013
Acron Group*    
Remuneration paid for participation in a management body 1,589 1,396
Salary 55,877 44,609
Bonuses 49,601 24,704
Other payments (including compensation of expenses related to performance of duties as members of management bodies) 234 1,307
Acron Group total 107,301 72,016
Including Acron (Veliky Novgorod):    
Remuneration paid for participation in a management body 1,589 1,396
Salary 26,827 19,220
Bonuses 13,575 13,086
Other payments (including compensation of expenses related to performance of duties as members of management bodies) 234 1,307
Acron (Veliky Novgorod) total 42,225 35,009

Remuneration of members of the Managing Board and CEO
(‘000 RUB)*

Remuneration 2014 2013
Acron Group*    
Remuneration paid for participation in a management body 0 0
Salary 140,224 130,024
Bonuses 186,643 66,689
Other payments (including compensation of expenses related to performance of duties as members of management bodies) 560 3,105
Acron Group total 327,427 199,818
Including Acron (Veliky Novgorod):    
Remuneration paid for participation in a management body 0 0
Salary 79,760 78,877
Bonuses 105,091 33,769
Other payments (including compensation of expenses related to performance of duties as members of management bodies) 558 3,105
Acron (Veliky Novgorod) total 185,409 115,751

Internal and External Control System

Internal Control

The Group has created and operates an effective system of internal control over financial and business activity developed in accordance with Russian law, and acting in accordance with the Group’s Charter and internal documents, and with consideration for the rules for listing securities on Russian stock exchanges and the recommendations of the Bank of Russia Corporate Governance Code recommended by the Bank of Russia.

In order to ensure that the internal control system functions effectively, the Group is guided by its Regulation on the Internal Control System for financial and business activity, which sets the goals, objectives and principles for internal control bodies.

The full text of the Regulation on the Internal Control System is available in the “Corporate Governance”section.

Internal Audit Team

The main objectives of the Internal Audit Team include control over financial and business activity, annual audit of the Group based on its performance in the reporting year and participation in assessing the efficiency of the internal control system. The Internal Audit Team’s activity is subject to the Regulation on the Internal Audit Team, which is approved by the general meeting.

The text of the Regulation on the Internal Audit Team is available in the “Corporate Governance” section.

The Internal Audit Team is composed of five members elected by the general meeting. On 29 May 2014, the general meeting elected the following members to the Internal Audit Team:

  • Irina Klassen, Chair, Head of the Protocol Unit, Secretary of Acron’s Board of Directors and Managing Board
  • Valentina Alexandrova, Chief Labour Economist of Acron’s HR Department
  • Tatyana Strigalyova, Head of Acron’s Planning and Economy Department
  • Nadezhda Preobrazhenskaya, Chief Expert of Acron’s Internal Audit Department
  • Tatyana Khrapova, Acron’s Senior Deputy Chief Accountant

In 2014, the Internal Audit Team conducted an audit of Acron’s financial and business activity. The audit did not detected any instances of non-compliance with the requirements of Russian law, and the accuracy of the data contained in the Group’s annual financial statements and Annual Report was confirmed.

Remuneration Paid to Internal Audit Team Members in 2014 (‘000 RUB)

Remuneration 2014 2013
Salary 2,860 2,465
Bonuses 3,394 3,267
Other 114 114
Total 6,368 5,847

External Control

Each year, Acron engages an auditor having no property interests in the Group or its shareholders to audit and confirm the accuracy of its RAS and IFRS financial statements (accounts).

A nominated auditor is put up for preliminary discussion at a meeting of the Audit Committee. The Audit Committee prepares recommendations for the Board of Directors regarding the proposed nominee and the price of its services for the next financial year. Based on the recommendation by the Audit Committee, the Board of Directors proposes to approve the nominee at the annual general meeting and determines the price of its services.

When selecting its nominees, the Audit Committee takes into account the auditor’s general and industry experience, the qualifications of its employees and the cost of the auditing services.

On 29 May 2014, the general meeting approved Baker Tilly Russaudit to audit the Group’s RAS financial statements and KPMG to audit its IFRS financial statements.

In 2014, the external auditors received the following fees: Baker Tilly Russaudit RUB 3.6 mn, KPMG RUB 12.9 mn.

On compliance with principles and recommendations of the Corporate Governance Code

In 2014, legislators focused on legal status and governance at public companies. These matters were also the primary focus of the Bank of Russia, acting as state regulator for the financial markets, corporate relations and stock exchanges.

Federal Law No. 99-FZ, dated 5 May 2014 (enacted on 1 September 2014) amended the Civil Code of the Russian Federation, significantly altering the legal status of business entities. In particular, the previous division into open and closed joint-stock companies was abolished, the concept of a public joint-stock company was introduced, and the features of its legal status and corporate governance were established. Under these amendments, Acron Group, whose shares are listed (publicly traded) at MICEX, is recognised as a public joint-stock company.

In April 2014, the Bank of Russia approved its Corporate Governance Code (“Corporate Governance Code,” “Code”) and recommended that it be used by public joint-stock companies. The Code replaced the previous Russian Code of Corporate Conduct elaborated in 2002 by the Federal Commission on the Securities Market. The new version of the national Corporate Governance Code reflected generally recognised principles representing global best practices for corporate governance in public companies. One section of the Code contains guidance on practical implementation issues not expressly covered by law, including recommendations on organising the work of a Board of Directors and other management bodies, creating a transparent remuneration system for members of management bodies and other key executives of a company, and developing efficient risk management and internal control systems.

In 2014, the Moscow Interbank Currency Exchange, operator of the Moscow Exchange, amended its securities listing rules based on the new version of the Corporate Governance Code. These amendments materially clarified the corporate governance requirements for those issuers whose securities are included in a MICEX quotation list, including new criteria to recognise elected members of the Board of Directors as independent directors, requirements for the minimum number of independent members of the Board of Directors, extension of the functions of the Board of Directors committees and the requirement to have a corporate secretary.

Over 2014, Acron assessed the compliance of its corporate governance practices with the new requirements of law and the recommendations of the Corporate Governance Code. Taking into account the scale of regulatory changes already made, as well as legislators’ plans to further clarify corporate governance requirements, the Group expects that efforts to bring its corporate governance practices in line with the new requirements and recommendations will actively continue in 2015 and will be fully completed in 2016. Completion of this process is currently hampered by the lack of expected amendments to the Federal Law "On Joint Stock Companies," which should eliminate the conflict between the provisions of this law and the new Civil Code of the Russian Federation as pertaining to corporate relations in joint-stock companies.

A brief overview of the most important aspects of the Group’s corporate governance model is available in the Corporate Governance Report here. Below, Acron presents the results of a self-assessment of its compliance with corporate governance principles and a description of the methodology used to perform this assessment.

Methodology use to assess Acron’s compliance with principles of corporate governance established by Corporate Governance Code

The Group assessed its compliance with corporate governance principles within the scope recommended by MICEX in its information letter No. 31-14/236 dated 13 March 2015. The report on compliance with the Code’s principles and recommendations was prepared using the structure and format recommended by the MICEX information letter and Bank of Russia letter No. 06-52/2825 dated 30 March 2015.

In the absence of statutory or recommended methodology for assessing compliance with the principles of the Corporate Governance Code, the Group developed its own methodology. This methodology includes a rating system and guidance on assigning a compliance rating for each principle recommended for assessment by the MICEX letter.

Compliance ratings for the principles (recommendations) of the Corporate Governance Code were assigned based on the following factors:

1. Deviations (if any) in the Group’s corporate governance system and practices from the principles and recommendations of the Corporate Governance Code, and
2.
Scope of the identified deviation, defined using the following factors:
  • Whether or not such deviation may damage the balance of interests of the participants of corporate relations recommended by the Code
  • Whether or not the Group applies other corporate governance mechanisms and instruments instead of those recommended by the Corporate Governance Code

  • Sources of information about the Group’s corporate governance system and practices used for rating purposes: the Group’s Charter and other internal documents regulating corporate relations; local regulatory documents regulating the legal status and activity of the Group’s business units and officers; minutes of shareholder meetings and materials provided to those entitled to participate in the Group’s general meeting; minutes of the Board of Directors meetings and materials provided to members of the Board of Directors; minutes of the Managing Board meetings and materials provided to members of the Managing Board; information to be disclosed by the Group under the Federal Laws “On Joint Stock Companies,” “On the Securities Market,” and “On Countering the Illegitimate Use of Insider Information and Market Manipulation and on Amending Certain Laws of the Russian Federation,” and any other information disclosed by the Group on its website; comments (interviews) by members of the Group’s management bodies, officers and the secretary of the general meeting (the Group’s Board of Directors and Managing Board).

    In order to assess the Group’s compliance with the corporate governance principals established by the Corporate Governance Code, the following rating system was used:

    Rating   Guidelines for Rating Assignment 
    In Compliance This rating shall be assigned if the Group complies in full with the principle in question (recommendation on its implementation), as confirmed by provisions of the Group’s Charter or any other internal documents, local regulatory documents or the Group’s corporate governance practices.
    Generally in Compliance This rating shall be assigned if the Group complies in part with the principle in question (recommendation on its implementation) but the identified deviations are not significant because they cannot cause any damage to the balance of interests of the participants of corporate relations recommended by the Code or/and the Group applies other corporate governance mechanisms and instruments instead of those recommended by the Corporate Governance Code.
    Partially in Compliance This rating shall be assigned if the Group complies in part with the principle in question (recommendation on its implementation) and the identified deviations can cause damage to the balance of interests of the participants of corporate relations recommended by the Code or/and the Group does not applies other corporate governance mechanisms and instruments instead of those recommended by the Corporate Governance Code.
    Not in Compliance This rating shall be assigned if the Group does not comply in full with the principle in question (recommendation on its implementation).
    Not Applicable This rating shall be assigned if the principle in question (recommendation on its implementation) cannot be applied to the Group’s corporate relations for legal, organisational (structural) or other intrinsic reasons.

    Overview of the results of the assessment of Acron’s compliance with corporate governance principles established by the Corporate Governance Code

    The assessment revealed that the Group’s corporate governance system is in compliance with 13 principles, generally complies with 5 principles, partially complies with 13 principles and does not comply with 10 applicable principles (recommendations on their implementation) of the Corporate Governance Code.

    Appendix 1 hereto presents a detailed report on the Group’s compliance with corporate governance principles established by the Corporate Governance Code as of 31 December 2014.

    The Group already applies a number of the Code’s recommendations to form its corporate governance system. According to the Board of Directors, the results of this self-assessment demonstrate a mature level of corporate governance in the Group. However, the Group did not implement some of the recommendations of the Corporate Governance Code. Overregulation of corporate relations can significantly complicate the governance of public companies, each of which, despite their similarities, has unique features and traditions of corporate governance. Therefore, the Group does not follow several provisions of the Code in order to maintain relatively flexible management bodies capable of prompt decision-making in the course of its business activity. To some extent, the difficulties with practical implementation of certain recommendations of the Corporate Governance Code are caused by existing contradictions in the regulations that inevitably arise during active reform of corporate relations. The Group considers it possible to implement certain of the Code’s recommendations based on the results of a comprehensive assessment and detailed analysis of the potential positive and negative consequences of such changes, its corporate governance practices, expectations of the Group’s shareholders and other investors, the current economic environment and applicable legal regulations. It should be noted that the Corporate Governance Code was adopted very recently, so the Group has not had sufficient time to evaluate and introduce all of the Code’s recommendations into its corporate governance practices.

    Acron’s plan of action and measures to improve the corporate governance model and practices

    The objective for further improvement of the Group’s corporate governance is implementation of the recommendations of the Corporate Governance Code. The Group plans to ensure implementation of the Code’s recommendations regarding electing more independent directors to the Board of Directors and ensuring that Board of Directors committees consist entirely or mainly of independent directors. The Nomination and Remuneration Committee shall assess the compliance of nominees to the Board of Directors with independence criteria. The Group also plans to introduce the office of corporate secretary, who will be responsible for exercising those corporate secretary functions stipulated by the Corporate Governance Code and coordinating the activity of various business units. The Group intends to make amendments to its Charter and other internal documents in connection with corporate law reforms and changes to listing rules, including improvement of internal documents and local regulatory documents related to the Group’s risk management and internal control systems and internal audit.

    My Annual Report

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