Governance and ethics
We are developing a strong track record in effective governance and we remain committed to the principles of the new corporate governance code.”
Name: Andrey Melnichenko
Role: Non-executive Chairman
Name: Dmitry Strezhnev
Role: Chief Executive Officer
Name: Nikolay Pilipenko
Role: Non-executive Director
Name: Vladimir Stolin
Role: Independent Director
Name: Richard Sheath
Role: Independent Director
Name: Alexander Landia
Role: Independent Director
Name: Garth William Moore
Role: Independent Director
Name: Andrea Wine
Role: Independent Director
The Board’s strategic role
The Chairman of the Board of Directors Mr Andrey Melnichenko, and the Chief Executive Officer (CEO) and General Director, Mr Dmitry Strezhnev, have clearly defined and different responsibilities.
In addition to compliance with Russian corporate requirements, we follow the UK governance code which emphasises not only the need for demonstrable shareholder communications but also for strong oversight of risk management and the alignment of remuneration policy with stakeholder interests. Since 2001 our aim has been to become a world leader in the agrochemical sector. Consequently, the Board’s mission is to ensure that we have a solid and consistent strategy, achieve our business goals, and deliver shareholder and stakeholder value in the long term.
The Board also ensures that we adopt international standards and best practice and monitors our accounting function, risk management processes, internal controls, governance framework and sustainability strategy.
Each member of the Board has built a sound understanding of the business and our industry. They develop relationships with – and access information from – the management team, in particular on strategy implementation, risk monitoring and assessment of key material issues. We make full use of each Board member’s skills sets and experience and ensure that each individual has ample opportunity to express opinions and give considered advice.
The selection and nomination of Board members is made by the Corporate Governance and Personnel Committee. Its members have the competence and experience to manage the search process and evaluate candidate suitability. Shareholders and the main Board are consulted over recommended candidates and the General Director makes the final selection.
All candidates are selected and nominated regardless of nationality, ethnicity, gender, age or other non-professional characteristics.
In 2013, the Board welcomed two new members, Alexander Landia and Garth Moore.
Taking informed decisions
To facilitate the understanding of our operations, Board members undertake yearly site visits to one of our facilities. Unfortunately, the 2013 site visit had to be cancelled; however, a tour of Usolskiy Potash is planned for 2014.
The agenda for Board activity is planned twelve months in advance, taking into account the optimal cycle for reviewing recurrent issues such as budgets, financial reporting and strategy. The timing, expectations and goals of these reviews are well understood by both the Board and management team and include detailed updates on core operational areas, investment projects and strategy.
Each Board member is assessed annually by their fellow directors and their contribution is evaluated. The 2013 assessment focused on strategy and risk resilience, but this will be strengthened and improved in 2014.
We provide every new Director with a clear picture of our business and operations as soon as they join the Board. This formal induction process also requires learning the regulations pertaining to Board procedures, standing items on the Board’s forward agenda and a round of meetings with key managers. New directors are also given the opportunity to visit one of our facilities during their induction.
In 2014 we will develop an integrated training programme for Board members; this will supplement the general induction and enhance decision-making.
We have adopted the UK Corporate Governance Code definition of ‘Independent Director’. A key criterion is that the individual is free from any conflicts of interest. If such actual or potential conflicts arise, independent directors are notified and are required to act appropriately.
New Directors are required to declare any conflicts of interest and sign up to the Company’s Board Regulations. This requires them to refrain from taking action that could lead to a conflict of interest and obliges them to inform the Chairman as soon as possible. According to Russian legislation, information on related party transactions are disclosed. The annual report (and website) disclose cross-Board memberships, existence of controlling shareholders and related parties.
As at the date of publication of this report, five of the Board’s eight Directors were fully independent of the Company’s executives, affiliates and major counterparties. Their independent status is confirmed by the Board of Directors after each election or re-election using a standard questionnaire relating to the declaration of interests. All directors are required to inform the Company of any events which could lead to the loss of their independent status.
Leadership by example
The Chairman oversees and guides the Board and is responsible for ensuring its effectiveness by facilitating open communications, developing relations and creating a culture of mutual respect and constructive debate.
The Board sets company strategy and monitors its progress. The strategy is implemented by the General Director and members of the Management Board, who are responsible for company performance. The Management Board comprises key managers responsible for finance, fertilizer production, mining, sales, logistics and administration. Other members of the management team with responsibility for sustainability and stakeholder relations include the procurement Director, Heads of HR, HSE, Communications, Investor Relations and Government Relations.
The Board of Directors appoints the CEO and the members of the Management Board and determines the length of their terms. Further information on the Board and executive team is available on our website at www.eurochem.ru/who-we-are/Board.
There are three committees chaired by Board members – the Audit Committee, the Corporate Governance and Personnel Committee and the Strategy Committee.
The Audit Committee consists of two members: an independent Chairman; and a non-executive director, who is not formally regarded as independent as he served as the Company’s CFO from 2006 to 2008. The current Finance Director and the Head of internal Audit attend all Committee meetings; the Corporate Secretary participates in the meetings regularly and the external auditors are invited to take part in discussions when necessary. The Committee’s primary function is to oversee the quality of financial and sustainability reporting and integrity of information disclosure. The Administrative Director is ultimately responsible for the timely production of the sustainability report.
The Strategy Committee has three members: a non-executive Chairman and two independent directors. It reviews and approves divisional and segment strategies, development projects, acquisitions and significant investment decisions. This requires environmental and social impact competence as our investment activity can affect the local environment and create infrastructure and opportunities for local employment.
The Corporate Governance and Personnel Committee has three independent directors. It focuses on remuneration and incentives, staffing requirements at ongoing investment projects, the introduction of health and safety performance indicators within the management incentive programme and reviewing and updating the EuroChem Codes of Business Conduct and Ethics.
EuroChem is a member of the Russian national Council for Corporate Governance, a non- governmental organisation aiming to educate Boards and improve standards of governance throughout the country.
In line with our Human Resources policy, we aim to attract the best people with the right talent to complement our skills, irrespective of gender or ethnicity.
Our Board of Directors demonstrates diversity of experience, opinion, gender and nationality. The gender imbalance across our Group companies is an ongoing issue, as it is for many other businesses in the science, mining and engineering sectors. Nevertheless, we continue to look at ways of improving gender balance in senior roles, including our E-Generation programme, which is identifying the bright and motivated young men and women whom will lead the company in the years ahead.
Assessing risks and critical concerns
The executive team has primary responsibility for identifying, assessing and managing risks. This process also includes engagement with stakeholders. These processes and decisions are reviewed at regular meetings of the Audit Committee. In certain instances particular risk management issues are discussed by the main Board.
EuroChem defines a ‘critical situation’ as a state of affairs that adversely affects or can adversely affect the business and its reputation. These may include:
- Emergencies and catastrophes causing damage to human life and the environment.
- Incidents such as accidents, emissions of hazardous substances, fires or workplace fatalities.
- Termination of operations due to financial, economic, technological or political reasons.
- Negative media coverage.
- Local or national conflicts involving government, local authorities or communities.
When such situations arise, the information is communicated by the Company Secretary within one working day to all Board members. The General and Administrative Directors then have responsibility for keeping the Board and Company Secretary up-to-date. The Company is also required to inform the Board of any other situations such as legal disputes, in which case, the General Director and Director of Legal Affairs have communications responsibility.
In 2013, there were two key critical situations:
- A fatal accident at EuroChem BMU
- An incident involving a subcontractor violation of health and safety regulations
While the Board and the CEO take ultimate responsibility for the sustainability strategy, implementation is overseen through the three Board committees and the Directors of Finance and Administration. Heads of Communication, HR, Health, Safety and Environment. They report into the Directors and in turn work with their counterparts across each of the operating companies, acting directly where new assets are being developed and or acquired.
All developments in economic, environmental and social performance are communicated to the Board through scheduled meetings and at other times when required. In addition to scheduled meeting material, Board members are provided with periodic updates on health and safety performance, legal processes, corporate events and strategic projects. In the case of a significant event or emergency, Board members are the first to obtain updates from the management team.
The Board is also provided with media overviews, market analyses, peer and competitor reviews, and updates on new legislation.
EuroChem operates certified management systems covering quality, environment, health and safety. These systems operate to achieve objectives and targets and record all procedures, actions and responsibilities. The main systems that impact on sustainability are financial, health and safety, environmental and human resources.
The performance of senior managers with responsibility for these systems is reviewed annually and they benefit from a programme of continuing professional development. As a consequence, we are often cited as best in class in relation to our sector and companies in other sectors in Russia.
Ethics and corporate behaviour
EuroChem has worked to a formalised Code of Ethics and Code of Conduct since 2007.