BOARD OF DIRECTORS
A high-quality corporate governance system and an efficiently operating Board of Directors are the most important prerequisites for long-term sustainable development in a modern company.
In companies aimed at long-term successful development, the role of the Board of Directors increases dramatically since the Board of Directors have to act reasonably and in good faith for the benefit of the company and its shareholders.
The Board of Directors is a strategic management body, whose main objective is the implementation of general (directing) management of the company's activities, as well as the execution of supervisory and overseeing functions. First of all, its competences include the most important issues of the Company’s management, such as strategy definition, investment and budget planning, developing management motivation and assessment system, as well as supervision of the company's assets, reliability and effectiveness of risk management systems, internal control, internal audit and corporate governance system.
The Board of Directors of MTS PJSC exercises general governance over the Company’s activities in accordance with the provisions of the Company’s Charter, Regulation on the Board of Directors of MTS PJSC, For more information see website and the requirements of the legislation of the Russian Federation.
The main purposes of the Board of Directors are:
- development and analysis of general corporate strategy, control over its implementation;
- providing for the control over executive bodies and chief executives of the Company, and assessment of their activities;
- increasing the capitalization of the Company, expanding its market positions, achieving and preserving the Company’s competitiveness;
- maintenance of a stable financial standing, increasing revenues and profitability; and
- protection of rights and lawful interests of the Company’s shareholders.
Composition of the Board of Directors
The composition and structure of the Board of Directors affects its performance, and thus performance of the entire Company; this being said, the important aspect is the balance of the composition in terms of qualifications of its members, their experience, knowledge and business qualities. A member of the Board of Directors should, first of all:
- be able to communicate effectively with people
- participate efficiently in a discussion,
- understand the difficult situation based on the information prepared by management, relying on his experience and ability to quickly analyze information, checking responses to the questions asked.
The quantitative composition of the Company’s Board of Directors is permanent. The Board of Directors was elected at the annual General Meeting of MTS PJSC Shareholders on June 27, 2019, and for the duration of 2019 it consisted of 9 members. Such number of members of the Board of Directors makes it possible to form the composition, which is balanced from the point of view of professional qualification, experience and business skills of the members of the Board of Directors, to provide high efficiency of work and fully meets the needs of the Company and interests of the shareholders. Issues related to the needs of the Board of Directors in the field of professional qualification, experience and business skills of the members of the Board of Directors, and also to the quantitative composition, were considered within the framework of the procedure for assessment of the Board of Directors’ work (in more detail – section “Assessment of the Performance of the Board of Directors”).
Independent directors should be included in the composition of the Board of Directors for effective implementation of its functions and making informed, grounded decisions, ensuring control over management in the interests of the company's owners. Independent directors allow to ensure a reasonable balance of interests of all the parties concerned: the Company itself, its shareholders and other concerned parties. For the independent directors to be able to influence the decisions taken by the Board of Directors, their number must be equal to at least one third of the total composition of the Board of Directors. In this regard, the number of independent directors in our Board of Directors is over one third.
In June 2015, the number of independent directors in the Board of Directors was increased to four. The increase of the independent directors’ number allows the independent standpoint within the Board of Directors to exercise greater influence on the business decisions taken, on the Company’s corporate policy and strategy.
Criteria of independence of the Board of Directors’ members are defined in the Regulation on the Board of Directors of MTS PJSCFor more information see website and correspond to state-of-the-art international practices of corporate governance.
NYSE listing also adds additional obligations for us related to the composition of the Board of Directors: the Company is required to have at least one member of the Board of Directors (in the Audit Committee) with expertise in accounting or relevant financial management experience (financial expert). The Audit Committee of the Board of Directors is headed by Thomas Holtrop, who has experience and knowledge in the preparation, analysis, assessment, and audit of financial statements.
According to recommendations of the Code, the key committees (Audit, Remuneration and Nomination) are formed exclusively from independent directors. Other committees include at least two independent directors.
For key projects, the Board of Directors establishes Special Committees, which also include independent directors. For example, a committee like this, consisting only of independent directors, was established in 2018 for the project envisioning MTS PJSC’s share increase in the authorized capital of MTS Bank PJSC.
An important factor for the company is the professional experience and reputation of its independent directors. As a rule, it is the care for reputation and professionalism of a person that help him take very seriously the work in the Board of Directors, observe the principles of absence of conflicts of interests, carefully study the materials and make informed decisions when voting at meetings of the Board of Directors.
From the moment the Board of Directors included independent members their role and contribution to representation of interests of our Company got stronger.
Independent Directors participate in strategic sessions for discussing the Company’s strategy update with participation of the Board of Directors members, representatives of the majority shareholder and managers of the Company. Following the strategic sessions results, the matter of update of the Company’s strategy and development plan shall be presented to the Board of Directors for consideration.
Independent Directors are actively involved in preliminary discussions of many related-party transactions which are important for the Company. The Company has also implemented a practice of preliminary review of a series of related-party transactions, including transactions with companies in AFK Group (a majority shareholder), at meetings of the Audit Committee under the Board of Directors consisting only of Independent Directors. As common practice shows, this noticeably facilitates the work of independent Board of Directors members as to approval of and agreeing upon transactions.
Our Independent Directors are professional managers, whose experience and knowledge make a significant contribution to the development of the Company’s corporate governance system. Mastering of the best practices, great managerial experience, understanding of business needs and HR management specifics, proactive approach, strategic thinking, openness in discussions: all this makes an invaluable contribution not only to the results of the activity of the Board of Directors, but also to those of the Company in general.
Boards of Directors’ Compositions Effective in 2019
| From June 28, 2018, to June 27, 2019 | From June 27, 2019, to December 31, 2019 |
|---|---|
| Ron Sommer – Chairman of the Board of Directors | Feliks Vladimirovich Yevtushenkov Chairman of the Board of Directors |
| Artyom Ivanovich Zasursky – Non-executive Director | |
| Aleksey Borisovich Katkov – Non-executive Director | |
| Aleksey Valerievich Kornya – Executive Director | |
| Stanley Miller – Independent Director | Antonios Theodosiou Antoniou Independent Director |
| Vsevolod Valerievich Rozanov – Non-executive Director | |
| Regina Dagmar Benedicta von Flemming – Independent Director | |
| Thomas Holtrop – Independent Director |
Information on Members of the Board of Directors as of December 31, 2019
Key Competences of the Board of Directors Members
| Member of the Board of Directors | Duration of work on the Board of Directors | Key competences | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Strategy | Finance and Auditing | Industry Specialization (telecom) | Legal Matters and Corporate Governance | Risk Management | HR management | M&A | GR/IR | ||
| A. Antoniou | 1 year (from June 2019) | ⊙ | ⊙ | ⊙ | |||||
| F. V. Yevtushenkov | 1 year (from June 2019) | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ |
| A. I. Zasursky | 3 years (from June 2017) | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ |
| A. B. Katkov | 2 years (from June 2018) | ⊙ | ⊙ | ⊙ | |||||
| A. V. Kornya | 2 years (from June 2018) | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ |
| V. V. Rozanov | 7 years (from June 2012) | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ |
| Regina von Flemming | 4 years (from June 2015) | ⊙ | ⊙ | ⊙ | ⊙ | ||||
| T. Holtrop | 7 years (from February 2013) | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | |
| V. B. Yumashev | 1 year (from June 2019) | ⊙ | ⊙ | ⊙ | ⊙ | ⊙ | |||
Chairman of the Board of Directors
The Chairman of the Board of Directors of MTS PJSC bears the main responsibility for ensuring the implementation of the rights and interests of the shareholders and achieving a balance between the short-term financial result and the long-term strategic positioning of the business. In terms of the personal qualities of the chairman, this means the ability to combine pragmatism and specificity in solving tactical issues with the role of a strategist and visionary who deeply understands the processes occurring in the company and has a clear vision of the local market situation. The Chairman of the Board of Directors has the highest level of personal responsibility for the long-term sustainability of the business and strives to ensure the growth of shareholder value.
The Chairman of the Board of Directors is not an independent director, a senior independent director is not defined. Thus, one of the recommendations of the Bank of Russia Corporate Governance Code is not respected. At the same time, the expanded Corporate Governance Committee of the MTS Board of Directors (with participation of all independent directors) regularly analyzes the recommendations of the Bank of Russia Corporate Governance Code that are not respected by the Company and assesses the possibility of their implementation. This non-respected recommendation was considered at all past meetings, including at the last meeting on December 18, 2019: the directors did not consider its implementation appropriate. Detailed information is presented in the appendix to this report, “Report on Compliance with the Bank of Russia Corporate Governance Code”. The level of corporate governance of the Company and the atmosphere of constructive discussion formed by the previous chairman of the MTS board of directors do not currently require, according to members of the board of directors, the implementation of this recommendation of the Bank of Russia Corporate Governance Code and the appointment of another chairman, albeit formally meeting all independence criteria.
The Board of Directors is a well-coordinated mechanism, a single team, in which everyone contributes to the management decision-making process. Within the MTS Board of Directors there is a strong independent block of directors, and four places out of nine have been occupied by independent directors for the last four years. The Board of Directors is balanced both from the point of view of quantitative composition and from the point of view of experience and qualification of its members. Each member of the board is a professional of the highest level, a carrier of industry knowledge and business experience, a generator of advanced ideas. The chairman is the leader, the central figure of the board whose main task is to make his team of professionals work as productively as possible. While forming a businesslike, dynamic, positive atmosphere in the board of directors, he moderates the discussion so that each participant can show their best qualities but the result of discussions is a unified, balanced, justified, and specific managerial decision.
Corporate SecretaryFor more information see website
The Corporate Secretary ensures effective current interaction with the shareholders, coordinates actions of the Company for protection of rights and interests of shareholders, and supports effective work of the Board of Directors.
The functions of the Corporate Secretary in MTS PJSC are performed by a special structural subdivision – the Corporate Governance Department, the main functions, rights and obligations of which are defined in the Regulations on Corporate Governance Department.For more information see website
The Functions of the Corporate Governance Department at MTS PJSC include:
- participation in the improvement of the Company’s corporate governance system and practice;
- participation in the organization of the preparation and holding of the Company’s General Meetings of shareholders;
- ensuring the effective work of the Board of Directors and Committees of the Board of Directors of the Company;
- participation in the realization of the Company’s policy on information disclosure, and also provision of Company’s corporate documents storage;
- provision of interaction of the Company with its shareholders and participation in the prevention of corporate conflicts;
- ensuring the implementation of the procedures established by the Law and internal documents of the Company, ensuring the rights and legitimate interests of shareholders and control over their use;
- ensuring the Company’s interaction with regulators, trade organizers, the registrar, other professional participants of the securities market within the powers assigned to the Corporate Secretary; and
- immediate notification of the Board of Directors of all identified violations of the law and internal documents of the Company, observance of which is within the functions of the Corporate Governance Department.
The Corporate Governance Department is headed by the Corporate Governance Director, an officer of the Company reporting to the Board of Directors of the Company.
The Corporate Governance Director of MTS PJSC is also responsible for:
- preparation and conducting of meetings with the shareholders of MTS PJSC;
- management of subsidiaries of MTS Group;
- ensuring the timely disclosure of information in accordance with the requirements of the securities market legislation;
- development of Corporate Governance System of MTS Group;
- integrated management of intangible assets; and
- other functions.
The Board of Directors approves the nominated Corporate Governance Director as the manager of the unit serving as the Corporate Secretary.
The Director of Corporate Governance Department in the reporting period was Corporate Governance Director of MTS PJSC, Maxim Aleksandrovich Kalinin.
Board of Directors Secretary
Main purpose of the Board of Directors Secretary of MTS PJSC is to ensure compliance by the Company’s management bodies with the requirements of legislation and internal regulatory documents of the Company, which guarantee the enforcement of rights and interests of its shareholders.
Regulatory base for implementation of Board of Directors Secretary’s functions, besides the Charter, is the Regulation on MTS PJSC Board of Directors.
Board of Directors Secretary:
- carries out an instatement of newly elected members of the Company’s Board of Directors;
- informs members of the Board of Directors and invited persons on forthcoming meetings of the Board of Directors;
- sends to members of the Board of Directors materials on issues of the Board of Directors agenda;
- upon request, provides to members of the Board of Directors an additional information on Company’s activities;
- calculates the votes on issues put to a vote and keeps record of the Board of Directors meetings;
- ensures storage of the Board of Directors’ documents;
- controls implementation of the Board of Directors’ decisions;
- assists the Chairman of the Board of Directors in planning for activities of the Board;
- ensures communication of members of the Board of Directors with management; and
- assists in solving organizational and technical issues.
The Board of Directors Secretary since 2005 has been the Corporate Governance Director of MTS PJSC, Maxim Aleksandrovich Kalinin
Organization of the Board of Directors’ activities
At least six in-person meetings are be conducted each year in accordance with the approved plan of meetings of the Board of Directors. If necessary, it is possible to participate in a joint meeting through video conferencing. Extraordinary meetings are convened to take decisions on urgent matters. Meetings in the form of absentee voting are conducted to vote on issues on which members of the Board of Directors do not have significant qualms.
The plan for the Board of Directors’ activities for the next year is approved in December of the current year. Dates, periods, and locations of meetings shall be determined according to the schedules of activities of the Board of Directors members in order to provide for participation of all the directors.
Traditionally the plan of activities includes the main issues of Company’s operation: strategy, finances, budget and risks, and HR matters. Such plan shall be prepared with regard to the suggestions of the Board of Directors members and Company’s managers. All issues of the Board of Directors meeting agenda shall normally be reviewed by dedicated committees, allowing to discuss and draw up recommendations for a final decision by the Board of Directors.
In-person meetings of the Board of Directors are usually held in Moscow headquarters. First meeting of the newly elected Board of Directors shell be held with personal attendance, on the day of the General Meeting of Shareholders which decided on election of the Board of Directors.
To hold the meeting in the headquarters, it is necessary to plan and approve the schedule of activities for two days: meetings of committees under the Board of Directors, briefing with Board of Directors members (PreBoard), the meeting of the Board of Directors, and to make all practical arrangements: on provision of simultaneous translation, services on hotel booking, transfers, catering, etc.
The Chairman of the Board of Directors holds monthly meetings/consultations with representatives of shareholders and/or managers of the Company. Main topic of such meetings is a matter of the management of strategic changes. This allows to initiate global strategic changes outside of routine management ant to change the focus of a common perception of Company’s systems and processes.
The Company believes it is a good practice allowing to share ideas and observations from our experience of working with other companies and businesses, which at the end of the day enriches our discussions in the Board of Directors and forms a strong base for right decisions of the executives.