2021 sustainability report

GOVER­NANCE

Corporate governance

Corporate governance principles

Nornickel’s corporate governance framework is designed to take into account and balance the interests of shareholders, the Board of Directors, managers and employees, as well as other stakeholders.

Our approaches to an effective governance framework draw on the applicable Russian laws, including the Corporate Governance Code recommended by the Bank of Russia. Its key principles are reflected in Nornickel’s Articles of Association, Regulations on the Board of Directors, Anti-Corruption Policy and other by-laws*.

Our key corporate governance principles:

  • equitable and fair treatment of every shareholder;
  • support for the shareholders to let them exercise their rights and lawful interests in the most reasonable and convenient manner;
  • professionalism and leadership of the Board of Directors, and involvement of independent directors in governance;
  • strategic management by the Board of Directors, its efficient control over executive bodies, and oversight of the risk management and internal control framework;
  • sound, bona fide and efficient management of the Company’s day-to-day operations by executive bodies accountable to the Board of Directors and the General Meeting of Shareholders;
  • compliance with the Russian laws and the national laws of the countries of operation;
  • corporate social responsibility;
  • strong business ethics;
  • zero tolerance to corruption, and effective anti-corruption measures;
  • full, transparent, reliable and timely disclosure;
  • robust internal controls, internal and external audits;
  • active collaboration with investors, creditors, and other stakeholders in order to increase the Company’s assets and market capitalisation.

Share capital structure

In 2021, the Board of Directors resolved to repurchase 5,382,865 of Nornickel’s own outstanding shares (representing 3.4% of its authorised capital).

On 19 August 2021, the General Meeting of Shareholders resolved to reduce the Company’s authorised capital to RUB 153,654,624 through cancellation of 4,590,852 repurchased ordinary shares. Following all the Russian statutory procedures to complete the reduction of the authorised capital, the Company cancelled 4,590,852 treasury shares on 6 October 2021.

The remaining 791,227 shares uncancelled after the buyback were kept as treasury shares.

As at the end of 2021, the authorised capital of MMC Norilsk Nickel was made up of 153,654,624 ordinary shares with an aggregate market value of USD 47.5 bn as at 30 December 2021. The Company’s ordinary shares have been trading on the Russian market since 2001 (MOEX: GMKN). American depositary receipts (10 ADRs represent one share) were also issued in 2001 and are traded on the LSE (ticker: MNOD) and over the counter in the US (ticker: NILSY).

The Company’s shareholding structure as at the end of 2021: INTERROS LIMITED — 35.95%, EN+ GROUP IPJSC — 26.25%, treasury shares — 0.5%, shares and ADRs in free float and held by investors in Russia, the USA, Europe, Asia and other regions — 37.3%.

Shareholding structure as at 31 December 2021, %

Shareholding structure as at 31 December 2021, %

Governance bodies

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Pursuant to MMC Norilsk Nickel’s Articles of Association, its governance bodies are:

  • the General Meeting of Shareholders, the Company’s supreme governance body;
  • the Board of Directors, a collegial governing body in charge of strategic management of the Company and oversight of its executive bodies;
  • the Management Board and the President that represent the collegial and sole executive bodies of Nornickel, respectively, and manage day-to-day operations.

Board of Directors

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The Board’s authority and formation process, as well as the procedure for convening and holding Board meetings are determined by the Articles of Association and Regulations on the Board of Directors.

According to the Articles of Association, the Board of Directors has 13 members. Members of the Board are elected at the Annual General Meeting of Shareholders for a period extending until the next Annual General Meeting of Shareholders. The current size of the Board of Directors is best aligned with Nornickel’s goals and objectives. It is also well-balanced in terms of independence, which ensures efficient decision-making in line with the interests of all stakeholders and improves the quality of adopted managerial decisions. The Board of Directors currently includes six independent directors who provide professional unbiased opinion on all agenda items.

As at 31 December 2021, the Board of Directors consisted of 13 members*:

  • six independent directors: Gareth Peter Penny, Sergey Bratukhin, Sergey Volk, Roger Munnings, Evgeny Shvarts and Robert Edwards*;
  • six non-executive directors: Stanislav Luchitsky, Alexey Bashkirov, Sergey Barbashev, Sergey Batekhin, Maxim Poletaev and Vyacheslav Solomin;
  • one executive director: Marianna Zakharova.

As at 31 December 2021, the Board of Directors was chaired by Gareth Peter Penny, an independent director.

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The Board of Directors oversees the Company’s management, financial and business affairs. The Board has the responsibility to define the principles of and approaches to organising the risk management and internal control framework and to monitor its implementation. The Board of Directors may instruct the management team on individual matters and monitor implementation of resolutions and tasks. Authorised executives are vested with powers and responsibilities to address economic, environmental and social matters and may delegate their powers to other employees based on their competences and functions. As a participant of the Company’s risk management process, the Board of Directors is responsible for:

  • analysing the main risks associated with the Company’s activities and ensuring the implementation of actions and procedures to manage such risks (pursuant to the Company’s Charter);
  • approving the Company’s key risks reporting;
  • approving risk appetite.

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The Board of Directors meets as and when required, but at least once every six weeks.

In 2021, the Board of Directors of MMC Norilsk Nickel held 43 meetings (10 meetings in person and 33 meetings in absentia).

The most discussed topic during the Board meetings in 2021 was corporate governance.

As part of these meetings, it considered 102 matters, including 30 corporate governance matters, 15 deal approvals, 11 economic and financial matters, 3 social and environmental matters, and 43 other matters*.

Committees of the Board of Directors

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The Board of Directors has five committees.

The committee operations, structure, functions and membership are defined by the respective committee regulations.

Key functions of the Board’s committees

Committee
Key functions

Committee

Audit Committee

Key functions

  • reviewing matters related to financial statements;
  • overseeing risk management and internal controls;
  • overseeing external and internal audits;
  • preventing employee and third party wrongdoing;
  • reviewing HSE matters.

Committee

Strategy Committee

Key functions

  • preliminary review of matters pertaining to sustainable development, investment planning, restructuring, and interaction with capital markets and government authorities.

Committee

Budget Committee

Key functions

  • issuing recommendations to the Board of Directors in order to facilitate decisionmaking on the amount of dividends and on the record date to be suggested by the Board of Directors; taking into account information on the Company’s financial results; approving the Company’s budget.

Committee

Corporate Governance, Nomination and Remuneration Committee

Key functions

  • support in assessing, overseeing and improving Nornickel’s corporate governance framework; succession planning for Nornickel’s Board of Directors and Management Board; providing incentives, evaluating the performance of Nornickel’s Board of Directors, Management Board, President, and Corporate Secretary, and setting relevant remuneration policies; supervising the development and implementation of Nornickel’s information policy.

Committee

Sustainable Development and Climate Change Committee

Key functions

  • integration of the sustainable development principles, including climate change, into the Company’s operations;
  • development and implementation of a strategy on sustainable development and climate change;
  • overseeing risk management and internal control in sustainable development and climate change;
  • overseeing the Company’s internal reporting and disclosures on sustainable development and climate change;
  • overseeing external audit of the Company’s sustainable development and climate change reports and activities.

Composition of the Board’s committees

Chairman
Share of directors
Committees of the Board of Directors
Directors
Independent
Non-executive
Independent
Non-executive

Committees of the Board of Directors

Audit Committee

Directors

5

 
Independent

+

Chairman
Non-executive

+

 
Independent

60%

Share of directors
Non-executive

40%

Committees of the Board of Directors

Budget Committee

Directors

5

 
Independent

Chairman
Non-executive

+

 
Independent

60%

Share of directors
Non-executive

40%

Committees of the Board of Directors

Strategy Committee

Directors

5

 
Independent

Chairman
Non-executive

+

 
Independent

40%

Share of directors
Non-executive

60%

Committees of the Board of Directors

Corporate Governance, Nomination and Remuneration Committee

Directors

5

 
Independent

+

Chairman
Non-executive

+

 
Independent

80%

Share of directors
Non-executive

20%

Committees of the Board of Directors

Sustainable Development and Climate Change Committee

Directors

5

 
Independent

+

Chairman
Non-executive

+

 
Independent

80%

Share of directors
Non-executive

20%

Evaluation of the Board of Directors performance

The Company has conducted regular assessments of the Board of Directors’ performance since 2014. Nornickel has developed its Performance Evaluation Policy for the Board of Directors in line with the Bank of Russia’s Corporate Governance Code and global best practices, as well as recommendations of independent consultants. According to the Policy, the Company runs annual internal evaluation (self-evaluation) of the Board of Directors’ performance in the form of an online questionnaire filled by each director. The questionnaire contains 77 questions, divided into three parts and 15 sections. All questions are graded on a scale from 1 to 10. For each question there is a text field where directors may enter additional comments. Answering all questions is mandatory.

Following the self-evaluation, the Corporate Governance, Nomination and Remuneration Committee prepares the Board of Directors’ performance report for the year and develops recommendations for improving the Board functions that were scored below average. With the Committee’s recommendations taken into account, the Board of Directors approves the report; the recommendations are communicated to all stakeholders.

In addition, the Company organises an external independent evaluation of the Board of Directors’ performance once every three years. The next external evaluation is scheduled for 2022 and will cover the Board’s performance in 2021.

Director induction and training

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Apart from providing training for employees and management, the Company also focuses on proper induction of the Board of Director’s members. Nornickel has in place the Professional Development Policy for Members of Board of Directors. In line with the policy, newly elected Board members undergo onboarding by attending a series of meetings with executives and key officers of the Company, where they get an opportunity to discuss the most important aspects of the Company’s operations directly with the persons in charge. The Corporate Secretary makes sure the new directors familiarise themselves with the existing by-laws of the Company.

All members of the Board of Directors receive annual training in dealing with insider information. The Company also organises field sessions for its directors, which involve visits to the Company’s production sites and meetings with heads of production units to address key issues locally. The Board members are informed about their rights and duties, including the requirement to notify the Company of changes in their statuses.

Executive bodies

The President and the Management Board* are the Company’s executive bodies. In the reporting period, the position of the Company’s President was held by Vladimir Potanin, who concurrently chaired the Company’s Management Board. As at the end of 2021, Vladimir Potanin had held the position of the President (CEO before 2015) for 9 years and 13 days.

Nornickel’s management regularly reports to the Board of Directors on various areas of the Company’s operations and takes steps to submit problems and concerns for preliminary discussion in order to ensure the most impartial and informed decision-making possible. A more detailed structure of sustainable development management by executive bodies is available in the Sustainability Governance subsection of the Strategic Vision section.

Prevention of conflict of interest

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Nornickel implements various measures to prevent and settle potential conflicts of interest among its shareholders, members of the Board of Directors and top management. The Company created the Conflict of Interest Commission at the Head Office to ensure better prevention, identification and settlement of conflicts of interest, as well as to develop and improve corporate culture.

Transactions involving a conflict of interest that meet the criteria for relatedparty transactions are executed in line with the procedure prescribed by laws on joint-stock companies.

In accordance with Nornickel’s Articles of Association, transactions involving a conflict of interest for a shareholder owning more than 5% of voting shares in the Company are subject to special consideration by the Board of Directors and can only be executed upon an approval by a qualified majority voting of the Board members (10 out of 13). Nornickel’s by-laws also state that members of the Board of Directors and the Management Board shall refrain from engaging in any activities that may cause a conflict of interest, and, if there is reason to believe such conflict may occur, notify the Corporate Secretary in writing.

If a director has a direct or indirect personal interest in a matter submitted for consideration by the Board of Directors, they shall inform the Board of Directors accordingly before the matter is considered or resolved and withdraw from any further discussions and voting on such matter.

Nornickel has in place the Regulations on the Prevention and Management of Conflicts of Interest, which apply to all of the Company’s employees. The document outlines the methods to identify potential and existing conflicts of interest and ways to settle them.

Ensuring transparency and dialogue with stakeholders on corporate governance

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Each year, Nornickel strives to increase stakeholder involvement in corporate governance, as it is an important factor of our operating efficiency.

The Company is committed to maintaining a high level of transparency in its business operations and making all the necessary disclosures in line with global best practices, which take the form of press releases, presentations, annual and sustainability reports, statements of material facts, and other interactive tools. We place a special emphasis on environmental and sustainability communications. Following the diesel fuel spill incident in Norilsk, the Company quickly organised a way to keep all stakeholders posted about the situation. We continue publishing updates on the clean-up operation and the Great Norilsk Expedition on our corporate website.

We disclose quarterly production results and accounting statements prepared under the Russian Accounting Standards (RAS) on the Company’s website. Every six month, we publish IFRS financial statements, issuer reports, and affiliate lists.

In 2021, despite the pandemic, the Company maintained an active dialogue with a wide range of Russian and international investors. Nornickel has been historically using various communication channels such as conference presentations, road shows, and site visits for investors. In 2021, we held a number of online one-on-one meetings, some of which were attended by the Company’s top management. In November 2021, the Strategy Day was traditionally held, attended by the Company’s senior executives and the Chairman of the Board of Directors.

We also organise regular online dialogues to identify key strengths and weaknesses of the top management — employee relations. In 2021, over 40 Group facilities held 1.5-hour online meetings with heads of business units to inform the employees about the Company’s growth plans and strategy and answer the most important and relevant questions.

Remuneration

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Key principles and mechanisms of remunerations due to the governing bodies are set out in the by-laws* of the Company. The Board of Directors monitors and oversees the Company’s remuneration framework.

The Board of Directors’ annual remuneration is set out in the Remuneration Policy for Members of the Board of Directors approved by the General Meeting of Shareholders.

The annual remuneration for non-executive directors includes:

  • base remuneration of USD 120,000 for the Board membership;
  • additional remuneration of USD 50,000 for membership in a committee of the Board of Directors;
  • additional remuneration of USD 150,000 for chairing a committee of the Board of Directors;
  • reimbursement of expenses incurred by directors in discharge of their duties.

In 2021, the Annual General Meeting of Shareholders set the remuneration for the Chairman of the Board of Directors, an independent director, in the amount of USD 1 mln per year, paid on a quarterly basis in equal instalments in roubles at the exchange rate of the Bank of Russia on the last business day of the reporting quarter*.

The remuneration of senior executives consists of the base salary and bonuses. Bonuses are linked to the Company’s performance, including both financial (EBITDA, free cash flow) and nonfinancial indicators (workplace injury rates, labour productivity).

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To engage its top executives in sustainability management, the Company included HSE targets in their annual 2021 team KPIs (aggregate weight of 40%). The Environmental Project Implementation indicator was selected as a KPI for the Long-Term Incentive Programme for the Group’s Key Employees (total weight of 30%).

ESG-related KPIs of the top management

Period
Annual team KPIs
Long-term KPIs

Period

Focus area

Annual team KPIs

Occupa­tional health and safety

Long-term KPIs

Environ­ment

 

Ecology and environ­ment

Period

KPI weight

Annual team KPIs

20%

Long-term KPIs

20%

 

30%

Period

KPI target

Annual team KPIs

A 20% reduction of TRI (Total Recordable Injuries) vs the 2013–2020 minimum figures

Long-term KPIs

Zero environ­mental incidents classified as an emergency

 

Delivery of environ­mental projects