Remuneration of members of the management and control bodies
Remuneration of members of the Board of Directors
Pursuant to clause 2 of article 64 of the Federal Law “On Joint Stock Companies”, a resolution on the payment of remuneration to the members of the Board of Directors of the Company may be adopted only by the General Meeting of Shareholders.
The Company has in operation the Regulation for Payment of Remuneration and Compensation for Members of the Board of Directors of IDGC of Centre, JSC, approved by the General Meeting of Shareholders (Minutes No. 01 of June 3, 2008) available on the website of the Company at the address: http://www.mrsk-1.ru/docs/H2H9nK.pdf.
This Regulation stipulates that remuneration for participation in meetings is paid to the members of the Board of Directors; moreover, additional remuneration is calculated according to the results of the appraisal of the activities of the Board of Directors. In total the Regulation provides for two kinds of additional remuneration: for the net profit figure given in the data of the annual accounting statements approved by the Annual General Meeting of Shareholders and in the event of an increase in the market capitalisation rate of the Company during the Board of Directors’ term in office.
Remuneration for participation in meetings is paid to the member of the Board of Directors as follows:
- if held in absentia — five (5) times the minimum monthly wage rate of a first-class employeeIn the course of 2011 the following monthly minimum wage rates for first-class employees were applicable: I quarter — RUB 4,207, II quarter — RUB 4,367, III quarter — RUB 4,417, IV quarter — RUB 4,117;
- if held in presentia — ten (10) times the minimum monthly wage rate of a first-class employee.
For the net profit indicator the additional remuneration for each member of the Board of Directors is calculated on the basis of the amount of net profit according to the data of the annual accounting statements approved by the AGMSAnnual General Meeting of the Shareholders, the number of members of the Board of Directors in accordance with the Articles of Association of the Company and the number of meetings held during the year in which the member of the Board of Directors participated. In the event of a change of composition of the Board of Directors, such remuneration is paid to all members of the Board of Directors who have performed work during the year in which the Company received the net profit for the results of its activity.
The amount of additional remuneration for achieving an increase in the market capitalisation rate of the Company for each member of the Board of Directors is 0.0175 percent of the Company’s market value increase calculated for the period from the date of election of the member of the Board of Directors to the date of election of a new Board of Directors of the Company. The condition for payment of the specified remuneration is the average monthly volume of transactions of no less than RUB 1.5 mn concluded with the ordinary shares of the Company on the stock exchange during the term in office of the Board of Directors.
A number of restrictions provided for by the Regulation are applied in the calculation of additional remunerations:
- additional remunerations are not paid if the member of the Board of Directors did not participate in more than 50% of meetings held (from the date of his election to the date of the termination of his powers);
- the amount of additional remuneration for achieving a net profit indicator target cannot exceed the salary of the Chief Executive Officer established by the Board of Directors:
- ¾ by more than 5 times for a member of the Board of Directors;
- ¾ by more than 7 times for the Chairman of the Board of Directors;
- the amount of additional remuneration of a member of the Board of Directors for achieving a target for increasing the size of the Company’s market capitalisation cannot exceed the salary of the Chief Executive Officer established by the Board of Directors by more than 5 times.
Remuneration for participation in the meetings and for performance of the net profit index is paid to the Chairman of the Board of Directors at a 1.5 coefficient.
A member of the Board of Directors may refuse to receive all or part of the additional remuneration by submitting the relevant application to the Company.
In total for 2011 RUB 31,800,891 were paid to members of the Board of Directors, of which RUB 25,355,298 was for achieving targets for additional remuneration based on results from 2010, and RUB 6,445,593 consisted of remuneration payment for participating in meetings in 2011.
| Indicator | Remuneration of the Board of Directors | ||
|---|---|---|---|
| June 17, 2011 | June 22, 2010 | June 11, 2009 | |
| Remuneration for participation in meetings, RUB | 2,893,135 | 3,552,458 | — |
| Additional remuneration for the net profit index, RUB | — | 13,522,278 | 11,833,020 |
| TOTAL: | 2,893,135 | 17,074,736 | 11,833,020 |
Remuneration of members of the Management Board
The Management Board of the Company includes executive employees of IDGC of Centre, JSC elected by the Board of Directors, who are vested, in addition to the obligations provided for by employment agreements, with the obligations to exercise the powers of a member of the Collegial Executive Body of the Company, the Management Board of IDGC of Centre, JSC, as provided for by the Articles of Association and Regulations on the Management Body of the Company approved by the Extraordinary General Meeting of the Shareholders of IDGC of Centre, JSC (Minutes No. 1829pr/1 of February 28, 2008).
While acting as members of the Management Board, such employees are paid a monthly remuneration in the amount of RUB fifteen thousand eight hundred and thirty (15,830.00) in accordance with the terms and conditions of supplementary agreements to their employment agreements.
Members of the Management Board of the Company are classified as senior managers according to the Regulations on Material Incentives for Senior Managers of IDGC of Centre, JSC (Minutes of the Meeting of the Board of Directors No.13/08 of August 01, 2008) effective in 2011 and the Regulations on Material Incentives and Employment Benefits for Senior Managers of IDGC of Centre, JSC (Minutes of the Meeting of the Board of Directors No. 16/11 of July 18, 2011).
Bonus payments for senior managers are based on the achievement of key performance indicators (hereinafter referred to as “KPIKey Performance Indicators”), and depend upon the degree of KPI accomplishment for the respective reporting periods (quarter and year). These key indicators are established on the basis of indicators specified by the Board of Directors of the Company for the Chief Executive Officer.
In 2011, remuneration in the amount of RUB 47,402,482 was paid to members of the Management Board of the Company for the key performance indicators achieved for the fourth quarter of 2010 and for 2010, for the first and second quarters of 2011, as well as sums for additional and special premiums.
Remuneration of the Chief Executive Officer
The criteria for determination and the amount of remuneration of the Chief Executive Officer are specified by the employment agreement concluded in accordance with the Articles of Association of the Company and by the Regulations on Material Incentives for the Chief Executive Officer of IDGC of Centre (Minutes of the Meeting of the Board of Directors No. 16/11 of July 18, 2011; up until that date the Regulation approved by the Board of Directors of the Company was in effect, Minutes No. 19/08 of November 28, 2008).
Bonus payments to the Chief Executive Officer of IDGC of Centre, JSC are based on the achievement of key performance indicators determined by the Board of Directors of the Company for the respective reporting periods (quarter and year); in addition non-recurrent, special and additional bonus payment is provided for.
In accordance with the Annex to the Regulations on Material Incentives for the Chief Executive Officer of IDGC of Centre, JSC, the KPI of the Chief Executive Officer include financial, technical and investment indicators. Remuneration is paid conditional on the Board of Directors’ approval of the report of the Chief Executive Officer on the accomplishment of the agreed KPI.
A special and additional bonus payment is paid in the events of achievement of a high level of profitability of the equity capital of the Company. A one-off bonus may be paid to the Chief Executive Officer for work of particular importance, or for being granted an award.
In 2011, such remuneration was paid to the Chief Executive Officer for achieving the key performance indicators for the fourth quarter of 2010, for 2010, and for the first and second quarters of 2011, as were sums for additional and special premiums. The specified payments are included in the remuneration of the members of the Management Board.
Remuneration of the members of the Audit Commission
The system of remuneration for the members of the Audit Commission of the Company is specified by the Regulations for the Remuneration and Compensation of Members of the Audit Commission of IDGC of Centre, JSC (Minutes of the Annual General Meeting of Shareholders No. 01 of May 03, 2008). Pursuant to the Regulations, remuneration worth 25 times the minimum wage rate of a first-class employee is paid to members of the Audit Commission for their participation in the inspection (audit) of the Company’s financial and economic activities. In this regard the remuneration of the Chairman of the Audit Commission is paid at a 1.5 coefficient.
In 2011, remuneration of RUB 491,288 was paid to members of the Audit Commission.