Annual report 2013

Corporate Management in Sustainable Development

Activity Supervision in Corporate Social Responsibility

Sustainable development issues in corporate social responsibility are managed on a strategic and operative level. The Company is constantly improving the management system in order to raise its efficiency and correspondence to the best world practices.

The Company’s general activity in sustainable development is supervised by the management bodies. In keeping with the Charter of MMC Norilsk Nickel, they include:

  • The General Shareholders’ Meeting—the Company’s supreme management body;
  • The Board of Directors — carries out general supervision of the Company’s activity, as well as resolving issues governed by the Federal Law on Joint-Stock Companies and the Company’s Charter to the competency of the General Shareholders’ Meeting;
  • The Board and Director-General are the Company’s collegial and personal executive bodies and they supervise the Company’s ongoing activity.

In the year reported here, senior managerial staff underwent significant renewal and the managerial structure of MMC Norilsk Nickel was changed. The members of the Board of Directors have changed twice: according to the results of a special General Shareholders’ Meeting held on 11 March 2013 and the results of the annual General Shareholders’ Meeting held on 6 June 2013. Today, the members of the Board of Directors include renowned world specialists with many years of work experience in the mining industry.

Independent directors are elected to Norilsk Nickel’s Board of Directors in accordance with the generally accepted corporate management practice. Five of the 13 members of the Board, including the Chairman of the Board, are independent directors. Four seats on the Board are occupied by representatives of the two main shareholders, the Interros and Rusal companies.

(1) Supreme management body: election of members of the Board of Directors and Revision Commission, approval of auditor, approval of annual report and annual accounting reports, distribution of profit

(2) Verification of financial and economic activity

(3) General management

(4) Advisory bodies under the Board of Directors: drawing up recommendations for the Board of Directors

(5) Management of operational activities

The most conservative criteria are used to determine the independence of the members of the Board, in accordance with Item 8.15 of the Company’s Charter. Within the framework of the project to improve the existing corporate management system (CMS), the Company is steering a course toward developing its own Corporate Management Code containing a description of the CMS operating model and the main principles for organising and running the system (structure, composition, main responsibilities, policies, and procedures meeting the best world practices). In accordance with the recommendations of the Corporate Management Code made by the Bank of Russia for use by joint-stock companies, the securities of which are permitted for trading in organised markets, MMC Norilsk Nickel plans to place the emphasis in its Corporate Management Code, along with provisions aimed at efficiently running the Board of Directors, on specifying the criteria of director independence and to recruit consultants to assess the Board’s activity. The members of the Board of Directors are presented in the Company’s Annual Report for 2013.

In 2013, the Company held 64 board meetings: 13 meetings requiring personal attendance and 51 meetings held via video-conferencing. The quarterly board meetings with members in personal attendance examined the Company’s financial results, information about the implementation of strategic initiatives, and management reports on the results of environmental, industrial safety, and occupational safety efforts, as well as reports on production indices.

In 2013, the Board of Directors’ committees continued their work: the Auditing Committee; Strategy Committee; Budget Committee; Corporate Management, Personnel, and Rewards Committee.

The amount of rewards for board members according to the results of their work at year end is determined by a decision of the annual General Shareholders’ Meeting and includes the basic amount of the reward for being elected a member of the Board of Directors, compensation of expenses relating to the performance of their duties, and well as perks for participating in and chairing the Board of Directors’ committees.1

In compliance with the Charter of MMC Norilsk Nickel, determining the amount of rewards and compensations paid to the members of the Company’s Administration and Director-General is within the competence of the Company’s Board of Directors.

The work of the management is evaluated on the basis of key performance indices.

The post of the personal executive body of the Company — Director-General — was occupied by V. O. Potanin during the period under report; he also performs the functions of the Chairman of the Board.

In 2013, 45 board meetings were held: 2 meeting with personal attendance and 43 meetings held via video-conferencing. Along with questions relating to the Company’s current activity, the Board paid special attention to the Business Subdivision Initiative Support Programme on Information Technology for 2013-2018.

Operational Activity Management in CSR

The Deputy Director-General for Social Policy and Public Relations is responsible for coordinating CSR efforts. The Social Policy Department is responsible for preparing the Corporate Social Responsibility Report.

The main subdivisions carrying out the supervision of CSR operational activities and participating in preparing the CSR Report are the following: the Department on Work with the Investment Community, the Joint-Stock Capital Department, the Personnel Policy Department, the Public Relations Department, the Occupational and Industrial Safety Department, the Social Policy Department, the Investment Project Management Department, the Federal and Regional Programme Department, the Environmental Department, the International Financial Accounting Department, the Economic Department and Internal Control Department.

All of the Company’s subdivisions are responsible for sustainable development management within the boundaries of their competence. The following committees coordinate efforts in separate areas: the Budget Committee, the Charity Committee, the Corporate Management, Personnel and Rewards Committee, the Occupational Injury Prevention Committee, and the Investment Committee. A Corporate Integrated Management System (CIMS) For information on CIMS see Section 6. “Environmental Responsibility.”for quality control and the environment has been created in the Company and is functioning successfully.1

Specialised subdivisions supervise operational activity in corporate social responsibility at the Group’s foreign enterprises within the range of their functional responsibility by drawing up, adopting, and executing managerial decisions.

Organisational Structure and Functional Managerial Subdivisions in CSR in 2013

Risk Management System

In order to reduce the negative effect of potential risks in the Company, a risk management system has been created and is efficiently functioning aimed at ensuring ongoing financial and economic activity that is being constantly improved and increasingly brought into harmony with the best world practices and risk management standards.

The main tasks of the corporate risk management system include:

  • Strict correspondence to legislative requirements
  • Reasonable and enhanced financial control
  • Prevention of insider trading
  • Correspondence to the Anti-Corruption Charter of Russian Business

The risk management system (including financial risks) is described in greater detail in MMC Norilsk Nickel’s Annual Report for 2013. Key Elements of the Company’s Risk Management System:

The corporate risk management system keeps in mind a wide range of non-financial risks:

  • technical and production risks;
  • reputational risks;
  • regulatory risks;
  • environmental risks;
  • occupational safety risks;
  • personnel risks;
  • risks relating to international assets.

There was no significant change in the list of risks in 2013 For a detailed description of non-financial risks, see CSR Report for 2012. compared with the previous period. In 2013, work began on actualising the Corporate Risk Management Conception that is to be completed in 2014 with the participation of an external consultant. In addition to the updated Conception, joint efforts will result in recommendations to further improve the Company’s risk management system.

In compliance with the Corporate Risk Management Conception, the results of risk identification and assessment, as well as measures to reduce them, are examined annually by the Director-General and Management Board and approved by MMC Norilsk Nickel’s Board of Directors.

Prevention of Corruption

In its efforts to preserve its business reputation and strengthen the trust and interest of its shareholders, investors, business partners, employees, the state, and the international community in the results of its activity, the Company considers it its duty to adhere faithfully to the demands of Russia’s anti-corruption legislation and the adopted international anti-corruption standards.

In 2013, a Compliance Division was formed in order to minimise the legal, financial, and reputational risks in the Department of Joint-Stock Capital, Compliance – correspondence of the company’s activity to the requirements of government bodies, legislative regulations, applicable rules, recommendations, and standards, including in-house corporate policies and procedures, as well as ethical business practices Compliance and Combating the Illegal Use of Insider Information. The key competencies of this department include compliance risk management issues, monitoring changes in the legislation, consultation of the Company’s subdivisions, and drawing up recommendations relating to adhering to the demands of regulatory legal acts, standards, the Company’s regulatory and methodological documents, and collaboration with monitoring (supervisory) bodies when carrying out compliance control and drawing up and coordinating regulatory and methodological documents aimed at changing the processes in the Company pertaining to compliance risks and/or leading to their appearance.

The Company has begun drawing up an Anti-Corruption Policy that is a set of interrelated key principles, procedures, and specific measures aimed at preventing and intercepting corruption violations in the Company’s activity.

The Company is carrying out regular training of employees in the prevention and combating of corruption. In October 2013, employees of the Compliance Department undertook training in the Basic Level Programme on the fundamentals of compliance and received an International Compliance Association qualification.

The Company has a successfully functioning Corporate Trust Service that makes it possible to ensure the Company directors’ efficient response to violations/abuse/embezzlement. In 2013, the Service received 229 statements, a third of which (71) were confirmed.

The Company’s senior management is supporting government measures aimed at combating corruption and adhering to the anti-corruption policy it pursues. Deputy Chairman of the Board of MMC Norilsk Nickel A. Burgov led meetings of the Corruption Transparency and Prevention target group within the framework of the Business Twenty (B20) — Sherpa – authorised person of the leader of a member state of the G-8 and representative of a country in the G-20 and BRICS. Sherpas are responsible for contacts with colleagues from foreign countries, preparing agendas for summits, and drawing up agreements. a sherpa meeting of the Group of 20 (G20) during Russia’s chairmanship—held in Moscow in December 2013.

In 2013, Norilsk Nickel exerted efforts to join the Anti-Corruption Charter of Russian Business, in compliance with which the Company pledges to introduce a whole set of special anti-corruption programmes and practices that affect not only the situation in the Company, but also its relations with business partners and the state. The charter envisages doing away with preferences, carrying out purchases based on open bargaining, introducing financial monitoring, and Joining was registered in January 2014. assisting law-enforcement bodies.