Managing Possible Conflicts of Interest
Possible conflicts of interest are managed at all levels of the Company.
For the avoidance of any potential conflicts among its shareholders, the Company provides equal opportunities for exercising shareholder rights established by the applicable laws.
Ensuring the Company's interaction with shareholders and participating in the prevention of any corporate conflicts are within the competence of the Corporate Secretary. The Corporate Secretary has to promptly notify the Board of Directors of any threatened violation of the applicable laws, shareholder rights or any conflicts of interest. The Company has arranged activities on shareholder relations, including explanations of the Company’s position by the shareholders’ requests.
Board of Directors
The Board of Directors is responsible for managing any conflicts of interest in the Company. The Charter specifies the procedure for the Board of Directors to review the related party transactions. The Regulations on the Board of Directors specifies the duties of the Board of Directors’ members related to avoidance and management of any conflicts of interest.
When considering agenda items, members of the Board of Directors assess a potential conflict between their interests and those of the Company. With respect of any issue that may, in the opinion of a member of the Board of Directors, result in such a conflict of interest, the director shall not participate in voting and, where necessary, in the discussion of such issue. Any actual/potential conflicts of interest are communicated by members to the Chairman of the Board of Directors and/or the Corporate Secretary.
For the avoidance of any potential conflicts among the Company’s employees, the Board of Directors specified the rules of conducting transactions in financial instruments by persons included in the insider list, as well as the rules for disclosing insider information, and checks adherence to these rules on a regular basis.
According to the internal documentation, the members of the Management Board and the Chief Executive Officer:
- should refrain from any actions that may cause a conflict of interest, and should such conflict arise – immediately notify the Chairman of the Management Board / the Chairman of the Board of Directors and/or the Corporate Secretary;
- while in office, may not hold and/or control 20 or more percent of voting shares (interests or stakes) in any entity competing with the Company or having any business interest in maintaining relations with the Company;
- may not accept any gifts from persons interested in resolutions passed as part of their duties, or other benefits from such persons.
Top-managers and Employees
The rules of avoidance and prevention of conflicts of interest are regulated by the Code of Business and Corporate Ethics, which defines the terms "conflict of interest" and "corruption" and specifies the procedure of corporate frauds prevention. The Company has in place the Council for Business Ethics. Managing the conflicts of interest is among the functions of this Council.
Special rules on prevention of corporate frauds are listed in the Company’s Policy on Anti-Corruption and Countering Corporate Fraud. The Policy stipulates the key principles and the organizational structure of the Company’s for countering corporate fraud, monitoring procedures, and anti-corruption training for the employees, including the algorithms in case of threatened violation of anti-corruption rules.
Special rules aimed at preventing the securities market manipulation and the misuse of insider information are stipulated in the Regulations on Insider Information, which define the rules for disclosing insider information and conducting transactions in financial instruments by persons included in the insider list.
Prevention of Corruption
In the reporting period, the Company continued to focus on improving anticorruption and anti-fraud efforts, ensure compliance by top managers and employees with international and Russian anticorruption legislation, and the applicable local regulations.
As part of anti-corruption practices:
- The Company has been consistently working on improving the framework for building its culture elements, organizational structure, and rules and procedures designed to prevent corporate fraud and corruption, and to mitigate reputational risks and risks that the Company will be held liable for bribing officials; for that purpose, Rosneft’s Comprehensive AntiFraud and Anti-Corruption Program for 2019–2020 was drafted and approved by Rosneft’s Council for Business Ethics on 10 December 2018;
- Rules and a procedure for anti-corruption examination of draft local regulations and administrative documents of the Company were determined to exclude the risk that they would encourage corruption; a standard anti-corruption clause is included in agreements with legal entities and individuals; in 2018, due diligence was conducted on 122,048 potential bidders (to supply inventories, perform capital construction projects, and provide oilfield and nonoperating services), with 2,593 bids rejected;
- the Company’s Regulations on the Procedure for Charitable Activities of Rosneft and Group Subsidiaries, and on Sponsorship by Rosneft and Group Subsidiaries are applied across the Company;
- The Company is vetting job applicants on an ongoing basis to identify potential conflicts of interest, including affiliation;
- Additionally, the Company has in place a number of organizational measures to meet the requirements for hiring former government officials;
- The Company collects and verifies the information on income, property, and property obligations for certain categories of employees;
- The Company enhances the commitment of the Company’s management to preventing corruption, including conflicts of interest, by entering relevant provisions into employment contracts, and including provisions on liability for failure to comply with antifraud and anti-corruption requirements of the Company’s local regulations in employee job descriptions.
- The Company is working on instilling zero tolerance for corruption in its employees.
- The Company operates a 24/7 Security Hotline to report on cases of corporate fraud and corruption. Members of the Company’s Board of Directors are updated on the Security Hotline operation on a quarterly basis.
The corruption control section on the official corporate website has:
- The Company’s statement on its zero tolerance for corruption;
- key provisions of international and Russian anti-corruption legislation;
- local corruption control regulations of the Company (Rosneft’s Code of Business and Corporate Ethics, and AntiCorruption Policy);
- security hotline contacts;
- information on cooperation with law enforcement authorities, etc.