Corporate Governance

Managing Possible Conflicts of Interest

Possible conflicts of interest are address ed at all corporate governance levels.

Shareholders

For the avoidance of any potential conflicts among its shareholders, the Company provides equal opportunities for exercising shareholder rights established by the applicable laws.

The Corporate Secretary is responsible for shareholder relations of the Company and also contributes to preventing corporate conflicts. The Corporate Secretary has to promptly notify the Board of Directors of any threatened violation of the applicable laws or shareholder rights and any possible conflicts of interest. The Company manages shareholder relations, including shareholders’ requests for explanation.

Board of Directors

The Board of Directors is responsible for managing any conflicts of interest in the Company. The Charter sets out the procedure for considering interested-party transactions by the Board of Directors. The Regulations on the Board of Directors determine the duties of Board members related to prevention and management of any conflicts of interest.

When considering agenda items, members of the Board of Directors assess potential conflict between their interests and those of the Company. With respect to any issue that may, in the opinion of a Board member, result in such a conflict of interest, the director shall not participate in voting and, where necessary, in the discussion of such issue. Board members must report any actual/potential conflicts of interest to the Chairman of the Board of Directors or the Corporate Secretary.

For the avoidance of any potential conflicts among the Company’s employees, the Board of Directors introduced rules for conducting transactions in financial instruments by persons included in the insider list and rules for disclosing insider information, and monitors compliance on a regular basis.

Rosneft’s Regulations Rosneft’s Regulations on Internal Control Rules for the Prevention, Detection and Suppression of Illegal Use of Insider Information in Rosneft and/or Market Manipulation.

The Corporate Secretary, Svetlana Gritskevich, is in charge of compliance with regulatory and internal requirements for countering the illegal use of insider information.

Executive Bodies

In accordance with the internal regulations, members of the Management Board and the Chief Executive Officer:

  • shall refrain from any actions that may cause a conflict of interest and, should such a 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 otherwise benefit from such persons.

The Board of Directors reviews, on a quarterly basis, information on assessment and monitoring of potential conflicts of interest in case of the Head of Internal Audit serving on the Management Board and considers the Company’s efforts to minimise this risk as adequate.

Top Managers and Employees

The rules for the avoidance and prevention of conflicts of interest are governed by the Code of Business and Corporate Ethics which defines the terms “conflict of interest” and “corruption” and sets out the procedure for preventing corporate fraud. The Company’s Council for Business Ethics also contributes to managing conflicts of interest.

The rules for the avoidance and prevention of conflicts of interest are set forth in the Corporate Governance Code, the Code of Business and Corporate Ethics, and the Regulations on Managing Conflicts of Interest in Rosneft and Group Subsidiaries.

Special rules for the prevention of corporate fraud are laid down in the Company’s Policy on Combating Corporate Fraud and Involvement in Corruption Activities. This Policy establishes the key principles and the organisational structure for combating corporate fraud, monitoring procedures, and anti-corruption training for the employees, including response protocols in case of threatened violation of anti-corruption rules.

Special rules aiming to prevent the securities market manipulation and the illegal use of insider information are laid down in Rosneft’s Regulations on Internal Control Rules for the Prevention, Detection and Suppression of Illegal Use of Insider Information in Rosneft, which determine the rules for disclosing insider information and the rules for conducting transactions in financial instruments by persons included in the insider list.

Special rules for the prevention of corporate fraud are governed by the Company’s Policy on Combating Corporate Fraud and Involvement in Corruption Activities.

Company’s Policy

Anti-corruption Efforts

In 2019, Rosneft continued to focus on countering corruption and corporate fraud and ensuring compliance by the Company’s employees with international and Russian anti-corruption laws, and its internal regulations.

Rosneft was consistently improving its framework for building anti-corruption elements of the corporate culture and organisational structure, as well as rules and procedures intended to prevent corporate fraud and corruption and mitigate reputational risks and risks of sanctions for bribery that might be imposed on the Company.

To this end, Rosneft’s Council for Business Ethics put together and introduced the Comprehensive Anti-Fraud and Anti-Corruption Programme for 2019–2020Approved by the Council for Business Ethics on 10 December 2018 (Minutes No. 7).. In 2019, programme activities included:

  • adopting Rosneft’s Guidelines on Prosecution of the Company’s Officers/ Employees for the Failure to Prevent and/or Manage a Conflict of InterestIn accordance with the Guidelines on Prosecution of Officers for the Failure to Prevent and/or Manage a Conflict of Interest developed by the Russian Ministry of Labour in pursuance of Clause 10 of the National Anti-Corruption Plan.;
  • drafting and communicating to all employees the Concise Guide to Compliance, including anti-fraud and anti-corruption provisions governing, inter alia, exchange of business gifts and hospitality;
  • arranging for and collecting ethical declarations, analysing them and doing selective fact-checking. Rosneft’s Council for Business Ethics approvedMinutes No. 10 dated 16 August 2019. the outputs;
  • quarterly updating the Company’s employees on typical violations of anti-fraud and anti-corruption rules (including management of conflicts of interest);
  • drafting recommendations on anti-fraud and anti-corruption measures and communicating the same to the Group Subsidiaries and joint ventures;
  • conducting 405 anti-corruption audits of draft internal regulations and implementation documents;
  • publishing the All about Compliance information bulletin (quarterly) and an article devoted to the International Anti-Corruption Day;
  • arranging for and conducting an employee survey on combating corporate fraud and involvement in corruption activities;
  • developing and launching the new distance learning course – Business Ethics Compliance: Corporate Gifts and Hospitality;
  • developing and implementing the Company’s Regulations on Coordinating Anti-Fraud and Anti-Corruption Processes, including the following procedures:
    • assessment of corporate fraud and corruption risks;
    • protection of whistleblowers;
    • reporting of suspected corporate frauds or corruption and investigations;
    • training and communications in combating corporate fraud and corruption;
    • monitoring and control of anti-fraud and anti-corruption processes.

In pursuance of Clause 22 and Subclause b of Clause 28 of the National Anti-Corruption Plan, the Company continued to provide anti-corruption training to its employees, including newly hired staff.

The Company’s in-house coaches held in-person trainings in Managing Conflicts of Interest for heads of business units, including members of the Board of Directors / supervisory boards of the Group Subsidiaries. The Company held in-person trainings for representatives of overseas Group Subsidiaries in Anti-Corruption Compliance: Managing Conflicts of Interest in the context of local anti-corruption laws.

In the reporting year, the Company kept on updating the Executive Office of the Russian Government on its progress towards Instruction of the Russian Government No. DM-P17-4575 dated 23 July 2018 on the implementation of the National Anti-Corruption Plan for 2018–2020 approved by Presidential Executive Order No. 378 dated 29 June 2018 (5 July 2019, 18 July 2019, 22 November 2019, 25 November 2019, 2 December 2019).

The Company attended the Participation of Organisations in Combating Corruption conference held by the Prosecutor General’s Office and the Ministry of Labour and Social Protection of the Russian Federation which focused on anti-corruption law enforcement practices by organisations tasked with supporting federal executive authorities.

The Company has in place the Code of Business and Corporate Ethics (the Code) and the Policy on Combating Corporate Fraud and Involvement in Corruption Activities (the Policy), both approved by Rosneft’s Board of Directors, which outline Company-wide principles and approaches aiming to ensure compliance with anti-corruption requirements.

The Code reflects the Company’s culture, while underlining its commitment to the highest standards of business ethics and imposing the responsibility for compliance with ethical standards on all employees regardless of their status and position. The Code explains the key terms on how to manage conflicts of interest and exchange corporate gifts.

The Policy imposes the responsibility on all employees and members of the Company’s governing bodies, regardless of their position, for compliance with anti-corruption principles and requirements as well as for actions (omissions) of their subordinates. The Policy also requires employees to report any inducement to corruption offences to the authorised officers and functions.

The Company also has in place the Regulations on Managing Conflicts of Interest in Rosneft and Group Subsidiaries which set out a framework to classify conflicts of interest, including conflicts of interest between shareholders and members of the Company’s governing bodies (e.g. decisions made by corporate governing bodies that might adversely affect the Company’s financial and operating performance; the Company failing to make a statutory disclosure or members of corporate governing bodies underreporting on their positions in governing bodies of other entities, on interests (stakes) held in other entities, or other information required to be disclosed by the applicable laws, the Company’s Charter or internal regulations).

The Company has set up conflict of interest commissions.

The Company makes organisational arrangements to meet the requirements for hiring former government officials, collect and verify information on income, property, and property-related obligations for certain categories of employees; enhance the commitment of the Company’s management to preventing corruption, including conflicts of interest, by adding relevant provisions into employment contracts, and amending employee job descriptions with provisions on liability for failure to comply with anti-fraud and anti-corruption requirements of the Company’s internal regulations.

The Company operates a 24/7 Security Hotline to report on cases of corporate fraud and corruption

which gathers and analyses incoming information on corporate frauds, corruption and conflicts of interest.

In 2019, the Security Hotline received 35,106 calls amounting to RUB 40.46 mln of damage identified/prevented. The Company terminated 34 employment contracts and took disciplinary actions against 92 employees. In 19 cases, the investigation findings were submitted to law-enforcement authorities.

Members of the Company’s Board of Directors are updated on the Security Hotline operation on a quarterly basis.

The analysis of the Security Hotline operation proved its high efficiency in preventing and deterring employees from offending against the Company’s internal regulations or engaging in other abusive practices.

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 laws;
  • internal corruption control regulations of the Company (Rosneft’s Code of Business and Corporate Ethics and Policy on Combating Corporate Fraud and Involvement in Corruption Activities);
  • Security Hotline contact details;
  • information on cooperation with law enforcement authorities.

section Corruption Control