Corporate governance

Activities of the Board Committees

Audit Committee

Hans-Joerg Rudloff
Statement of Hans-Joerg Rudloff, Chairman of the Audit Committee
2020 was a hard year for many companies all over the world. Due to the pandemic, Rosneft had to reorganise internal processes and organisational systems across all its units. Working from home and lack of interaction between employees and businesses caused a number of hard challenges, and it is the commitment and discipline of our staff that helped us tackle them. In spite of all the difficulties, the Company conducted over 200 audits, 30 ad hoc inspections that involved our new objectives, such as supporting new projects, for example, those related to shipbuilding, and other business expansion initiatives. In addition, we provided continuous training in new systems and technologies. Although the Audit Committee members were unable to meet in person, the audit function exercised its duties and carried out its mission due to the high quality of available written materials.In general, we overcame the last year’s challenges and adapted to a new way of doing business. Therefore, our shareholders can be certain that the Company's internal control system is functioning to its full potential.
In 2020, the Audit Committee held 17 meetings (one in person and 16 in the form of absentee voting) and considered 40 items (two at in-person meetings and 38 at meetings held in the form of absentee voting).

Key resolutions

The Committee recommended that the Board of Directors approve the proposal to the General Shareholders Meeting regarding the distribution of the Company’s profit for 2019, the amount of dividends for 2019, and the payout procedure.

To ensure proper preparation of accounting (financial) statement and impartiality and independence of the external audit, the Committee:

  • reviewed the consolidated financial results, financial statements and the relevant audit reports (on a quarterly basis);
  • recommended Ernst & Young as the Company’s auditor and the amount of the auditor’s fees.

To ensure efficiency of the risk management and internal control system, the Committee conducted preliminary review of the following:

  • report on the status of the Comprehensive Plan for the Enhancement of the RM&ICS in 2019 and on approval of the Plan for 2020–2022;
  • reporting on the company-wide financial and operational risks materialised in 2019;
  • reporting on the identification of company-wide financial and operational risks for 2021;
  • report on internal investigations conducted by Rosneft in 2019;
  • results of the survey on strategic risks in 2020.

The auditor’s fees for 2020 recommended to the General Shareholders Meeting:

  • audit of Rosneft’s RAS accounting (financial) statements – RUB 7,200,000, including VAT;
  • audit of Rosneft’s IFRS consolidated financial statements – up to RUB 79,906,950, including VAT.
The external auditor’s actual remuneration for the audit of financial statements and other services is disclosed on the Company’s website in the Corporate governance – Internal control and audit – Company auditor section.

The Working Capital Management Policy was updated to set out a risk-oriented approach to managing working capital elements, the Company’s adherence to information transparency, and absence of restrictions on competition in managing accounts payable and receivable.

To ensure the impartiality and independence of the internal audit, the Committee reviewed:

  • reports on the internal audit performance in 2019 and first six months of 2020, and information on the independence and objectivity of the internal audit;
  • the assessment and results of the quarterly monitoring of potential conflicts of interest related to the Head of Internal Audit serving on the Management Board in Q1–Q3 2020.

In the area of corporate governance, the Committee:

  • updated Rosneft’s Policy on Internal Audit to reflect the amendments to Federal Law No. 208-FZ On Joint-Stock Companies dated 26 December 1995 with respect to the requirement to prepare and disclose to shareholders an internal audit report on the safety and efficiency of the Company’s risk management and internal control system.

The matters related to financial statements and information provided by the auditor were first discussed during conference calls between the Committee members, management, and representatives of internal and external auditors.

HR and Remuneration Committee

Matthias Warnig
Statement of Matthias Warnig, Chairman of HR and Remuneration Committee
One of the most notable events for the Company in 2020 was the change in our approach to the Management Board formation. Five CEOs of key Group Subsidiaries joined the Management Board in 2020 to give a more important role to our regional businesses implementing major oil and gas projects. Alongside that, the Committee focused on assessing the effecitveness of the Company’s HR and succession policies. The Committee ensured the independence of nominees and Board members. Motivation was another focus of the Committee.

Key resolutions

To attract skilled talent to the Company’s management and create conditions for high performance, the Committee:

  • reviewed proposals regarding the remuneration of the members of the Board of Directors and Audit Commission for 2019–2020, as well as the compensation of the expenses related to their functions;
  • provided recommendations for appointments to the Management Board;
  • verified the compliance of candidates to the Board of Directors with independence criteria;
  • renewed the Succession Plan for Directors and members of the Management Board.

To assess the performance of the Company’s management and governing bodies, the Committee reviewed:

  • top management's collective and individual KPIs for 2020, their normalised KPI performance criteria for 2019, and the results considered in the 2019 annual bonus calculation;
  • self-assessment of the Board’s performance;
  • reports and action plans for introducing professional standards in the operations of Rosneft and Group Subsidiaries in 2021.

Key matters related to the Committee activities were discussed in due course with the Committee members with the involvement of the Company’s management.

In 2020, the HR and Remuneration Committee held 14 meetings in the form of absentee voting and considered 29 items.

Strategy and Sustainable Development Committee

Robert Dudley
Statement of Robert Dudley, Chairman of the Strategy and Sustainable Development Committee:
The Committee name was changed in 2020 to emphasise our focus on environmental and social responsibility, improving the corporate governance system and enhancing its transparency, as well as supervision over the Company's strategic investment projects.

Key resolutions

To determine the Company’s priorities, the Committee reviewed:

  • status of the Rosneft–2022 Strategy;
  • Rosneft’s 2019 Sustainability Report;
  • Rosneft’s updated Long-Term Development Programme and the audit of its implementation results in 2019;
  • adjustment of Rosneft’s business plan for 2020;
  • the Company’s business plan for 2021–2022, its implementation results and normalisation for 2019;
  • renewal of the Company’s Accounting Function Development Strategy to 2024, with its name changed to Rosneft’s Programme to Improve the Efficiency of Rosneft's Accounting Function to 2024.

With respect to HSE matters, the Committee approved reports on the Company's HSE activities in 2019 and preliminary results in 2020.

To run the Company's business projects, the Committee recommended that the Board of Directors approve key metrics and budgets for a number of business projects.

To promote innovation, the Committee recommended that the Board of Directors approve Rosneft’s Innovation Development Programme for 2020–2024 with an outlook for 2030.

When reviewing the key matters, the Chairman and Committee members consulted the Company’s management, requested additional information and received written and oral clarifications.

In 2020, the Strategy and Sustainable Development Committee held 15 meetings in the form of absentee voting and considered 28 items.