Remuneration for members of management bodies
Remuneration for members of the Board of Directors
The amount of remuneration for members of the Board of Directors depends on the Company’s financial results and is approved annually by shareholders. The ability of shareholders to engage in discretionary intervention eliminates the risk of potential abuse of the remuneration programme.
In accordance with the decision of the General Meeting of Shareholders, members of the Board of Directors who do not hold positions within the Company’s executive bodies (who are not executive directors) were paid remuneration in the amount of 0.005% of EBITDA in 2017 according to the Company’s consolidated IFRS financial statement for 2016.
Besides the base portion of remuneration, members of the Board of Directors were paid additional remuneration for performing the functions of Chairman of the Board of Directors (50% of the remuneration for a member of the Board of Directors), a member of the Board of Directors (10% of the remuneration for a member of the Board of Directors), and chairman of a committee of the Board of Directors (50% of the remuneration for a committee member).
The total amount of remuneration paid to members of the Board of Directors in 2017 amounted to RUB 303.37 million (remuneration includes personal income tax). No compensation was paid to members of the Board of Directors for expenses related to participation on the Board of Directors in 2017.
|Name||Position||Holds government positions and civil service positions||Amount, RUB|
|A. B. Miller||Chairman of the Board of Directors||No||34,214,850|
|V. I. Alisov||Member of the Board of Directors||No||22,809,900|
|M. M. Garayev||Member of the Board of Directors||No||22,809,900|
|V. A. Golubev||Member of the Board of Directors, Member of the Audit Committee||No||25,090,890|
|N. N. Dubik||Member of the Board of Directors, Member of the Audit Committee, Chairman of the Human Resources and Remuneration Committee||No||28,512,375|
|A. V. Kruglov||Member of the Board of Directors, Member of the Audit Committee, Member of the Human Resources and Remuneration Committee||No||25,090,890|
|E. V. Mikhailova||Member of the Board of Directors||No||22,809,900|
|K. G. Seleznev||Member of the Board of Directors||No||22,809,900|
|M. L. Sereda||Member of the Board of Directors, Chairman of the Audit Committee||No||26,231,385|
|V. P. Serdyukov||Member of the Board of Directors||No||22,809,900|
|S. A. Fursenko||Member of the Board of Directors, Member of the Human Resources and Remuneration Committee||No||25,090,890|
|V. V. Cherepanov||Member of the Board of Directors, Member of the Human Resources and Remuneration Committee||No||25,090,890|
|A. V. Dyukov||Executive Member of the Board of Directors||No||No remuneration paid|
Remuneration for members of the Management Board
The Company has a clearly structured and objective remuneration programme for top and senior executives that ensures a connection between short-term goals and the amount of bonus payments. In addition to bonuses tied to short-term results, the Company has a motivation system based on the dynamics of the Company’s market capitalization over a three-year period.
Remuneration for Management Board members consists of three parts:
- base portion of remuneration,
- annual bonus,
- long-term incentive programme.
The base portion of remuneration is determined on an individual basis and fixed in the employment contract.
The annual bonus aims to motivate key management personnel to achieve the annual goals. When determining the size of the annual bonus, the degree to which executives fulfilled a fixed set of KPIs and business initiatives is analysed and approved. This set of KPIs includes performance indicators with respect to the Company’s strategic goals as well as corporate, financial, and performance targets, and starting in 2016 it also comprises indicators demonstrating compliance with industrial safety and occupational safety standards.
In order to improve the effectiveness of the employee material incentive system so that they achieve annual targets and, as a result, the Company's strategic goals, the Board of Directors approved an Annual Bonus Policy for employees in 2017, which serves as the primary document with respect to annual bonuses and defines the goals, principles, components, procedure, and conditions of the annual bonus system for employees of the Company and its subsidiaries.
Input data used to set goals includes:
- the Company’s Development Strategy;
- the development strategies for the Units and functional areas;
- the annual business plan of the Company and its divisions.
The Company deems as equally important both the success (efficiency) of day-to-day operations as well as the implementation of long-term and strategic development measures that lay the foundation for the Company’s qualitative development in the medium and long term. To this end, both financial and operational indicators as well as business initiatives are taken into account when setting goals for the reporting period:
- financial and operational indicators (FOI): indicators that encompass the most significant aspects of current operating activities;
- business initiatives (BI): tasks that aim to improve the Company’s activities, including in the future.
Strategic targets (planned and actual) are approved by the Board of Directors of Gazprom Neft PJSC.
Based on the strategic targets approved by the Board of Directors, key performance indicators of the following management levels are determined for specific businesses: Exploration and Production, Logistics, Refining, and Sales, etc. Once the set of KPI is determined, they are cascaded and/or partitioned to all levels of management of Gazprom Neft PJSC and its subsidiaries.
|Indicator||2017, adjusted plan||2017, actual|
|Normalized consolidated earnings before interest, taxes, and depreciation (EBITDA), RUB bln||492.8||551|
|Economic value added (EVA), RUB bln||(20.4)||24.9|
|Return on average capital employed (ROACE),Indicator calculated according to IFRS: adjusted EBITDA and the income tax rate are applied taking into account the joint venture. %||11.7||13.9|
|Debt capital to EBITDA ratio||1.64||1.19|
|Value of total proved reserves taking into account the proportion in affiliates,Starting with the 2017 budget, hydrocarbon reserves under the Russian classification are reflected in the 2013 classification (Order No. 477 of the Ministry of Natural Resources and the Environment) per AB1 + C1 categories. mln TOE||3,558||3,615|
|Reserve-replacement ratio (RRR), %||62||118|
|Production volume, mln TOE||89.4||89.75|
|Oil refining volume, mln t||39.3||40.11|
|Volume of premium petroleum product sales, mln t||25.6||26.13|
|Refining depth, %||82.0||83.5|
|Labour productivity, RUB mln / person||31.79||33.66|
|Powers||Authorized person / authorized body|
| ||Board of Directors|
| ||CEO or a person authorized by the CEO|
The Long-term Incentive Programme is based on the appreciation of share value and was approved by the Board of Directors in 2012. The programme is an integral component of the Gazprom Neft Group’s long-term growth strategy and envisages the payment of remuneration to management for increasing the Group’s value for shareholders over a certain period.
Main goals of the Programme:
- ensuring growth in the Company’s operational efficiency in the long term;
- uniting the interests of the Company’s shareholders and senior executives;
- ensuring a balance between the Company’s short-term results and long-term sustainable development;
- the effective recruitment and retention of senior executives at the Company based on best international and Russian market practices.
The Programme is subject to positive dynamics and the Company’s market capitalization over each three-year cycle of the Programme. The Programme is available to key management personnel of the Gazprom Neft Group subject to the fulfilment of certain duties. The amount of remuneration is assessed at fair value at the end of each reporting period and is paid at the end of the three-year period of the Programme. Remuneration depends on certain market conditions and duties that are taken into account when determining the amount that can be paid to such employees. Expenses are recognized throughout the validity of the plan.
The fair value of obligations under the Programme is determined using the Black-Scholes-Merton assessment model, which primarily takes into account the price of the Company’s shares, share price volatility, dividend yield, and interest rates over a period that is comparable to the remaining term of the plan. Changes to assessments of the fair value of an obligation over the course of the remuneration plan are reflected in the period during which they arise. The most recent three-year long-term motivation programme ended in 2017.
Income accrued for members of the Management Board totalled RUB 1.285 billion in 2017. Payments included salary for the reporting period, taxes charged for such salary and other mandatory payments to the relevant budgets and extra-budgetary funds, bonuses, annual paid leave for work during the reporting period, and payment for treatment and medical care.
No additional remuneration was paid to members of the Management Board for work in the management bodies of Gazprom Neft or its subsidiaries in 2017.
The Company did not issue any loans (credits) to members of the Board of Directors or Management Board.
|Indicator||Board of Directors||Management Board||Total|
|Remuneration for participating in management bodies||303,371.67||–||303,371.67|