7.2.Information on Following the Recommendations of the Corporate Governance Code

The Company continues improving the quality of corporate governance, implementing the best Russian and world practices.

Transneft observes a significant part of the principles and recommendations of the Bank of Russia Corporate Governance Code.

The priority for developing corporate governance in 2019 was to ensure a high level of satisfaction of investors and stakeholders with the Company’s corporate governance system. According to the CGC, the Board of Directors is obliged to control the practice of corporate governance, therefore, since 2017, the Board of Directors of the Company annually reviews information on corporate governance practices at Transneft, since 2019, the Company annually reviews the report on the Company’s information policy.

The Course of Implementation of the Corporate Governance Code Requirements to the Company’s Corporate Governance Practice

In 2019, the Company additionally implemented 4 principles of the CGC into its corporate governance as a result of approval of the Corporate Governance Code and 2 more principles in practice. After their implementation, the Company fully observed 56 of the 79 CGC principles (70.87%) by the end of 2019.

The Methodology of Estimating Compliance with Corporate Governance Principles Stipulated in the Corporate Governance Code

The Company’s compliance with the principles stipulated in the Corporate Governance Code was estimated in accordance with the Recommendations on Drawing a Report on Adherence to the CGC Principles and Recommendations.

The Corporate Governance Code Principles and Recommendations Adherence Report (Appendix 4) explains the key reasons, factors and (or) circumstances that barred the Company from full compliance with the principles stipulated in the CGC.

The Results of Estimating Compliance with the Corporate Governance Principles Stipulated in the Corporate Governance Code in 2017-2019:
Corporate Governance Principles Principles Recommended in the CGC 2017 2018 2019
Full compliance Partial compliance No compliance Full compliance Partial compliance No compliance Full compliance Partial compliance No compliance
Shareholder rights and equal treatment of all shareholders 13 10 2 1 9 24 CGC principles (5%) are not applicable to the Company and cannot be fully observed due to the fact that all voting shares (100%) belong to the sole shareholder represented by the Russian Federation. 24 CGC principles (5%) are not applicable to the Company and cannot be fully observed due to the fact that all voting shares (100%) belong to the sole shareholder represented by the Russian Federation. 9 24 CGC principles (5%) are not applicable to the Company and cannot be fully observed due to the fact that all voting shares (100%) belong to the sole shareholder represented by the Russian Federation. 24 CGC principles (5%) are not applicable to the Company and cannot be fully observed due to the fact that all voting shares (100%) belong to the sole shareholder represented by the Russian Federation.
Board of Directors 36 19 15 2 25 9 2 28 7 1
Corporate Secretary 2 1 - 1 1 - 1 1 - 1
The Company’s Board of Directors and executive management remuneration system 10 7 1 2 7 1 2 7 1 2
Risk management and internal control and audit 6 3 3 - 2 4 - 2 4 -
Information disclosure 7 5 2 - 6 1 - 7 - -
Material corporate actions 5 3 1 1 1 3 1 2 3 -
Total score 79 48 24 7 51 20 8 56 17 6
100 % 60.8 % 30.4 % 8.9 % 64.6 % 25.3 % 10.1 % 70.9 % 21.5 % 7.6 %