UC RUSAL Sustainability report 2016


Corporate governance

Corporate governance system

Principles

High quality corporate governance leads to successful business development and increases the investment potential of the Company, providing more security for shareholders, partners and customers as well as reinforcing the Company’s internal control system.

The UC RUSAL’s corporate governance system is based on internationally recognised standards of corporate governance. The principles of organisation of corporate governance are enshrined in the Company's Articles of Association, the Code of Corporate Governance, the Code of Corporate ethics, as well as other internal documents governing the operation of the management and control bodies.

The Company is continually improving its corporate governance system by introducing best world practices and ensuring that the activity of the management bodies complies with the requirements of the listing of stock exchanges, where the Company's financial tools are traded.

In 2010, the Code for Securities Transactions by Directors of the Company and other employees of the Group was adopted on the basis of requirements of the Listing Rules of the Hong Kong Stock Exchange and provisions of the French Monetary and Financial Code, the General Regulation of the AMF and the EU Market Abuse Regulation.

Please see more detailed information about the corporate governance system in the Annual Report for 2016.

Management bodies

General Shareholder Meeting G4-34

The General Shareholder Meeting is the highest management body, through which the shareholders are able to participate in the management of the Company and in the decision-making process on key issues of its operation.

Board of Directors

The Board of Directors is collectively responsible for the management and activity of the Company, including the responsibility for approval and control of overall development strategies, annual budget, business plans and material investment plans for the Company; control and evaluation of the performance of the Company in terms of policies, budgets and plans; approval and supervision of management performance; reporting of the Company's operation to all parties, to whom the report is to be submitted in accordance with the established procedure and ensuring that the accounting records are consistent with the legal obligations of the Company. G4-42, HKEx Appendix 27 KPI para 8

The roles of the chairman of the Board of Directors and the Chief Executive Officer are segregated and are independent from each other. The Chairman is responsible for ensuring the effective functioning of the Board of Directors. The functions of the Chief Executive Officer include the monitoring of the implementation of the principles identified by the Board of Directors for the areas of production and the full cycle of production and sales, financial management and corporate finance, marketing, etc., as well as for the day-to-day management of the GROUP and the enforcement of strategic decisions adopted by the Board of Directors. G4-39

During the year ended December 31, 2016, the Board of Directors consisted of 3 executive, 9 non-executive and 6 independent non-executive directors (representing at least one third of the members of the Board of Directors as required under the Listing Rules of the Hong Kong Stock Exchange). The current composition of the Board of Directors offers sufficient independent checks and balances and an appropriate governance structure for the Company. G4-38

Most of the committees (the Audit Committee, the Remuneration Committee, the Corporate Governance and Nominations Committee, the Health, Safety and Environment Committee and the Norilsk Nickel Committee) were headed by independent directors. The Board of Directors believes that all independent non-executive directors have appropriate and sufficient industrial or financial experience and qualifications to carry out their duties.

Due to the fact that the main shareholders are the companies that compete or can compete with UC RUSAL, and also have the right to initiate the appointment of their representatives on the Board of Directors of the Company, an analysis of the independence of the members of the Board of Directors and the Company's top management from the top management of the main shareholders is carried out to confirm that the Company can conduct its business on its own account and independently from the main shareholders. G4-41

UC RUSAL recognises the importance and fully applies the principles of equality and diversity in the composition of the Board of Directors.

Selection of candidates takes into consideration a range of diversity perspectives, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. The ultimate decision is based on merit and contribution that the candidates will bring to the Board of Directors.

The existence of a wide range of opinions and individual experiences, regardless of gender, age and ethnicity, is a significant factor in the adoption of balanced decisions. The Company believes that the increasing diversity of the Board of Directors is an essential element in supporting its strategic objectives and achieving sustainable development. At the end of the reporting year, the Board of Directors was composed of 4 women and 14 men. The Corporate Governance and Nominations Committeeconducts analysis and evaluation of the practical implementation of diversity principles. G4-LA12 G4-40

Committees of the Board of Directors G4-34

The following main special purpose committees are operating under the Board of Directors: the Corporate Governance and Nominations Committee, the Remunerations Committee, the Audit Committee and the Norilsk Nickel Committee, as well as the Marketing Committee and the Health, Safety and Environment Committee. The Committees, in accordance with their competence, are responsible for the preliminary consideration of the matters submitted to the Board of Directors and make recommendations. HKEx Appendix 27 para 8

The tasks of the Health, Safety and Environment Committee include reviewing the Company's policies in the Health, Safety and Environment related areas, assessing the Company’s compliance with regulatory requirements and assumed commitments, and assessing risk and performance. HKEx Appendix 27 para 9

The functions of the Corporate Governance and Nomination Committee include, among other things, the development, provision of recommendations and the annual revision of the guidelines, policies and practices of corporate governance of the Company and its consolidated subsidiaries, overseeing the implementation of corporate governance issues, reviewing and monitoring the Company's policies and practices on compliance with legal and regulatory requirements, reviewing and monitoring the training and continuing professional development of the Directors and top management, as well as the development, review and monitoring compliance with the Company's Code of Ethics.

The Committee establishes the criteria applicable to the evaluation of the nominees to the Board of Directors, including: independence (in the case of selection of independent non-executive directors), gender diversity, age, existing skills, experience and knowledge of the business of the Company and the industry, in which it operates, and the willingness to devote sufficient time and effort to performing his/her responsibilities as a member of the Board of Directors.

The primary functions of the Remuneration Committee are, among other things, to make recommendations to the Board of Directors on the remuneration package of the Directors and senior management, and to assist the Board of Directors in overseeing the administration of the Company’s compensation and benefits plans. Remuneration policies are determined on the basis of an employee’s qualifications and performance, as well as the complexity of his or her job.

The total remuneration, including the basic salary, performance-linked salary, incentive-linked salary and bonus of the directors in 2016 amounted to approximately USD18 mln. G4-51

The tasks of the Audit Committee are to provide the Board of Directors with an independent assessment of the effectiveness of the Company's financial statements, internal control and risk management systems and audit processes.

Please see more detailed information about the composition and activity of the committees of the Boards of Directors in the reporting year in the Company's Annual Report; the regulations on the committees of the Board of Directors have been published on UC RUSAL website.

Performance evaluation and training

The Board of Directors conducts a self-assessment of performance on the annual basis. The results are reviewed by the Corporate Governance and Nomination Committee. In this way, positive developments and areas for further improvement are identified. G4-44

Pursuant to the Corporate Governance Code, all directors must continually upgrade their professional knowledge and develop their skills. During the reporting period, all directors received information about relevant industry issues and existing legislation.G4-43

Executive bodies and senior management

The Board of Directors has delegated the day-to-day operation of the Group to executive Directors and the Executive Committee to ensure effectiveness and appropriateness of functions.

The primary role of the Executive Committee is to assist the Chief Executive Officer and senior management with the day-to-day management of the Company and to assist the Board of Directors in formulating and implementing the strategy of the Group and monitoring its performance.

Additional functions and responsibilities of the Executive Committee include, inter alia, the development of the GROUP's strategy for subsequent approval by the Board of Directors and implementation of the strategy after its approval, as well as control and monitoring of financial performance and other matters. The Executive Committee is empowered to establish committees comprising of its members, as well as other managers from time to time. G4-37