Principles of encouraging managers and Board of Directors Members
Remuneration for members of executive bodies and other key staff members of Gazprom and main subsidiaries
The amount of short-term remuneration for members of the executive bodies of Gazprom (Chairman of the Management Committee, Members of the Management Committee) as well as Members of the Board of Directors employed with Gazprom is defined by labor contracts.
Gazprom and its main subsidiaries dealing with gas production, transmission, underground storage, processing and sales have introduced a system of incentives for key managers, including the members of Gazprom’s executive bodies.
The amount of remuneration for the members of executive bodies and other key staff members depends on Gazprom’s operating results and their own contribution to achieving these results.
The annual bonus system is an element of the incentive system for key managers.
Annual bonus system
It applies to the management of Gazprom and its main subsidiaries and envisages abidance by unified principles and approaches to remuneration, based on the assessment of their performance by setting the amount of remuneration depending on the key performance indicators (KPI) achieved.
The total bonus fund is determined on the basis of company-wide KPIs specifying operational results of Gazprom and its subsidiaries in the main business areas.
Company-wide KPIs are subdivided into two groups:
- financial & economic (no more than seven indicators with the total weight of up to 70 per cent of the total KPI weight);
- industry-based, considering the specifics of the Company’s activities (no more than four indicators with the total weight of up to 50 per cent of the total KPI weight).
The annual bonus for the management is defined on the basis of performance level with regard to each KPI. The failure to achieve a KPI leads to the reduction of the annual bonus.
Starting from 2015, the target (planned) and actual values of key performance indicators are to be annually approved by the Gazprom Board of Directors.
Remuneration for Members of Gazprom Board of Directors
The amount of remuneration for the Members of the Gazprom Board of Directors is approved by the annual General Shareholder Meeting.
The procedure of calculating the amount of remuneration is determined by the new edition of the Regulation on procedures for determining the amount of remuneration for Gazprom’s Board of Directors Members, approved by the Decision of the Gazprom Board of Directors No. 2523 dated April 15, 2015.
The new edition of the document prepared with due regard to the best global practices provides for a more clear-cut remuneration structure and envisages three parts: basic, additional and premium (singled out into a separate segment).
The basic part of the remuneration is paid for exercising the authority of a member of the Board of Directors.
The additional part of the remuneration is paid for any additional responsibilities fulfilled by the member of the Board of Directors when functioning as Chairman of the Board of Directors or Deputy Chairman of the Board of Directors, or when working in the Committees of the Board of Directors.
The premium part of the remuneration is paid out for reaching the company-wide key performance indicators applicable within the annual bonus system for Gazprom’s management.
The Document also envisages that the Board of Directors may recommend that the General Shareholders Meeting should not pay or should pay smaller remunerations to the Members of the Board of Directors than the amount calculated under the Regulation.
Those Members of the Board of Directors who are taking public or civil service offices do not get remuneration.