Corporate governance framework
Sustainable development governance
Our governance framework for sustainable development (SD) relies on a number of internal and external drivers:
- Internal SD drivers are centred around PhosAgro’s mission and values, which, in turn, are upheld through our corporate strategy.
- External drivers include stakeholder expectations and the global community’s requirements for the maturity of the Company’s SD governance framework.
Components of SD governance framework and measures to improve them
- Environmental Policy updated
- Health and Safety Policy updated
- Code of Conduct for Counterparties drafted and implemented
- Regulation on the Environmental, Health and Safety Committee of the Board of Directors updated
- Regulation on the Remuneration and Human Resources Committee of the Board of Directors updated
- Personnel Management Policy updated
- Sustainable Development Committee of the Board of Directors, established in 2019, further developed by the Company in 2020
- Sustainable Development Department further developed by the Company in 2020
- Comprehensive regulations on interaction in preparing non-financial reporting drafted and implemented
- Climate risks and opportunities identified, assessed and included in the corporate risk register
- Company’s management systems certified to ISO 9001, ISO 14001 and ISO 45001
- Climate Strategy drafted and approved by the Board of Directors
- Water Strategy drafted and approved by the Board of Directors
- Energy Efficiency Programme developed and approved by the Sustainable Development Committee
- List and coverage of sustainability KPIs expanded
- Goals set in 2019 reviewed and approved by the Sustainable Development Committee as part of exercise to adopt Water and Climate Strategies
- Comprehensive system to evaluate suppliers against ESG criteria developed, with its automation and migration to an e-platform in progress
- Project to prioritise the UN SDGs implemented, with a list of initiatives pursuing individual SDGs-related targets being complied
- The transfer of data on environmental protection via the natural resource user’s online account enabled
- Supplier ESG evaluation system digitalised
- Mandatory training in various areas (for example, health and safety) included in the sustainability training framework; some of the training courses digitised and adapted to be provided online
- GRI reporting training provided to all specialists in key areas
- Comprehensive regulations on interaction in preparing non-financial reporting drafted and implemented
- Participation in major international and Russian initiatives (RSPP, UN Global Compact, IFA) maintained
- Procedure for preparing integrated annual reports drafted and approved. CEO appointed as chair of the working group in charge of the integrated annual report
- Procedure for the Sustainable Development Committee to monitor the Company’s ESG scores and ratings assigned by leading global ESG data providers (Sustainalytics, MSCI, CDP, FTSE Russell) developed
- Action plan for improving the Company’s key ESG scores and ratings (Sustainalytics, MSCI, CDP, FTSE Russell) developed and approved by the Sustainable Development Committee
- Easy-to-use procedure for preparing GRI-compliant reporting developed and implemented, links to initial data sources enabled in the Company’s information system
- CDP report published
- TCFD recommendations for reporting implemented
Corporate governance assessment
When assessing the quality of corporate governance at PhosAgro, we follow best practices and adhere to the recommendations of the Corporate Governance Code (CGC) approved by the Bank of Russia on 21 March 2014. PhosAgro’s own Corporate Governance Code is based on the CGC.
The actual compliance with the CGC is measured on an annual basis and disclosed in a dedicated report, which is subject to review and approval by the Board of Directors and is given as an appendix to the Company’s annual report.
| CGC section | Number of recommendations | Full compliance | Partial compliance | Non-compliance | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2018 | 2019 | 2020 | 2018 | 2019 | 2020 | ||
| 1. Shareholder rights and equitable treatment of shareholders | 13 | 11 | 11 | 11 | 2 | 2 | 2 | – | – | – |
| 2. Board of directors, its remit, independence, and committees | 36 | 33 | 33 | 33 | 3 | 3 | 3 | – | – | – |
| 3. Corporate secretary | 2 | 2 | 2 | 2 | – | – | – | – | – | – |
| 4. Remuneration of the company's directors, members of the executive bodies, and other key employees | 10 | 4 | 4 | 5 | 5 | 5 | 4 | 1 | 1 | 1 |
| 5. Risk management and internal control | 6 | 6 | 6 | 6 | – | – | – | – | – | – |
| 6. Disclosures and the company's information policy | 7 | 7 | 7 | 7 | – | – | – | – | – | – |
| 7. Material corporate actions | 5 | 4 | 3 | 3 | 1 | 2 | 2 | – | – | – |
| Total | 79 | 67 | 66 | 67 | 11 | 12 | 11 | 1 | 1 | 1 |
In 2020, the Company achieved compliance with principle 4.1.3 through the adoption of internal regulations providing a comprehensive set of rules for reimbursing expenses of its directors, members of the executive bodies, and other key managers.
Eleven corporate governance principles are partially not complied with. The non-compliance relates primarily to the remuneration of the Company’s directors, members of the executive bodies, and other key employees. Cases of partial compliance with the recommendations of this CGC section are mainly due to the fact that the Company does not have a single bylaw governing payments to its directors, members of the executive bodies, and other key managers. At the same time, its approaches to remuneration, including that payable to directors, are clearly defined in other internal documents – the resolutions of annual shareholders’ meetings.
For every case of partial compliance, the Company specifies the measures taken to mitigate the associated risks.
The only case of non-compliance with the CGC recommendations, which relates to principle 4.3.2, is caused by the lack of a long-term share-based incentive programme for members of the executive bodies and other key managers. The Company believes that in the current situation its existing system of executives’ remuneration is sufficiently motivating, meets the needs of the Company and its shareholders, aligns the executives’ goals with those of the Company, and minimises the risks of qualified leadership talent attrition, which is why the Company is not currently considering any share-based incentive programmes.
In 2020, the Internal Audit Department assessed the quality of the Company’s corporate governance in line with best practices represented by the recommendations of CGC and the UK Corporate Governance Code adopted by the Financial Reporting Council (FRC) in July 2018. The Internal Audit Department verified and confirmed the degree of compliance of the Company’s corporate practices with the CGC recommendations as stated in the 2019 report. On top of that, it reported a high degree of compliance with the recommendations of the UK Corporate Governance Code relevant to PhosAgro’s operations.
In March 2020, PhosAgro’s Board of Directors reviewed the report on the Company’s corporate governance quality, taking into account the MSCI and Sustainalytics ratings, the report on compliance with the CGC principles and recommendations, as well as the assessment of compliance with the Russian and UK corporate governance codes performed by the Internal Audit Department.
Noting a high level of compliance, the Board of Directors also analysed the governance quality criteria that were not met fully or partially, and reviewed an improvement plan. Among other things, it includes the following improvements:
- providing more detailed information to shareholders ahead of general shareholders’ meetings about external auditors, interested-party transactions, notable appointments of external candidates to the Board of Directors and their contribution to its work, as well as the procedure for net profit distribution and its compliance with the Company’s dividend policy;
- disclosing information about PhosAgro’s Corporate Governance Code and its compliance with the CGC approved by the Bank of Russia, on the Company’s official website;
- expanding the scope of the annual report to include the Board of Directors’ viability statement, the going concern assumptions, consideration given to key stakeholders’ voice in the Board’s decision-making, information about notable external appointments to the Board, and more details on the activities of the Audit Committee, Remuneration and Human Resources Committee, and the Corporate Secretary;
- including additional matters related to corporate culture, leadership succession planning, diversity, gender equality, and inclusion in the agenda of the Board of Directors and its committees.
In April 2021, the Board of Directors approved the report on compliance with CGC principles and recommendations in 2020 and gave a positive assessment of the progress against the improvement plan.
In 2021, the Company will keep working to identify more areas for improvements based on the UK Corporate Governance Code and the review of best practices, and ensure their phased implementation.
Corporate governance framework
General Shareholders’ Meeting
The activities of the Company’s supreme governing body – the General Shareholders’ Meeting – are governed by the Regulation on the General Meeting of Shareholders. In May 2020, the Annual General Shareholders’ Meeting was held in absentia to elect a new Board of Directors and Review Committee, determine the Board of Directors’ remuneration, distribute the 2019 profit, including dividend payouts, and resolve on other matters within the its remit. It was held in absentia due to the COVID-19 outbreak. Despite the pandemic-related restrictions, the Annual General Shareholders’ Meeting was held no later than usual, i. e. in last ten days of May.