Corporate governance structure
Key principles
In its corporate governance practice, Nornickel is governed by the applicable Russian laws, the Listing Rules of PJSC Moscow Exchange, and the Corporate Governance Code recommended by the Bank of RussiaThe Bank of Russia’s LetterNo. 06-52/2463 On the Corporate Governance Code, dated 10 April 2014.. Nornickel’s corporate governance system is designed to balance the interests of its shareholders, the Board of Directors, management as well as employees and other stakeholders.
Key corporate governance principles
Corporate governance performance
In order to meet the Bank of Russia’s recommendations to raise information transparency of the securities market, Nornickel has updated its internal documents regulating disclosures and identified events/facts with a potential to materially influence the price of the Company’s securities.
To further improve its corporate governance and meet the Bank of Russia’s recommendations on risk management, internal control and internal audit processes, in the reporting year, Nornickel developed new versions of the Regulations on the Internal Audit Department and Internal Control Policy as well as the Internal Audit Policy. The above documents were amended as follows:
- According to the new version of the Regulations on the Internal Audit Department, the Department has been tasked with the evaluation of the Company’s corporate governance and the performance audit of its corporate sustainability risk management system;
- The Internal Control Policy was updated in terms of the composition of internal control entities and the Company’s committees; its provisions regulating the division of responsibilities among the Company’s departments were amended;
- The Internal Audit Policy has been developed bearing in mind the position of the Bank of Russia and the International Professional Practices Framework. The main purpose of the document is to regulate the internal audit procedures of the Company, ensure their compliance with the principles of setting up and executing an internal audit, and define the scope of duties and control procedure for internal audit quality assurance and improvement.
During the reporting year, the Company approved a number of internal documents dealing with the prevention of corruption and fraud. In March 2022, the Board of Directors approved the Corporate Fraud Policy. The main purpose of the document is to prevent, identify and mitigate the risks of corporate fraud as well as to build and implement a corporate system of measures and mechanisms to prevent corporate fraud.
In addition, the Company updated its Procedure Rules for Anti-corruption Due Diligence of Internal Documents by the Head Office of MMC Norilsk Nickel as well as the Regulations on the Prevention and Management of Conflicts of Interest. The new version of the Regulations on the Prevention and Management of Conflicts of Interest includes a requirement to sign a conflict of interest declaration when entering into a contract with a sole proprietor or transactions with individuals, including former government and municipal employees. The amendments also stipulate that a notice of a pre-conflict situation and/or a conflict of interest (arising as part of the contractual procedure) should be filed with the Corporate Trust Line, or a notification should be sent to the employee who initiated the contract.
In addition, with a view to codifying the existing practice and further improving the regulatory framework to prevent unlawful use of insider information and market manipulation, the Company has updated its Internal Control Rules for Preventing, Detecting and Stopping the Unlawful Use of Insider Information and/or Market Manipulation, and the Regulations on the Procedure for Keeping the List of Insiders. The updated Regulations take into account the amendments made to the Bank of Russia’s regulations on maintaining insider lists.
In 2023, Nornickel intends to continue improving its corporate governance practice.
Given the importance and significance of anti-corruption procedures, the Company plans to approve an internal document to regulate the identification, assessment and management of corruption risks in 2023.
Compliance with the Corporate Governance Code
Nornickel’s corporate governance standards are based on the principles and recommendations of the Bank of Russia’s Corporate Governance Code, and the Company continues to consistently incorporate and implement them.
The Company’s compliance with the Corporate Governance Code’s principles and recommendations in 2022 was evaluated using a format recommended by the Bank of Russia’s Letter No. IN-06-28/102 dated 27 December 2021.
Nornickel’s corporate practices cover most of the Corporate Governance Code’s principles and recommendations. In case of a partial non-compliance, the Company provides an appropriate explanation and description of the corporate governance mechanisms and tools used by it instead of those recommended by the Code. For the full 2022 Corporate Governance Code Compliance Report, including comments, please see an Appendix to this Annual Report.
Stakeholder relations
To achieve operational excellence and further improve corporate governance, Nornickel is strongly focused on engaging its stakeholders in corporate governance, taking their needs into account when making important decisions.
At the end of the reporting year, Nornickel presented its 2022 sustainability results. The Company annually invites a wide range of experts to a dialogue in order to take into account the opinions of all its stakeholders. Nornickel’s strategy is underpinned by its sustainability agenda. The Company regularly engages with stakeholders to understand expectations and take the pulse of public opinion on corporate environmental and social sustainability. This year’s results were presented by the Company’s top managers in an online format. More than 200 people attended the conference, including Company employees, government authorities, businesses, local communities, environmental and other non-profit organisations, and industry bodies.
A well-built and clear corporate governance framework which is transparent for both Russian and foreign shareholders and investors as well as active stakeholder engagement directly affect the investment decisions and the price of the Company securities.
Dialogue with investors
The Company is committed to making mandatory disclosures in line with global best practice. To make its disclosures more meaningful and comprehensive, Nornickel uses an array of disclosure tools, including press releases, presentations, annual and sustainability reports, issuer reports, corporate action notices, and interactive tools. Nornickel ensures parallel disclosure of all material information both in Russian and English, with the latter being done via a regulatory information service approved by the UK regulator.
Nornickel’s quarterly disclosures made via its official website include its operating results and RAS financial statements. IFRS financial statements are released on a semi-annual basis To maintain strong investor relations, the Company makes extensive use of various communication tools, including conference presentations, road shows, site visits for investors, etc.Information on upcoming events is posted in the IR Calendar on the Company website.
For more details on investor relations, please see the Investor Relations section of this Annual Report.
Dialogue with employees
The Company regularly runs open online conferences between employees and senior management to identify strengths and weaknesses in communication and improve corporate governance. A challenging geopolitical environment, production upgrades and ambitious investment projects transform the approaches to work, routines, sustainability, safety, and environmental protection. To retain its leadership in the market, the Company needs to address new challenges, which is next to impossible without employee involvement. During the Nornickel Live annual broadcast, Nornickel’s vice presidents answered employee questions and discussed the Company’s news and future plans. March 2022 saw another Direct Line live broadcast, with top management fielding questions from Nornickel employees. The key topic was social support for Company employees in a challenging economic environment. Over 5 thousand questions from Nornickel employees were received during the live event. The issues discussed during the event included, among others, wage indexation across the Company’s footprint, payment of a one-time, first-quarter extra bonus in the amount of a monthly base salary and the Company’s decision to increase its financial assistance fund for employees in difficult life situations. All in all, RUB 20 billion were allocated to the above measures, with the total amount of employee support in 2022, including the indexation earlier this year, reaching RUB 50 billion (including deductions to budgetary funds).
Partnership and cooperation
Nornickel is building a multipurpose sports complex in Moscow. It will include a basketball centre, which will serve as a home arena for the CSKA basketball club (Professional Basketball Club CSKA is part of the Norilsk Nickel Group). The total area of the new sports complex on Leningradsky Avenue will be approximately 55 thousand sq m. The complex is expected to be completed by the end of 2023.
Nornickel is stepping up its cooperation on environmental protection with the Russian academic circles. During the reporting year, Nornickel launched a large-scale biodiversity study in the three Russian regions hosting the Company’s operations. The study seeks to delineate the areas affected by the Company’s operations and assess the current ecosystem biodiversity status. The findings by researchers will feed into the design of the biodiversity impact management system and help develop the biodiversity conservation and monitoring programmes. In addition, these findings will enable the identification and implementation of priority measures necessary for biological diversity conservation. The biodiversity-focused Great Scientific Expedition builds on the successful partnership between Nornickel and the Siberian Branch of the Russian Academy of Sciences, which started in 2020 with the Great Norilsk Expedition. By initiating voluntary large-scale environmental studies across its operating regions, the Company collects up-to-date information about the current condition of the environment across its footprint while also unlocking opportunities to further reduce its environmental impact.
In April, Nornickel signed a cooperation agreement with ROSATOM. The parties agreed to pursue a number of strategic projects in the Russian Arctic to enhance the Northern Sea Route infrastructure and Arctic shipping, including to implement shipbuilding projects and further develop the nuclear-powered icebreaker fleet. The agreement also contemplates a joint project to develop the Kolmozerskoye lithium deposit in the Murmansk Region and launch further deep processing of lithium raw materials. Kolmozerskoye is the largest and most promising deposit of lithium ores, accounting for 18.9% of domestic reserves. Nornickel and ROSATOM have established Polar Lithium, a 50-50 joint venture with equal governance rights, to implement the project by combining the parties’ assets and capabilities. Lithium mining will help set up the first domestic production of lithium-containing products as well as the production of lithium-ion traction batteries.
Also in 2022, Nornickel entered into two agreements to bolster its energy assets.
- Nornickel will hand over control and dispatch functions in the Norilsk energy system to the System Operator of the United Power System (SO UPS). The agreement contemplates the transfer of control and dispatch functions in the technologically isolated territorial power supply system in the Taimyrsky (Dolgano-Nenetsky) Municipal District to the Krasnoyarsk Regional Dispatch Office, a branch of SO UPS. The transfer will be phased and is expected to be completed by the end of 2023, with the parties working closely to expand the areas of dispatch responsibilities for SO UPS. In addition, the parties will bring their information systems in sync with each other to facilitate the exchange of process data between NTEC and SO UPS as part of the dispatch and technological control. This is necessary to streamline interoperability and harmonise technologies used by power supply entities across Russia. Going forward, these steps will make it possible to integrate the operational parameters of the isolated territorial power supply system of the Taimyrsky (Dolgano-Nenetsky) Municipal District into the information model developed by the Unified Energy System of Russia in line with the national standards.
- The other energy-related agreement was signed by Nornickel with Rosseti North-West, a power grid company. Nornickel plans to fully abandon the use of fuel oil at the Company’s Monchegorsk site. This investment project will help reduce pollutant emissions and facilitate Nornickel’s transition to modern green technologies.
In 2022, Nornickel entered into an agreement with RusHydro for the purchase of hydropower. The agreement marked another step in the implementation of the Company’s environmental strategy, which, among other things, provides for the gradual transition to carbon-free energy in the Company’s operations. The new agreement will enable Bystrinsky GOK to transition approximately 30% of its energy needs to carbon-free sources. This will lead to a reduction of GHG emissions by 100 thousand tonnes of CO2 equivalent in absolute terms in 2022 and also contribute to the Company’s environmental KPIs, e.g. cut its Scope 2 emissions. In addition, the plant continues to improve its energy efficiency and is currently assessing the feasibility of building new renewable energy facilities in the Zabaykalsky Territory.
In December 2022, Nornickel and Atomflot signed a long-term charter contract for a new Project 22220 icebreaker. The signing ceremony took place in Saint Petersburg as part of the Arctic: Today and the Future forum. This is a new long-term contract, unique in its duration. According to the document, the nuclear-powered icebreaker of the 22220 series will be used to escort vessels navigating the Northern Sea Route in the interest of Nornickel for a period through 2041, with an extension option until the end of 2051. Currently, Nornickel is using Sibir, a nuclear-powered icebreaker, under a short-term charter contract. Since early 2022, the icebreaker has supported year-round navigation on the Murmansk/Arkhangelsk – Dudinka route, escorting ships at a service speed in the Yenisei Bay. The new contract is part of a far-reaching strategic partnership between Nornickel and ROSATOM, which aims to further develop the Northern Sea Route. It meets the long-term interests of both parties: as a major consumer of icebreaker escort services, Nornickel receives guaranteed icebreaker support for the long term, while ROSATOM, as the Northern Sea Route infrastructure operator, secures orders for its current icebreaking fleet and a source of funding for the construction of new icebreakers.
Dialogue with indigenous minorities
Nornickel’s engagement with the indigenous peoples of the North inhabiting Taimyr is based on respect for the customs, traditions and culture of the indigenous communities. It takes place on a regular basis, covers all areas of mutual interest and relies on a holistic approach.
In May 2021, the local indigenous communities spearheaded the creation of the Indigenous Communities Coordination Council to engage with the tribal communities involved in traditional economic activities in Taimyr. Currently, the Coordination Council includes 53 indigenous local communities. The Coordination Council facilitates cooperation between indigenous communities and Nornickel, including under the Company’s RUB 2 billion five-year programme to support the indigenous peoples of Taimyr.
The programme was set up with the direct and immediate participation of representatives of indigenous communities and covers all aspects of indigenous life – social, economic, cultural, and linguistic, taking into account the needs and demands, values and views, ethnic traditions, and culture of the indigenous peoples inhabiting Taimyr.
A department responsible for liaising with indigenous peoples of the North was set up within the Polar Division to promote a direct dialogue. The new format of the Company’s direct dialogue with indigenous communities has significantly expanded the scope for engagement and created conditions to build their sustainability capacity by further improving rural infrastructure, advancing the economy by creating new industries based on traditional uses of natural resources that ensure processing of agricultural products and higher added value as well as by preserving historical traditions and cultural heritage.
Within its efforts to further improve its indigenous engagement formats, the Company pioneered the use of the free, prior and informed consent (FPIC) procedure for indigenous peoples in the Russian Arctic, offering relocation and community development options to indigenous people living in the Tukhard settlement area. Tukhard was founded in the 1970s as a rotation camp for the Norilskgazprom construction project workers. The new infrastructure and improved transportation options attracted nomadic indigenous people from nearby, who settled in the construction trailers abandoned on site. With a view to improving the living conditions in Tukhard, the Company proposed to build a new settlement and relocate the residents. Although the FPIC procedure is not part of the Russian law, Nornickel proposed to solve the relocation problem in line with international standards codified in the UN Declaration on the Rights of Indigenous Peoples.
Nornickel held initial consultations with the indigenous communities in the settlements of Lovozero and Krasnoshchelye in the Murmansk Region in view of the looming start of the Kolmozerskoye lithium mining project. Sámi, Nenets and Komi as well as representatives of reindeer farms, and independent experts on indigenous rights attended the meeting, the main purpose of which was to set up a two-way dialogue between the Company and indigenous peoples, to inform local communities about the upcoming project, and to listen to and record suggestions and comments put forward by local indigenous organisations. During the consultations, Nornickel representatives told the audience about the Company’s principles of engagement with indigenous people and about the Kolmozerskoye project. Geological studies of the Kolmozerskoye deposit were conducted back in the 1950s, and much of the project data has yet to be verified. The parties also discussed basic approaches to ethnographic and sociological research. The Company confirmed its intention to collect and verify all possible information on the range, nature and scale of traditional trades, sacred sites and burials, to identify the range of people potentially affected by the project, and to make detailed maps of the project area in the near future. The research will be carried out with the involvement of leading scientific institutions and in cooperation with indigenous peoples.
In October 2022, Murmansk hosted the Public-Private Partnership for the Sustainable Development of Indigenous Peoples, an international forum sponsored by Nornickel. Organised by the Federal Agency for Ethnic Affairs, the Ministry for the Development of the Russian Far East and Arctic, the Ministry of Foreign Affairs of the Russian Federation, and Nornickel, the event welcomed more than 200 delegates from Russia and other countries. The participants included representatives of federal and regional authorities, businesses, associations of indigenous peoples, international organisations as well as reindeer herders and leaders of tribal communities of Taimyr, Yamal, Chukotka, and many other regions. The forum is included in the work plan for the Russian chairmanship of the Arctic Council. The forum participants discussed best indigenous engagement practices of industrial companies. Generally accepted global approaches in this area include due diligence policies requiring targeted consultation by businesses with indigenous peoples when engaging in industrial operations in indigenous territories.
Government relations
The Company’s representatives also take part in parliamentary hearings and round table discussions organised by the Federation Council and State Duma of the Federal Assembly of the Russian Federation, the Government of the Russian Federation, the Russian Union of Industrialists and Entrepreneurs (RSPP), the Civic Chamber of the Russian Federation, the Chamber of Commerce and Industry of the Russian Federation, the Association of Managers interregional non-governmental organisation, etc.
Nornickel’s experts are involved in discussing draft regulations through anti-corruption expert reviews and regulatory impact assessments. This all helps to maintain a constructive dialogue with the government, cut red tape and improve the country’s business climate. Nornickel’s representatives also sit on various working groups created by federal executive authorities to help implement the regulatory guillotine mechanism.
In 2022, Nornickel and the Federal Supervisory Natural Resources Management Service signed cooperation agreements. The first agreement provides for the exchange of information and joint implementation of environmental initiatives. The second one is a pilot project, being the first agreement in the Russian Federation that contemplates receiving advice from the Federal Supervisory Natural Resources Management Service for Nornickel’s future investment projects.
Nornickel has supported the development of IN’HUB, a platform that will enable the creation of a global innovation centre in Russia in cooperation with international partners. The project initiated by Nornickel has been endorsed by more than 20 foreign associations and inventors’ organisations. As a responsible corporate citizen, Nornickel took the lead in proposing an innovation accelerator in Russia to help identify industrial applications for various inventions and technologies developed by scientific and operational teams, businesses and organisations, or any creative individual in general.
In June 2022, about 200 participants from more than 100 largest tech companies from Russia, Kazakhstan and Belarus as well as representatives of federal, regional and municipal authorities came to Norilsk by the invitation of Nornickel. For two days, participants of the forum discussed the capability of the domestic manufacturing sector to meet the needs of Nornickel and other large Russian businesses in all necessary supplies and equipment. A lot of attention was paid to government-sponsored business support measures and incentives for entrepreneurs in the Arctic region. The focus of the forum was on import substitution – one of the most important themes for the entire Russian manufacturing sector.
Nornickel has a long and successful history of cooperation with many Russian companies. Over 30 letters of intent were signed during the two days of the forum to formalise joint import substitution efforts between Nornickel and its potential suppliers.
In October 2022, the Federation Council, the upper chamber of Russia’s parliament, hosted a photo exhibition of the Clean Arctic project pursued in partnership with Nornickel. The most active participants in the Arctic Environmental Initiative, including the Company, were awarded letters of acknowledgment.
Managing conflicts of interest
Nornickel has developed measures to prevent potential conflicts of interest involving shareholders, Board members and senior managers.
The Company’s Articles of Association set forth the procedure for approving transactions by shareholders who hold more than 5% of voting shares. Such transactions are only made if approved by a qualified majority of Board members (at least 10 out of 13 votes).
Transactions that have the attributes of interested-party transactions are regulated by the law on joint stock companies.
The Company also has in place the Code of Conduct and Business Ethics for Members of the Board of Directors, which aims to reinforce high standards of ethics and business conduct among members of the Board of Directors and serves as guidance in the event of ethical risks and conflict of interest situations.The Code provides for the obligation of members of the Board of Directors and the Management Board are to refrain from actions that may result in a conflict of interest, and if such a conflict arises, they should promptly inform the Corporate Secretary in writing about such conflict.
If a Board member has a direct or indirect personal interest in a matter reviewed by the Board of Directors, they should inform other members of the Board of Directors before the matter is reviewed or a relevant resolution is passed, and refrain from participating in the review and from voting on the matter. In 2022, no notifications of conflicts of interest were received from members of the Board of Directors.