Annual report 2014

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Corporate governance principles

The Company’s sustainable development and investment appeal, as well as the reliability and quality of services largely depend on the governance system.

The current corporate governance system of Lenenergo is based on the effective and transparent system of relations between shareholders, management and stakeholders, which provides management and control of the Company’s activities in the interests of shareholders.

Lenenergo, as a public company, continually strives to improve its corporate governance following the generally accepted Russian and international corporate governance principles stated in the Corporate Governance Code.

Corporate governance of the Company is based on the following principles:

The Company’s Charter and internal documents provide for accountability of the Board of Directors to all shareholders in compliance with the applicable laws, controllability of executive bodies to the Board of Directors and General Shareholder Meeting.

The Company’s Audit commission ensures control over financial and economic activities of the Company. The system of internal control and risk management implemented by Department of internal audit and risk management functions in Lenenergo.

The Company involves auditors to confirm the compliance of the annual accounting statements of Lenenergo to the Russian accounting standards and International Financial Reporting Standard.

The Company shall protect shareholder rights and ensure the equitable treatment of all shareholders. The Board of Directors shall provide all shareholders with effective protection if their rights are violated.

Shareholders are entitled to participate in the Company’s management through decision-making on the most important issues of Lenenergo activities at the General Shareholder Meeting.

The Company shall disclose in due time reliable information on all material facts related to its activity, including on its financial standing, social and environmental indicators, performance, ownership and governance structure of Lenenergo, and provide free access to such information for all stakeholders.

The Company shall recognize the rights of all stakeholders envisaged by current legislation of the Russian Federation, and strives towards cooperation with such persons for the purposes of its development and assurance of financial stability.

In addition to these principles, the Company aspires in its activities to follow the principles of corporate governance stated in the Corporate Governance Code recommended by the Bank of Russia.

The efficiency of the Company’s corporate governance is provided by the following internal documents:

  • The Regulations on the procedure of preparation and holding of General Shareholder Meetings in the new edition (AGM Minutes #2/2014 of 24.06.2014);
  • The Regulations on the procedure of convocation and holding meetings of the Board of Directors in the new edition (AGM Minutes #2/2012 of 20.06.2012);
  • The Regulations on the procedure of convocation and holding meetings of the Management Board (AGM Minutes #1 of 30.05.2008);
  • The Regulations on the Audit Commission of Lenenergo in the new edition (AGM Minutes #2/2014 of 24.06.2014);
  • The Regulations on payment of remuneration and compensation to members of the Board of Directors (AGM Minutes #1 of 30.05.2008);
  • The Regulations on payment of remuneration and compensation to members of the Audit Commission (AGM Minutes #1 of 30.05.2008);
  • The Regulations on the Committee on strategy and development of the Board of Directors of Lenenergo, Open Joint Stock Company of the Power Industry and Electrification in the new edition (Minutes of the Board of Directors #4 of 09.09.2009);
  • The Regulations on the Committee on reliability of the Board of Directors of Lenenergo, Open Joint Stock Company of the Power Industry and Electrification in the new edition (Minutes of the Board of Directors #4 of 13.08.2014);
  • The Regulations on the Committee on audit of the Board of Directors of Lenenergo, Open Joint Stock Company of the Power Industry and Electrification in the new edition (Minutes of the Board of Directors #8 of 27.08.2012);
  • The Regulations on the Committee on personnel and remuneration of the Board of Directors of Lenenergo, Open Joint Stock Company of the Power Industry and Electrification in the new edition (Minutes of the Board of Directors #4 of 13.08.2014);
  • The Regulations on the Committee on technological connection to electric networks of the Board of Directors of Lenenergo, Open Joint Stock Company of the Power Industry and Electrification (Minutes of the Board of Directors #8 of 10.02.2009);
  • The Regulations on payment of remuneration and compensation to members of the Committees of the Board of Directors of Lenenergo, Open Joint Stock Company of the Power Industry and Electrification (Minutes of the Board of Directors #15 of 17.12.2013);
  • The Corporate Governance Code of Lenenergo in the new edition (Minutes of the Board of Directors #23 of 06.03.2013);
  • The Code of Corporate Ethics of Lenenergo (Minutes of the Board of Directors #23 of 06.03.2013).

The documents regulating the procedure for disclosure and use of information in Lenenergo are as follows:

  • The Regulations on insider information of Lenenergo in the new edition (Minutes of the Board of Directors #36 of 20.06.2013);
  • The Regulations on information policy of Lenenergo in the new edition (Minutes of the Board of Directors #7 of 19.09.2013).

The Company’s interaction with its subsidiaries and dependent companies is carried out on the basis of the approved procedure of interaction of Lenenergo with business entities whose shares (stakes) are owned by Lenenergo (Minutes of the Board of Directors #12 of 24.03.2009).

Data on compliance with the Corporate Governance Code

On 21 March 2014, the Board of Directors of the Bank of Russia approved the Corporate Governance Code (hereinafter — the Code). The letter of the Bank of Russia of 10 April 2014 #06-52/2463 recommended the Code for application by joint stock companies, whose securities are admitted to trading.

Corporate governance in Lenenergo is carried out in accordance with the rules and procedures embodied in the Charter and the Company’s internal documents.

The Company has approved the Corporate Governance Code of Lenenergo (by decision of the Board of Directors on 1 March 2013, Minutes #23 of 06.03.2013) for the purpose of ensuring more transparency in the Company’s governance and confirming the invariable commitment of the Company to follow the standards of appropriate corporate governance.

For the purpose of determining the compliance of corporate governance of Lenenergo with the principles and recommendations of the Corporate Governance Code, the Company performed the assessment of its compliance with the corporate governance principles embodied in the Corporate Governance Code.

Pursuant to the methodology, for each section of the Corporate Governance Code the share of COMPLIED under the recommendations stated in the corresponding sections was calculated.

For this analysis, the total number of estimates OBSERVED amounted to 204 out of 356, or 57% that testifies to the well-developed practice of corporate governance in the Company.

Detailed information about the compliance of Lenenergo with the provisions of the Corporate Governance Code recommended by the Bank of Russia is given in Appendix 4"Report on compliance with principles and recommendations of the Corporate Governance Code" on p. 277

Information about major transactions, related party transactions and other transactions of the Company in 2014 recognized by Lenenergo as material.

In the reporting year, the Company did not make any transactions recognized as major in accordance with the Federal Law About Joint-Stock Companies.

Information about transactions recognized in accordance with the specified law as related party transactions is given in the online version of the Annual Report www.ar2014.lenenergo.ru