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ORLEN ORLEN Group 2017
Integrated Report

Corporate Governance

GRI INDICATORS:
Capitals:

In 2017, PKN ORLEN applied all principles included the code “Best Practice for GPW Listed Companies 2016” (“Code of Best Practice”) applicable on the Warsaw Stock Exchange.

The code is available on the Stock Exchange website and on the PKN ORLEN corporate website www.orlen.pl in the section dedicated to the Company’s shareholders.

The full text of the Corporate Governance Compliance Statement of PKN ORLEN S.A. is available at www.orlen.pl, in the 'Investor Relations' section, under ‘WSE best practices’.


The rules of operation for PKN ORLEN’s governing bodies are defined in:

The documents are available on PKN ORLEN’s website at www.orlen.pl, in the sections: Corporate Bylaws and General Meetings.

Sections 'Company' and 'Investor Relations' of the PKN ORLEN corporate website contain the most current information on the composition of the Company’s Supervisory Board and Management Board, as well as annual statements on compliance with the Code of Best Practice for WSE Listed Companies.

COMMUNICATION WITH THE CAPITAL MARKET

  • One-on-one meetings
  • Group meetings
  • Roadshows
  • Site visits
  • Conferences
  • In Poland
  • Abroad
Broadcast events:
  • Quarterly earnings briefings
  • Strategy announcement
  • General Meetings
  • Other
Corporate website www.orlen.pl
Materials relating to Annual General Meetings:
Corporate Governance:
Other:

One of the basic tools for the communication with the representatives of the capital market is the Investor Relations section in the corporate website www.orlen.pl, maintained in both Polish and English. The Investor Relations section gathers information mainly for the investors and analysts. It includes, among others:

  • Regulatory announcements and periodic reports.
  • Presentations concerning the publication of the financial results and other events.
  • Multimedia files with teleconferences and videoconferences organized by the Company.
  • Interactive charts and grids presenting Company’s historical financial data in various periods, with the possibility of export to Excel.
  • Stock-exchange quotations of PKN ORLEN shares and main indexes.
  • Contact form.
  • Newsletter and RSS channel.
  • Interactive calendar, offering the possibility of setting a reminder, through a short text message or an e-mail, concerning the most important events in the Company.
  • Section for individual investors.

On the website, in the “Investor Relations” section, there is also a tab concerning the corporate governance. One can find there the Company’s annual reports on complying with best practices rules and the “Code of Best Practice”. There is also brief information on best practices applied by the Company and other information which are required through “Code of Best Practice”.

The General Meeting tab in the „Investor Relations” section contains set of corporate documents, information related to General Meetings and contact form regarding General Meeting.

The Company supports its shareholders, investors and analysts to have the knowledge of the sectors, in which it operates, through publications on websites:

  • ffbk.orlen.com - specialized publications and relations from industry conferences.
  • ffbk.orlen.com - the blog of PKN ORLEN’s Chief Economist  with comments on the current market situation.
  • Communication through social media: Twitter and Facebook.

Direct communication with capital market representatives is realised through:

  • Individual and group closed meetings, both in the country and abroad, also as teleconferences.
  • Open media conferences after each important Company’s event, such as publication of quarterly results or publication of the strategy - transmitted live through the Internet, along with a simultaneous translation to English.
  • Series of meetings with investors, in-country and abroad (roadshows).
  • Meetings of capital market representatives with key Company’s managers in the headquarters and places where PKN ORLEN conducts operating activity (so-called site visits).
  • The Investor and Analyst Days organised from time to time - workshops concerning various areas of activity of the Company, conducted by the representatives of the Management Board, executive directors and other, selected managers.

Important Company’s activities for shareholders and investors realised in 2017:

  • Fifth year in a row PKN ORLEN paid dividend at the level of PLN 3 per share – the highest dividend in the Company’s history.
  • New public bond issue programme directed to the individual investor up to the total amount of PLN 1 bn.
  • Quarterly and half-year reports published within 23 days on average following the closing of the relevant periods, and annual reports within 74 days following the end of the year.

Capital market participants appreciate the Company’s activities, which is confirmed by the awards and other distinctions it won in 2017:

  • First place in the category “The Best Investor Relations among Institutional Investors” - the assessment of investor relations in WIG 30 Index companies, a joint initiative of “Parkiet” newspaper and of the Chamber of Brokerage Houses.
  • Transparent company of the year 2016 – first edition of the ranking, organised by “Parkiet” newspaper and Institute of Accountancy and Taxes under the auspices of the Warsaw Stock Exchange.
  • Awards granted by prestige IR Magazine in two categories:
    • Best in Central & Eastern Europe
    • Best ESG communications
  • Special award for the best online annual report, special award for integrated report, distinction for the highest quality of financial reporting and Best of the Best title – competition „The Best Annual Report 2016” organised by the Institute of Accounting and Taxes.

Special control and voting rights

The exercise of the voting right and special control have been regulated in detail in PKN ORLEN’s Articles of Association. According to the provisions of the Articles of Association, one share of PKN ORLEN entitles to one vote at the Company’s General Meeting.The voting right of the shareholders has been restricted in the Articles of Association to the extent that none of them can exercise more than 10% of the total votes existing in the Company as at the date the General Meeting is held. The restriction of the voting right does not apply to the State Treasury and the depositary bank which issued, on the basis of the agreement with the Company, depository receipts in connection with the Company’s shares (in case this entity exercises the voting right from the Company’s shares).
The shareholders whose votes are subject to accumulation and reduction are jointly referred to as ‘the Shareholders Grouping’. The rules of accumulation and reduction are specified in detail in the Articles of Association. The shareholders being a part of the Shareholders Grouping cannot exercise the voting right from more than 10% of the total votes existing in the Company as at the date the General Meeting is held.
If the cumulated number of shares registered in the General Meeting by the shareholders being a part of the Shareholders Grouping exceeds 10% of the total number of shares of the Company, the votes resulting from the number of held shares are subject to reduction, the rules of which have been specified in detail in the Articles of Association of the Company.
The restriction of the voting right, described above, does not apply to the entities dependent on the State Treasury.

The State Treasury is entitled to appoint and recall one Member of the Supervisory Board. Furthermore, one Member of the Management Board of PKN ORLEN is appointed and recalled by the Supervisory Board upon the request of the State Treasury.

Additionally, in accordance with the Articles of Association of the Company, as long as the State Treasury is entitled to appoint a Member of the Supervisory Board, a resolution granting approval for activities related to sale or encumbrance in any way of shares or stock in the following companies: Naftoport Sp. z o.o., Inowrocławskie Kopalnie Soli S.A. as well as in the company that will be created in order to operate the pipeline transport of liquid fuels, require a vote in favour of their adoption by the Supervisory Board Member appointed by the State Treasury.

Special rights for the State Treasury shareholder can be a result of the commonly applicable provisions of law, i.e.:

  • The Act of 18 March 2010 on specific rights vested in the Minister in charge of energy and their execution in certain capital companies or capital groups conducting business activities in the electricity, crude oil and gas fuel factors. Read more >>
  • The Act of 24 July 2015 on the control of certain investments. Read more >>
  • The Act of 16 December 2016 on the rules of managing the national assets. Read more >>

Amendments of articles of association

Any amendment to PKN ORLEN’s Articles of Association requires a resolution of the General Meeting and has to be entered in the companies register. The resolution of the General Meeting to amend the Company’s Articles of Association is adopted by three quarters of votes. The General Meeting may authorize the Supervisory Board to formulate the uniform text of the Articles of Association or make other editorial changes as set out in the resolution passed by the General Meeting.

Once the amendments to the Articles of Association are entered in the companies register PKN ORLEN publishes a relevant regulatory announcement.

General Meeting of Shareholders

In 2017 two General Meetings were held: Extraordinary General Meeting on 24 January 2017 and Ordinary General Meeting on 30 June 2017.

During the Extraordinary General Meeting the Company’s shareholders adopted new rules of determining of the PKN ORLEN Management Board and Supervisory Board remuneration, proposed by the shareholder State Treasury, complies with the Act on the principles of determining the amount of remuneration for people managing certain companies as of 9 June 2016.

The Ordinary General Meeting held on 30 June 2017 adopted resolutions in following issues:

  • Approval of the annual reports on the operations of the Company and the ORLEN Group as well as the financial statements for 2016.
  • Acknowledgement of the fulfilment of duties by all the Supervisory and the Management Boards Members.
  • Distribution of the net profit for fiscal year 2016 in the following manner:
    • The amount of PLN 1 283 127 183.00 for dividend payment (PLN 3 per share).
    • The remaining amount, i.e. PLN 4 081 328 369.64 for the Company's supplementary capital.
  • Change of the resolution of the Extraordinary General Meeting dated 24 January 2017 regarding the rules of remuneration for people managing certain companies.
  • Appointment of Ms Izabela Felczak-Poturnicka and Mr Wojciech Kryński to the composition of the Company’s Supervisory Board.
  • Terms of proceedings regarding conclusions of agreements on legal services, marketing services, public relations and public communication services and management advisory services as well as donation agreements, releasing from the debt or other agreements with similar effect and changes of these agreements.
  • Obligation of submission to the General Meeting of representative expenditures statements, expenditures on legal services, marketing services, public relations and public communication services and management advisory services.
  • Terms of sale of fixed assets.
  • The determination of requirements for the candidate for a Management Board Member and conducting of a qualification procedure for a Management Board Member.

Management and Supervisory Bodies

Apart from generally applicable laws, the rules of conduct for PKN ORLEN Supervisory Board, its Committees and the Management Board are regulated in PKN ORLEN’s Articles of Association and the Supervisory Board and the Management Board Constitutions, respectively. The proceedings of the management and supervisory authorities in PKN ORLEN are also subject to the corporate governance principles set out by the Warsaw Stock Exchange.

The Management Board

Composition of the PKN ORLEN’s Management Board

Composition of the PKN ORLEN’s Management Board as at 1 January 2017

Name and surname Position held in
PKN ORLEN Management Board
Supervised divisions
Wojciech Jasiński President of the Management Board, Chief Executive Officer Audit, control and management of corporate risk, safety, head office, crude oil and gas, trade, innovations, corporate communication, marketing, protection of information, critical infrastructure and defense matters, strategy and project management.
Sławomir Jędrzejczyk Vice – President of the Management Board, Chief Financial Officer IT, capital investments and divestments, business controlling, planning and reporting, taxes, investor relations, finance management, supply chain management.
Mirosław Kochalski Vice – President of the Management Board, Corporate Affairs
 
The capital group, human resources, organisation and management systems, legal department, procurement, management of regulatory risk.
Piotr Chełmiński Member of the Management Board, Business Development/Power and Heat Generation Officer Health and safety, power and heat generation, environmental protection, realisation of property investments, development and technology.
Zbigniew Leszczyński Member of the Management Board, Sales Efficiency and development of sales, refining products wholesale, petrochemical products wholesale, logistics, retail sale.
Krystian Pater Member of the Management Board, Production Efficiency and optimisation of production, petrochemical production, refinery production, technology.

The Supervisory Board at its meetings on 26 and 29 June 2017 appointed to PKN ORLEN Management Board following persons: Mr Wojciech Jasiński to the position of the President of the Management Board, Mr Mirosław Kochalski to the position of the Vice – President of the Management Board, Mr Krystian Pater to the position of the Member of the Management Board, Mr Zbigniew Leszczyński to the position of the Member of the Management Board, Mr Wiesław Protasewicz to the position of the Member of the Management Board, Ms Maria Sosnowska to the position of the Member of the Management Board for a joint three-year term of the Management Board, which started on 1 July 2017.

Composition of the PKN ORLEN’s Management Board as at 1 July 2017

Name and surname Position held in
PKN ORLEN Management Board
Supervised divisions
Wojciech Jasiński President of the Management Board, Chief Executive Officer Audit, control and management of corporate risk, safety, head office, crude oil and gas trade, innovations, human resources, corporate communication, marketing, protection of information, critical infrastructure and defence matters, strategy and project management.
Mirosław Kochalski Vice – President of the Management Board The capital group, IT, capital investments and divestments, organisation and management systems, legal department, investor relations, supply chain management, management of regulatory risk.
Zbigniew Leszczyński Member of the Management Board (responsible for Sales since 6.07.2017) Efficiency and development of sales, refining products wholesale, petrochemical products wholesale, logistics, retail sale.
Krystian Pater Member of the Management Board (responsible for Production since 6.07.2017) Efficiency and optimisation of production, power and heat generation, water and sewage management, petrochemical production, refinery production, technology.
Wiesław Protasewicz Member of the Management Board
(responsible for Finance since 6.07.2017)
Business controlling, planning and reporting, taxes, finance management.
Maria Sosnowska Member of the Management Board
(responsible for Investments and Procurement  since 6.07.2017)
Administration, health and safety, environmental protection, realisation of property investments, development and technology, procurement.

The Supervisory Board at its meeting on 5 February 2018 dismissed from PKN ORLEN Management Board following persons: Mr Wojciech Jasiński, the President of the Management Board, Mr Mirosław Kochalski, the Vice – President of the Management Board, Ms Maria Sosnowska, the Member of the Management Board responsible for Investment and Procurement.

At the same meeting the Supervisory Board, pursuant to § 9 item 1 point 3 of the Company’s Articles of Association, acting on the basis of the motion of the Minister of Energy as of 5 February 2018, appointed with the effect from 6 February 2018 Mr Daniel Obajtek to the position of the President of the PKN ORLEN Management Board. The Supervisory Board decided also to delegate with the effect from 5 February 2018 Mr Józef Węgrecki for temporary acting as the Member of the PKN ORLEN Management Board, Investments and Procurement by the time of appointment of the Management Board Member for that position, providing that no longer than for three months.

Composition of the PKN ORLEN’s Management Board at the date of authorization of this Management Board Report

Name and surname Position held in
PKN ORLEN Management Board
Supervised divisions
Daniel Obajtek

President of the Management Board, Chief Executive Officer

Audit, financial control and management of corporate risk, head office, the capital group, crude oil and gas trade, human resources, corporate communication, control and safety, marketing, legal department, relations with local communities, strategy, management of regulatory risk.
Zbigniew Leszczyński Member of the Management Board
Sales
Efficiency and development of sales, refining products wholesale, petrochemical products wholesale, IT, logistics, retail sale.
Krystian Pater Member of the Management Board
Production
Efficiency and optimisation of production, power and heat generation, water and sewage management, petrochemical production, refinery production, technology.
Wiesław Protasewicz

Member of the Management Board
Finance

Business controlling, supervision of infrastructure safety and information, planning and reporting, taxes, investor relations, finance management, supply chain management.
Józef Węgrecki

Supervisory Board Member temporary acting as the Member of the PKN ORLEN Management Board, Investments and Procurement

Administration, health and safety, innovations, environmental protection, realisation of property investments, development and technology, procurement

On March 22nd 2018, the Supervisory Board of PKN ORLEN made certain changes on the Company’s Management Board. Ryszard Lorek was appointed to the Management Board as a member responsible for Sales.
On March 29th 2018, the Company received a letter of resignation from Mr Ryszard Lorek, whereby he resigned from the position of the PKN ORLEN Management Board Member responsible for Sales, effective from April 10th 2018. Józef Węgrecki, who was delegated by the Supervisory Board to the Management Board on February 5th 2018, with his remit covering Investment and Procurement, resigned from the Supervisory Board. By decision of the Supervisory Board, Mr Węgrecki was appointed member of the Management Board responsible for Operations. Jadwiga Lesisz, a member of the Supervisory Board, was delegated to temporarily manage the areas of Investment and Procurement. The Supervisory Board removed Krystian Pater from the Management Board. The Supervisory Board of PKN ORLEN S.A., following its meeting on 19 June 2018 appointed, with the effect from 24 June 2018, Ms Patrycja Klarecka to the Company's Management Board, reponsible for trade. Current composition of the PKN ORLEN's Management Board is available here.

Responsibility division of Members of the Management Board of PKN ORLEN is available as well on the Company’s website in the tab: Areas of Responsibility.

Appointing and recalling PKN ORLEN’s Management Board

The Management Board of PKN ORLEN consists of five to nine members, including the President, Vice-Presidents and other Members of the Management Board. Members of the Management Board are appointed and recalled by the Supervisory Board. One member of the Management Board is appointed and recalled by the Supervisory Board upon the request of the Minister in charge of the State Treasury.

The term of office of the Management Board Members is a joint term of office, ending on the day when the Ordinary General Meeting has been held, approving the financial statements for the whole second financial year of such term of office.

The Supervisory Board may suspend the President, Vice-Presidents, individual Members of the Management Board and all Management Board in their activities for serious reasons. Should the Management Board President be suspended from duty or his/her mandate expires before the end of the term of office, all his/her powers, except for the right to the vote cast referred to in § 9 item 5 point 2 of the Articles of Association are to be executed by the person appointed by the resolution of the Supervisory Board acting as President of the Management Board until the new Management Board President is appointed or the current one is restored to his/her position.

Organisation of PKN ORLEN’s Management Board activity

Detailed rules for the convening of Management Board meetings are included in the Constitution of the Management Board, available on Company’s website. Meetings of the Management Board are held when necessary, however, not less frequently than once every two weeks. For an effectiveness of resolution the scheduled meeting has to be notified to all Members of the Management Board and at least one half of the Management Board Members have to be present at the meeting. The Management Board resolutions are passed with a simple majority of votes (in the event of a voting deadlock, the President of the Management Board has the casting vote) provided that for resolutions to grant a procuration, unanimity of all Members of the Management Board is required. A Management Board Member who voted against a resolution that was adopted may communicate his/her dissenting opinion, however, such communication has to be justified.

Resolutions are adopted in an open vote. A secret ballot may be ordered at a request of each Member of the Management Board.
Resolutions are signed by all Members of the Management Board who were present at the Management Board meeting on which the resolution was adopted. The resolution is also signed by the Member of the Management Board who filed a dissenting opinion, with a note: “dissenting opinion” or "votum separatum".

According to the Constitution of the Management Board, the Management Board Members shall notify the Supervisory Board of any conflict of interest connected with the positions occupied by them, or of any possibilities of such conflict of interest. Should the Company’s interest be in conflict with the personal interests of the Management Board Member, the Management Board Member in question should abstain from deciding of such matters and request a proper remark to be made in he minutes of the meeting.

Competences of PKN ORLEN`s Management Board

All the Members of the Management Board are obliged and authorized to handle the issues of PKN ORLEN.

All the matters going beyond the ordinary course of business are subject to resolutions of the Management Board. Activities falling within the scope of the ordinary course of business are activities, among others, related to fuels trading within the meaning of the Company’s Articles of Association (i.e. crude oil, petroleum products, biocomponents, biofuels and other fuels including natural gas, industrial gas and heating gas) or energy and any other activities not specified in the Constitution of Management Board. In addition, Management Board consent is not required to perform an action which is integral part of other action, for which the Management Board gave already consent, unless otherwise result from Management Board resolution.

Resolution of the Management Board is required, among others to:

  • Adopt and amend the Constitution of Management Board.
  • Adopt and amend the Organisational Rules and Regulations of PKN ORLEN.
  • Adopt motions to be submitted to the Supervisory Board and/or to the General Meeting.
  • Convene the General Meetings and adopt the proposed agenda of the General Meetings.
  • Approve annual and long-term financial plans as well as the Company’s development strategy.
  • Approve investment tasks and corresponding liabilities if the resulting expenditures and encumbrances exceed PLN 10 000 000.
  • Incur liabilities, manage the property rights and any form of encumbrance on the Company’s property where the total value exceeds PLN 20 000 000 (with certain exceptions to that rule).
  • Dispose and purchase real estate, perpetual usufruct or an interest in real estate and to establish a limited property right.
  • Dispose of, purchase and encumber stakes, shares or other interest in other entities, including shares admitted to public trading.
  • Issue the Company’s securities.
  • Approve Company’s and the ORLEN Group’s financial statements.
  • Adopt and change the Company’s employees’ remuneration scheme, as well as decisions regarding introduction and fundamentals of the incentive schemes.
  • Conclude, amend and terminate a collective labour agreement applicable in the Company, and other agreements with trade unions.
  • Establish the principles of granting and revoking powers of attorney.
  • Formulate the so-called donation policy of the Company.
  • Grant a procuration.
  • Establish the internal division of competences among the Members of the Management Board.
  • Set up establishments/offices abroad.
  • Handle other matters which at least one Member of the Management Board requests to be handled in the form of a resolution.
  • Take decisions on the payment of interim dividends.

The Management Board has to regularly provide the Supervisory Board with exhaustive information on all aspects of PKN ORLEN’s business operations and the risks related to such operations as well as the methods of managing such risks.

The Supervisory Board

Composition of PKN ORLEN’s Supervisory Board in 2017

Name and surname Position held in PKN ORLEN Supervisory Board
Angelina Sarota Chairman of the Supervisory Board
Radosław L. Kwaśnicki Vice – Chairman of the Supervisory Board
Mateusz Henryk Bochacik Secretary of the Supervisory Board
Adrian Dworzyński Member of the Supervisory Board (Independent Member of the Supervisory Board)
Agnieszka Krzętowska Member of the Supervisory Board (Independent Member of the Supervisory Board)
Izabela Felczak-Poturnicka Member of the Supervisory Board – appointed by OGM on 30 June 2017
Wojciech Kryński Member of the Supervisory Board (Independent Member of the Supervisory Board)- appointed by OGM on 30 June 2017
Artur Gabor Member of the Supervisory Board (Independent Member of the Supervisory Board)- resigned from the position from 1 September 2017
Wiesław Protasewicz Member of the Supevisory Board – resignation as Member of the PKN ORLEN Supervisory Board with effect as of June 29th 2017

In 2017 the Supervisory Board held 14 minuted meetings and adopted 141 resolutions.

Attendance of PKN ORLEN Supervisory Board Members on Supervisory Board meetings was 99%. In the case of absence of Supervisory Board Member on the meeting, the Supervisory Board adopted resolution about its justification.

On 5 January 2018 the Minister of Energy acting on behalf of the shareholder the State Treasury, according to § 8 item 2 point 1 of the Company’s Articles of Association appointed Ms Małgorzata Niezgoda to the PKN ORLEN Supervisory Board. On 1 February 2018 Ms Małgorzata Niezgoda resigned from the position of PKN ORLEN Supervisory Board Member.

PKN ORLEN Extraordinary General Meeting on 2 February 2018 dismissed from the Supervisory Board Ms Agnieszka Krzętowska, Ms Angelina Sarota and Mr Adrian Dworzyński and appointed Ms Izabela Felczak-Poturnicka as the Chairman of the Supervisory Board, Ms Agnieszka Biernat-Wiatrak, Ms Jadwiga Lesisz and Ms Małgorzata Niezgoda as Members of the Supervisory Board.

On 5 February 2018 the Minister of Energy acting on behalf of the shareholder the State Treasury, according to § 8 item 2 point 1 of the Company’s Articles of Association appointed Mr Józef Węgrecki to the PKN ORLEN Supervisory Board.

Composition of the PKN ORLEN’s Supervisory Board at the date of authorization of this Management Board Report

Name and surname Position held in PKN ORLEN Supervisory Board
Izabela Felczak-Poturnicka Chairman of the Supervisory Board
Radosław L. Kwaśnicki Vice – Chairman of the Supervisory Board (Independent Member of the Supervisory Board from 14 March 2018)
Mateusz Henryk Bochacik  Secretary of the Supervisory Board (Independent Member of the Supervisory Board from 26 February 2018)
Agnieszka Biernat-Wiatrak Member of the Supervisory Board
Wojciech Kryński Member of the Supervisory Board (Independent Member of the Supervisory Board)
Jadwiga Lesisz Member of the Supervisory Board (Independent Member of the Supervisory Board)
Małgorzata Niezgoda Member of the Supervisory Board
Józef Węgrecki Member of the Supervisory Board delegated to temporarily stand in for Management Board Member

Current composition of the PKN ORLEN's Supervisory Board is available here.

The rules of conduct of PKN ORLEN's Supervisory Board

Appointing and recalling Members of PKN ORLEN’s Supervisory Board

PKN ORLEN’s Supervisory Board is composed of six to nine Members. The State Treasury is authorized to appoint and recall one Member of the Supervisory Board, other Members of the Supervisory Board are appointed and recalled by the General Meeting. Members of PKN ORLEN’s Supervisory Board are appointed for a joint term of office, ending on the day when the Ordinary General Meeting has been held, approving the financial statements for the whole second financial year of such term of office. Individual Members of the Supervisory Board and the entire Supervisory Board can be recalled at any time before the end of the term of office. The General Meeting of PKN ORLEN appoints the Chairman of the Supervisory Board, whereas the vice-chairman and the secretary are appointed by the Supervisory Board from amongst the other Members of the Board. The current term of the Supervisory Board started on 3 June 2016.

At least two Supervisory Board Members must meet the independence criteria specified in the PKN ORLEN Articles of Association. Independent Supervisory Board Members are not employees of the Company, its subsidiary or affiliate, as well as they are not associated with these entities based on a contract of similar nature, are also not tied to shareholder in a manner that excludes the independence.

Independent Members of the Supervisory Board, before being appointed to the Supervisory Board, should submit to the Company a written statement of compliance with above mentioned provisions. The statement of compliance are submitted to remaining Supervisory Board Members and to the Management Board.

If the mentioned provisions are not met, a Member of the Supervisory Board is obliged to immediately notify the Company thereof. The Company informs the shareholders about the current number of independent members of the Supervisory Board.

If the number of independent members of the Supervisory Board is less than two, the Company's Management Board is obliged to immediately convene a General Meeting and put an issue concerning changes in the composition of the Supervisory Board on the agenda of the General Meeting. The Supervisory Board acts in its current composition until the changes in the composition of the Supervisory Board are made, i.e. the number of independent members is adjusted to the statutory requirements set in the Articles of Association whereas the provisions of § 8 item 9 of the Articles of Association (containing a list of resolutions which must be passed with consent of at least one half of independent Supervisory Board Members) do not apply.

Organisation of PKN ORLEN's Supervisory Board's operations

Organisation of the Supervisory Board, in accordance with the principles outlined in the PKN ORLEN Articles of Association and the Constitution of the Supervisory Board, is available on the corporate website:
http://www.orlen.pl/EN/Company/Pages/CorporateBylaws.aspx .
 
Meetings of the Supervisory Board are held when necessary, however, not less frequently than once every two months.
The Supervisory Board can pass resolutions if at least half of its Members participate in the meeting. Subject to the provisions of the Commercial Code, a resolution of the Supervisory Board can be passed in writing or with the use of direct means of remote communication. Resolutions of the Supervisory Board are passed with an absolute majority of the votes cast in the presence of at least half of the Members of the Supervisory Board. This does not apply to any Members of the Management Board or the entire Management Board being recalled or suspended during the term of their office when at least two thirds of all the Supervisory Board Members have to vote in favour of the resolution.

Passing resolutions on the following matters:

  • Any contribution to Members of the Management Board provided by the Company or any related entities.
  • Giving permission to sign any significant agreement by the Company or a subsidiary with an entity related to the Company, a Member of the Supervisory Board, or Management Board as well as with their related entities.
  • Appointing a certified auditor to audit the financial statements of the Company requires the consent of at least one half of the independent Members of the Supervisory Board. Such provisions do not exclude applying art. 15 § 1 and 2 of the Commercial Code. In order to perform their duties the Supervisory Board has the right to inspect all documents of the Company, request reports and explanations from the Management Board and the employees, and review the assets and liabilities of the Company. In order to ensure proper performance of its duties, the Supervisory Board, for its own purposes, has the right to ask the Management Board to draw up expert reports and opinions or to hire an adviser. The costs are borne by the Company.

According to the Constitution of the Supervisory Board, a Supervisory Board Member shall inform the remaining Members of the Supervisory Board of any conflict of interest as well as refraining from participating in discussions and casting votes in the case of voting on the resolution on an issue in which a conflict of interest has arisen. In case of doubt as to whether the conflict of interest exists or not, the matter is resolved by the Supervisory Board in the manner of a resolution.

Competence of PKN ORLEN's Supervisory Board

The Supervisory Board of PKN ORLEN exercises permanent supervision over the Company’s operations, in all fields of its activity, specifically, the Supervisory Board is authorized to act as set out in the Commercial Code and the Company’s Articles of Association.

Additionally, the Ordinary General Meeting held on 30 June 2017 imposed on the Supervisory Board an obligation to evaluate the statements regarding representative expenditures, expenditures on legal services, marketing services, public relations and public communication services and management advisory services as well as to give consent for conclusion of agreements in these matters.

Given the corporate governance standards and in order to enable the shareholders to make a true and fair view of the Company, the Supervisory Board of PKN ORLEN is in charge of the additional duty to submit to the General Meeting of the Company:

  • Assessment of PKN ORLEN’s standing, including internal control, risk management, compliance and internal audit function.
  • An annual report on its work.
  • Assessment of how the company's disclosure obligations are fulfilled regarding the application of the principles of corporate governance.
  • Assessing the reasonableness of the Company's sponsorship activities and charity.

Committees of Supervisory Board

The Supervisory Board of PKN ORLEN may elect permanent or ad hoc committees which act as its collective advisory and opinion making bodies. The following permanent committees operate within the Supervisory Board of PKN ORLEN:

  • Audit Committee.
  • Strategy and Development Committee.
  • Nomination and Remuneration Committee.
  • Corporate Governance Committee.
  • Corporate Social Responsibility Committee (CSR Committee).

Audit Committee

The task of the Audit Committee is to advise the Supervisory Board of PKN ORLEN on the issues related to the proper implementation of budget and financial reporting rules and internal control within the Company and the ORLEN Group, as well as cooperation with the Company’s certified auditors. The Audit Committee meetings are held at least once per quarter, each time prior to the publication of the Company’s financial statements.

Pursuant to the provisions of the Constitution of the Supervisory Board of PKN ORLEN, the Audit Committee consists of at least two independent members and at least one member has qualifications and experience in accounting or finance.

In 2017, the Audit Committee held 14 minuted meetings.

In 2017, the Act of 11 May 2017 on auditors, audit firms and public supervision was implemented, which defined the tasks of the Audit Committee and introduced new requirements for member of the Audit Committee. The Audit Committee performs all tasks required by this Act. Members of the Audit Committee also meet all conditions provided for in the Act.

Corporate Governance Committee

The task of the Corporate Governance Committee  is to provide opinions and recommendations to the Supervisory Board on the implementation of corporate governance rules, assessment of reports concerning compliance with the corporate governance principles published by the Company and issuance of opinions on proposed changes to the corporate documents of the Company, as well as monitoring the Company management for compliance with legal and regulatory requirements, including compliance with the PKN ORLEN’s Code of Ethics and the corporate governance principles.

In 2017, the Corporate Governance Committe held 4 minuted meetings including 3 shared meetings with the Nomination and Remuneration Committee and 1 shared meeting with the Corporate Social Responsibility Committee.

Strategy and Development Committee

The task of the Strategy and Development Committee is to issue opinions and submit recommendations to the Supervisory Board on planned investments and divestments which exert a material impact on the Company’s assets.

In 2017 the Strategy and Development Committee held 5 minuted meetings.

Nomination and Remuneration Committee

The task of the Nomination and Remuneration Committee is to help to attain the strategic goals of the Company by providing the Supervisory Board with opinions and motions on how to shape the management structure, with regard to organisational solutions, remuneration schemes and selection of the staff with the skills required to ensure the Company’s success.

In 2017, the Nomination and Remuneration Committee held 8 minuted meetings including 3 shared meetings with the Corporate Governance Committee.

Corporate Social Responsibility Committee (CSR Committee)

The task of the CSR Committee is to support the Company's strategic objectives by taking into account social, ethical and environmental issues in the Company's operations and in contacts with stakeholders (including employees, customers, shareholders, local communities).

In 2017, the Social Responsibility Committee held 4 minuted meetings and 1 shared meeting with the Corporate Governance Committee.



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