CHAPTER 4
CORPORATE GOVERNANCE

4.4 Report on remuneration to the management and control authorities

4.4.1 Members of the Board of Directors Remuneration

Remuneration of the Board of Directors in 2016, RUB

n 2016, the remuneration was paid to the Board of Directors elected on June 26, 2015 appointed for the period from June 26, 2015 to June 27, 2016.

The amount of the remuneration was calculated in accordance with the Regulation on the payment of remuneration and compensation to the members of the Board of Directors of PJSC RusHydro approved by the annual General Meeting of Shareholders on June 26, 2015 (date of approval – June 26, 2015, Minutes of June 26, 2015 No.13).

Basic calculation parameters:

• the basic part of the remuneration of each member of the Board of Directors is 900,000 rubles;
• the amount of remuneration depends on the number of meetings attended by a member of the Board of Directors;
• the amount of remuneration increases if the member of the Board is:
  – a Chairman of the Board of Directors (by 30 %),
  – a Chairman of the Committee (by 20 %),
  – a member of the Committee of the Board of Directors (by 10 %);
• the total amount of remuneration, taking into account the allowances established by the Regulations, may not exceed 1,000,000 rubles;
• remuneration shall not be paid to a civil servant;
• remuneration shall not be paid to members of the Board of Directors who are or have been members of the executive bodies of the Company.

The decision on payment of remuneration to members of the Board of Directors was adopted by the Annual General Meeting of Shareholders on June 27, 2016. The decision on payment of remuneration to members of the Board of Directors was previously reviewed and recommended by the Personnel and Remuneration Committee (Minutes No. 50 of April 27, 2016).

The new version of the Regulation on the payment of remuneration and compensation to members of the Board of Directors of PJSC RusHydro was approved by the Annual General Meeting of Shareholders on June 27, 2016 (date of approval 27 June, 2016, Minutes of June 29, 2016 No. 15). The new edition of the Regulation abolished the maximum remuneration limit of 1,000,000 rubles, though set a premium on the remuneration of the senior Independent Director (15 %), presented details regardingthe compensation paid to the members of the Board of Directors, and lowered the threshold of missed meetings, which reduced remuneration from 50 to 25 %.

The Company does not pay compensation other than related to travel and accommodation for participation in the meeting, in particular, the Company does not pay remuneration to members of the Board of Directors in connection with the change in control or early termination of powers.

In May 2017, the Board of Directors recommended the Annual General Meeting of Shareholders decide to approve the Regulations on the Payment of Remunerations and Compensations to the members of the PJSC RusHydro Board of Directors in a new version providing for increasing the remuneration base part to 3,510,000 rubles. This proposal is aimed at increasing the motivation of the members of the Board of Directors and formulated on the independent consultant Ernst and Young (CIS) B.B. recommendations based on its members of the Boards of Directors remuneration practice study of large public companies.

4.4.2 Member of the Management Board Remuneration

The remuneration of the Management Board members, RUB

Remunerations to members of the Management Board, including the Chairman of the Management Board – CEO, were paid in 2016 in accordance with the terms of employment contracts and the Regulations on the procedure for payment of remuneration and compensation to members of the Management Board of PJSC RusHydro, approved by the decision of the Board of Directors on 16.11.2010 (date of approval – 16.11.2010, Minutes of 19.11.2010 No.111).

In 2016, the Board of Directors, with the direct participation of the Personnel and Remuneration Committee (nominations) and with the involvement of the Strategy Committee, conducted a detailed analysis of the current system of remuneration of the Management Board and introduced a new system of remuneration for the executive bodies of the Company from 2017 (date of approval – 11.11.2016, Minutes of 14.11.2016 No. 243).
The new remuneration model is fully interrelated with the implementation of short-term and long-term key performance indicators of the Company, approved by the Board of Directors of the Company upon the recommendation of the Personnel and Remuneration Committee (nominations) under the Company’s Board of Directors.

The new system of motivation is based on the following principles: transparency, balance (observing the balance of interests of the shareholders of the Company and the interest of management in achieving the Company’s long-term and short-term objectives ), fairness (the amount of remuneration directly depends on the results of the Company’s activities and the implementation of significant projects).

The new remuneration model provides for the Long-Term Incentive Program of the Management Board with reference to the growth of the value of shares and the fulfillment of key performance indicators of the Program established by the Board of Directors of the Company. The program is designed to more closely link the interests of the management and shareholders of the Company in the steady growth of the Company’s capitalization and business development.

The main objectives and principles of the Program: motivation of the Company’s management for the implementation of strategic tasks and openness to shareholders, remuneration is determined taking into account the level of achievement of the Program KPI, a unified mechanism for calculating remuneration and equal conditions for obtaining remuneration.

The amount and terms of remunerationto the members of the Management Board payable due to the early termination of the contract are determined by a document approved by the Board of Directors regulating the payment of remuneration and compensation to the members of the Management Board of PJSC RusHydro. No change-in-control benefits are applicable. The maximum amount of remuneration paid in case of early dismissal of a member of the Management Board is limited in accordance with the legislation of the Russian Federation by a three-fold average monthly salary of a member of the Management Board.

4.4.3 Remuneration of the Audit Committee

Remuneration of the Audit Committee, RUB

Payment of remunerations to members of the Audit Committee in 2016 was carried out in accordance with the Regulation on the payment of remuneration and compensation to the members of the Audit Committee of PJSC RusHydro (Minutes No. 13 of 26.06.2015), according to which the remuneration fee of the member of the Audit Committee is set at 25 minimum monthly rates of the worker of the first category established by the branch rates agreement in an electric power complex of the Russian Federation. The remuneration of the Chairman of the Audit Commission is increased by 50 %.

The new version of the Regulation on remuneration and compensation to members of the Audit Commission of PJSC RusHydro was approved by the Annual General Meeting of Shareholders on June 27, 2016 (date of approval – 27.06.2016, Minutes of 29.06.2016 No.15).

The new version of the Regulations provides for 15 % of the average annual remuneration of a member of the Board of Directors as a basic remuneration to a member of the Audit Committee. The basic remuneration is adjusted to the personal participation ratio of the member of the Audit Committee in meetings and the ratio taking into account the work as a Chairman and a Secretary of the Audit Commission. The new version of the Regulations also refines the reimbursement of travel and accommodation expenses necessary for the performance of their functions by the members of the Audit Committee, and provides for more details on the restrictions in payment of remuneration.

4.4.4 Auditor’s remuneration

Auditor’s remuneration^*, RUB

Remuneration of the auditor is determined by the decision of the Board of Directors of the Company taking into account the results of the competitive procedures and after preliminary consideration by the Audit Committee.