Gazprom-AR2014

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Corporate Governance 115 Summary of the instances of non-compliance of OAO Gazprom’s corporate governance practice to some of the key recommendations of the Russian Code of Corporate Governance Code’s principles and recommendations OAO Gazprom’s corporate governance practice To ensure independence of the internal audit function, its functional and administrative accountability shall be different. It is recommended that the internal audit function be functionally accountable to the board of directors, and administratively accountable directly to the sole executive body of the company (section 5.2.1. of the Code). The internal audit function is recommended to be functionally accountable to the board of directors, meaning that: — the board of directors (audit committee) approves internal audit policy (internal audit regulations) that sets the internal audit objectives, tasks and functions; — the board of directors approves (or the audit committee preliminarily reviews) appointments and dismissals and sets remuneration for the head of the internal audit function (section 267 of the Code); Internal audit tasks should also include the preparation and submission to the board of directors and executive bodies of the internal audit performance reports (also including data on assessment of current status, reliability and efficiency of the risk management and corporate governance frameworks) (section 272 of the Code). In accordance with the Regulation on the Internal Audit Department at the Administration of OAO Gazprom’s Management Committee (approved by OAO Gazprom’s Order No. 455 dated 04 September 2013), the Department is functionally accountable to the Board of Directors’ Audit Committee, and administratively accountable to the Chairman of Management Committee within the Administration of the Management Committee. Head of the Department is appointed and dismissed as proposed by Deputy Chairman of Management Committee and Head of the Administration of the Management Committee approved by the Board of Directors’ Audit Committee. The Regulation on the Internal Audit Department at the Administration of OAO Gazprom’s Management Committee does not specify such tasks (functions) of the internal audit business unit. In accordance therewith, head of the Department shall ensure submission to OAO Gazprom’s Audit Committee and management of regular (at least once a year) reports of implementation of the Annual Audit Plan. Pursuant to Resolution of OAO Gazprom’s Board of Directors No. 2452 dated 27 November 2014, with due account for the benchmarking of the Company’s corporate governance standards against the Code’s key provisions and given that the management can guarantee implementation of such initiatives, a draft Action Plan was prepared to introduce the key provisions of the Russian Code of Corporate Governance into OAO Gazprom’s practice. The draft document was submitted to the Federal Agency for State Property Management and the Ministry of Energy with a view to prepare relevant draft guidelines. OAO Gazprom Annual Report 2014
116 Corporate Governance Remuneration Scheme for Members of the Board of Directors, Executive Bodies and Other Key Employees Remuneration of members of executive bodies and other key employees is linked to OAO Gazprom’s performance and their personal performance. Remuneration scheme for members of executive bodies and other key employees of OAO Gazprom Short-term remuneration of members of executive bodies (Chairman of the Management Committee, members of the Management Committee) and members of the Board of Directors employed by OAO Gazprom is determined by their employment agreements. OAO Gazprom and its key gas production, transportation, underground storage, processing and sales subsidiaries also have in place an incentive scheme for key managers, including members of executive bodies. The scheme comprises the Annual Bonus Scheme and the Employee Equity Sharing Plan for the Management. The Annual Bonus Scheme covers executives of OAO Gazprom and its key subsidiaries and uses consistent principles and approaches to bonuses based on performance assessment results by linking the amount of remuneration to the achievement of KPIs. Underlying regulations for the key managers incentive programme in OAO Gazprom and its key subsidiaries — Regulation on the Annual Bonus Scheme for the Management of OAO Gazprom (approved by Resolution of OAO Gazprom’s Board of Directors No. 927 dated 19 December 2006). — Regulation on OAO Gazprom’s Key Performance Indicators (approved by resolution of OAO Gazprom’s Board of Directors No. 2435 dated 21 October 2014), was prepared with due account for methodical guidelines issued by the Ministry of Economic Development of the Russian Federation and the Federal Agency for State Property Management, as well as the KPIs applicable in OAO Gazprom. — Regulation on the Employee Equity Sharing Plan for the Management of OAO Gazprom (approved by Resolution of the Company’s Board of Directors No. 2105 dated 26 December 2012). The total bonus pool is determined based on corporate KPIs that measure the performance of OAO Gazprom and its subsidiaries in the critical lines of business. Corporate KPIs are grouped into financial and economic KPIs (maximum seven KPIs with a total weight of up to 70% of total KPIs weight), and industry-specific KPIs that reflect the Company’s profile (maximum four KPIs with a total weight of up to 50% of total KPIs weight). Corporate KPIs in the Annual Bonus Scheme KPI Weight in reporting period’s bonus, % 2014 Starting from 2015 Financial and economic KPIs per unit costs in Production 20 15 per unit costs in Transportation 20 15 ROE x 20 reduction of procurement costs 20 5 total shareholder return, TSR x 10 labour efficiency* x 5 Industry-specific KPIs gas sales by volume 20 15 major production facilities commissioned 20 15 * Included in the Annual Bonus Scheme KPI list by resolution of the Board of Directors in 2015. OAO Gazprom Annual Report 2014
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OAO Gazprom Annual Report 2014 The
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Contents 4 Statement of OAO Gazprom
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4 Statement of OAO Gazprom’s Chai
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6 Major results Gazprom Group Resul
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8 Company Information OAO Gazprom
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10 Company Information OAO Gazprom
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12 Company Information Track Record
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14 Company Information Gazprom Grou
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16 Company Information Operations a
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18 Business Development Prospects S
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20 Business Development Prospects G
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26 Business Development Prospects E
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30 Business Development Prospects U
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32 Business Development Prospects S
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34 Board of Directors and Managemen
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42 Board of Directors’ Report on
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48 Trends and Developments on Oil a
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54 Performance Results Exploration
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56 Performance Results Distribution
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58 Performance Results Distribution
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60 Performance Results The company
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62 Performance Results Hydrocarbon
Page 65 and 66: 64 Performance Results Transportati
Page 67 and 68: 66 Performance Results Gas transpor
Page 69 and 70: 68 Performance Results Gas Infrastr
Page 71 and 72: 70 Performance Results Hydrocarbon
Page 73 and 74: 72 Performance Results Gazprom, on
Page 75 and 76: 74 Performance Results OAO Mezhregi
Page 77 and 78: 76 Performance Results Major invest
Page 79 and 80: 78 Performance Results European gas
Page 81 and 82: 80 Performance Results In accordanc
Page 83 and 84: 82 Performance Results Oil and gas
Page 85 and 86: 84 Performance Results Sales of ref
Page 87 and 88: 86 Innovations In 2014, the budget
Page 89 and 90: 88 Innovations — produced a techn
Page 91 and 92: 90 Innovations 14 meetings of coord
Page 93 and 94: 92 Environment and Social Responsib
Page 101 and 102: 100 Environment and Social Responsi
Page 111 and 112: 110 Corporate Governance OAO Gazpro
Page 113 and 114: 112 Corporate Governance Corporate
Page 115: 114 Corporate Governance Summary of
Page 119 and 120: 118 Corporate Governance In additio
Page 121 and 122: 120 Corporate Governance Liability
Page 123 and 124: 122 Corporate Governance Audit Comm
Page 125 and 126: 124 Corporate Governance The intern
Page 127 and 128: 126 Corporate Governance Efficient
Page 129 and 130: 128 Corporate Governance Stock Mark
Page 131 and 132: 130 Corporate Governance Dividend P
Page 133 and 134: 132 Risk Management Gazprom has con
Page 135 and 136: 134 Risk Management Customs, curren
Page 137 and 138: 136 Glossary ADR of OAO Gazprom APG
Page 139 and 140: 138 Corporate Governance Units of M
Page 141 and 142: 140 Additional information List of
Page 143 and 144: 142 Additional information 11. Adde
Page 145 and 146: 144 Additional information 27. Bank
Page 147 and 148: 146 Additional information 45. Adde
Page 149 and 150: 148 Additional information 59. Trad
Page 151 and 152: 150 Additional information 68. Trad
Page 153 and 154: 152 Additional information 84. Cont
Page 155 and 156: 154 Additional information 96. Volu
Page 157 and 158: 156 Additional information Inclusio
Page 159 and 160: 158 Additional information Improvem
Page 161 and 162: 160 Additional information These ef
Page 163 and 164: 162 Addresses and Contact Details F
Page 165: www.gazprom.com
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Gazprom-AR2014

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