Corporate Governance Code Compliance Report for 2020
Report on compliance / non-compliance with the principles and provisions of the Corporate Governance Code (the “Code”) of JSC NC “KazMunayGas” (“KMG”) approved by resolution of the Sole Shareholder of KMG on 27 May 2015 (Minutes No.
In general, at year-end 2020, KMG was in compliance of the provisions and principles of the Code, taking into account the following aspects:
In line with item 2 of Chapter 1 of Section 2 of the Code “It is recommended to provide the optimal asset structure for the Fund’s Organizations. The parent company can be established in the form of a joint stock company in the Holding company. Other organizations are recommended to be established in the form of limited liability partnerships. In the Organizations that have been already established in the form of a joint stock company, it is recommended to consider the possibility of reorganization in the form of a limited liability company with account of economic, legal and other aspects and interests of the Fund Group. When creating new Organizations, the preferred legal form is a limited liability partnership. Creation of new Organizations in the form of a joint stock company is allowed in exceptional cases, such as planned in the future transfer of the Organization’s shares to the Stock Exchange Market.”.
These requirements of the Code were generally complied with in KMG during the reporting period. On 30 December 2015, the Government of the Republic of Kazakhstan by its Decree No. 1141 approved a Comprehensive Privatisation Plan for
In line with item 14 of Chapter 1 of Section 2 of the Code “Boards of Directors of the Fund and Organizations ensure the implementation of these standards and their observation. All officials and employees of the Fund and the Organizations must sign a statement confirming their familiarization with the Code of Business Ethics and regularly reaffirm their knowledge of the Code.”.
These requirements of the Code were generally complied with at KMG as of 31 December 2020. As per recommendations made by the independent consultant PricewaterhouseCoopers LLP following the diagnostics of corporate governance of KMG, a revised Code of Business Ethics was developed and approved by the Board of Directors (Minutes No.
In line with item 3 of Chapter 2 of Section 2 of the Code “The Boards of Directors of the Companies have full autonomy in decision-making within their competence, established by the Charter of Companies.”.
These requirements of the Code were generally complied with in KMG during the reporting period. Pursuant to item 4 of the KMG Charter, KMG’s financial and production activities are carried out based on economic independence; pursuant to item 13 of the KMG Charter, KMG’s objective is to generate net income from independent economic activity; pursuant to item 24 of the KMG Charter, KMG resolves all issues related to the planning of production activities, salaries, materials and technical supply, social development, income distribution, recruitment, placement and staff retraining independently. At the same time, the Law of the Republic of Kazakhstan «On Sovereign Welfare Fund» and certain Samruk-Kazyna JSC documents (Corporate Standard on Investment activity of
In line with item 5 of Chapter 3 of Section 2 of the Code “Sustainable development should be integrated in:
- management system;
- development strategy;
- key processes, including risk management, planning (long-term (strategy), medium-term (5-year development plan) and short-term (annual budget) periods), accountability, risk management, HR management, investments, operational activities and other as well as in the decision-making process at all levels - from bodies (General Meeting of shareholders (the Sole Shareholder), Board of Directors, Executive Body), to ordinary employees.”.
This requirement of the Code was generally complied with in KMG during the reporting period. By the resolution of KMG’s Board of Directors the Sustainability Management System Guidelines were approved in 2020, which includes a description of the organization of the stakeholder engagement process, integration of sustainability principles into key processes and monitoring, annual reporting on sustainable development, implementation of priority areas (initiatives) in the field of sustainable development, development and maintenance of a culture of sustainable development, risk identification and assessment, documentation management, measuring performance in the area of sustainable development. At the same time, the work on the integration of sustainable development into key processes will continue.
In line with item 6 of Chapter 5 of Section 2 of the Code «The Fund and Organization must have succession plans of appointments to the Board of Directors in order to maintain business continuity and progressive renewal of the Board of Directors.».
This requirement of the Code was generally complied with in KMG during the reporting period. The issue on the Succession Policy for members of the Board of Directors of JSC NC «KazMunayGas» was brought to the meeting of the Nomination and Remuneration Committee of the Board of Directors of KMG in November 2019 (Minutes No. 6/2019 dated November
In line with item 12 of Chapter 5 of Section 2 of the Code «The recommended frequency of meetings of the Board of Directors is
This requirement of the Code was generally complied with in KMG during the reporting period. 16 meetings were held in 2020.
- regular face-to-face meetings with personal presence of the members of the Board of Directors – 1;
- information session on KMG’s development strategy via videoconferencing – 1;
- regular meetings held via videoconferencing – 11;
- extraordinary meetings held via videoconferencing – 3.
The reduction in the number of meetings of the Board of Directors with the personal presence of members of the Board of Directors in the reporting year is associated with the pandemic of coronavirus infection. Compared with 2019, the total number of meetings of the Board of Directors decreased from 18 to 16, compared with 2018 – from 20 to 16, which indicates a positive trend.
In line with item 15 of Chapter 5 of Section 2 of the Code «With respect to the Corporate Secretary, the Organization develops a program of induction and succession planning.».
This requirement of the Code was not complied with in KMG during the reporting period. In 2020 there was a significant reduction in the number of employees of KMG Corporate Secretary Service, which resulted in unscheduled outflow of employees, and in this regard, in the reporting period the Corporate Secretary Service was focused on the priority tasks of the Company within the framework of improvement of corporate governance, and some direct activities of the unit were postponed due to insufficient resources. Activities on development of an induction and succession planning programme in relation to the Corporate Secretary are included in the Corporate Secretary Service’s work plan for 2021.
In line with item 7 of Chapter 6 of Section 2 of the Code «The Board of Directors in cooperation with the Audit Committee are responsible for annual assessment of risk management and internal control system’s efficiency.».
This requirement of the Code was generally complied with in KMG during the reporting period. In accordance with Section 6.2.7 of the Policy on the Corporate Risk Management System of JSC NC «KazMunayGas» and its subsidiaries and affiliates approved by resolution of the Board of Directors of KMG dated 13 December 2016 (Minutes No. 17/2016), the Internal Audit Service of KMG assesses the effectiveness of the risk management process, notifies the Board of Directors of KMG of significant deficiencies in the corporate risk management system of KMG, and develops recommendations for improving the risk management process. As part of the ongoing monitoring of the implementation of KMG’s Internal Audit Service recommendations, from December 21, 2020 to January 22, 2021 a post-audit was carried out on the results of the audit of the risk management process of KMG and its subsidiaries and affiliates conducted in 2016.