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13.1 Setting up of specialized committees of the Board of Directors of the Company, approval of the KPI system, development and adoption of the regulation on compensation of the management (based on the KPI system) and members of the Board of Directors of the Company (order No. Z-P13-6294 issued by the Government of the Russian Federation on July 23, 2009, Letter of Rosimushchestvo No. GN-13/20732 of August 18, 2009 (Order No. 1)

Within the framework of development and application of the practice of activity of the institute of independent directors, implementation of the Corporate Code of Conduct (FFMS RF order No. 421/r of April 4, 2002), recommendations made at the conference (on the issue of development of the institute of independent directors) of July 11, 2008, recommendations of the Federal Agency for State Property Management (Letter No. YuM-13/17194 of August 7, 2008), resolution of the Board of Directors of JSC “Transneft” of September 29, 2008, three specialized committees of the Board of Directors were set up:

  • Strategic Planning Committee,
  • Audit Committee,
  • Personnel and Remuneration Committee.

According to the resolution adopted the Board of Directors of JSC “Transneft” on December 1, 2008 (Minutes No. 15) regulations on the committees were approved.

In pursuance of the orders issued by the President of the Russian Federation on innovations and the decision of the Governmental Commission for Advanced Technologies and Innovations of August 3, 2010 (Minutes No. 4), by resolution of the Board of Directors of the Company of May 3, 2011, the Strategic Planning Committee of the Board of Directors of JSC “Transneft” was renamed as the Strategy and Innovation Committee. The Committee develops recommendations and proposals for the Board of Directors that are designated to improve performance of the Company, its long-term strategy, as well as to identify priorities of the scientific and technical and innovation policy in the system of the oil and oil product pipeline transportation.

The Audit Committee was set up in line with the requirements made to the issuers whose shares are quoted in the securities market. The regulation on organization of trade in the securities market approved by Order No. 07-102/pz-n of the FSFM of Russia dated October 9, 2007, stipulates that the Audit Committee shall only consist of the members of the Board of Directors other than a sole executive body and (or) members of the collective executive body of the company.

The KPI system (KPI) of the Company was approved by resolutions of the Board of Directors of JSC “Transneft” of September 5, 2001 (Minutes No. 14) and of October 27, 2011 (Minutes No. 16), and for the subsidiaries — by orders of the Management Board of the Company of October 6, 2011 (Minutes No. 34), of December 12, 2011 (Minutes No. 42) and of December 29, 2011 (Minutes No. 45). The Management Board of the Company by its resolutions of October 2, 2012 (Minutes No. 33) and of December 24, 2012 (Minutes No. 40) approved changes aimed at improving the KPI system used by the subsidiaries.

On the basis of the KPI system the “System of the Annual Remuneration of Managers and Employees of JSC ‘Transneft’ and organizations of the Transneft system” was developed by the Company. The System was approved by the Personnel and Remuneration Committee on December 5, 2011 (Minutes No. 4) and approved by the Board of Directors of JSC “Transneft” on December 15, 2011 (Minutes No. 18). By resolution of the Board of Directors of JSC “Transneft” of November 22, 2012 (Minutes No. 16) the above System was subject to changes connected with improvement of the KPI system used by the subsidiaries.

The Regulation on the System of Annual Remuneration of Managers and Employees of JSC “Transneft” and organizations of the Transneft system was approved by the Management Board of JSC “Transneft” on December 29, 2011 (Minutes No. 45). By resolution of the Management Board of JSC “Transneft” of December 24, 2012, (Minutes No. 40) the abovementioned Regulation was subject to changes connected with improvement of the KPI system used by the subsidiaries.

The draft Regulation on compensation of the members of the Board of Directors of JSC “Transneft” was considered and approved by resolution of the Board of Directors of JSC “Transneft” on November 13, 2012 (Minutes No. 15) and was duly submitted for approval of the General Meeting of Shareholders of JSC “Transneft”.