Board of Directors
The members of the Board receive remuneration for performing their duties in accordance with the regulations on the Board of Directors approved by the AGM. On June 30, 2014, the AGM approved a number of amendments to these regulations, changing the amount and structure of remuneration for the members of the Board of Directors.
The summary of the remuneration structure valid before and after the AGM for 2013 is presented in the table below.
Board of Directors’ Remuneration Policy summary
|Before June 30, 2014||After June 30, 2014|
|Fixed compensation paid (per each member)|
|Director||RUB 1.5 million per quarter
(RUB 6.0 million per year)
|RUB 4 million per year|
|Audit Committee member||RUB 150,000 per quarter
(RUB 600,000 per year)
|RUB 400,000 per year|
|Member of any other Committee||RUB 126,000 per quarter
(RUB 504,000 per year)
|RUB 320,000 per year|
|Board of Directors Chairman coefficient||1.30||1.50|
|Committee Chairman coefficient (for each)||1.25||1.25|
|Deduction in case of non-participation in x% of meetings: (similar for the BoD and the Committees)|
|up to 25%||10%||10%|
|more than 25% but fewer than 50%||30%||30%|
|more than 50%||100%||100%|
|Annual (variable) compensation of all Directors in the Board||% of OIBDA for the next reporting
financial year not exceeding 0.13%
|Deduction in case the Director participated in less than 50% of meetings||50%||na|
Members of the Board of Directors who are government officials do not receive any remuneration. As of December 31, 2014, there were three government officials serving as Directors on the Board.
The Company did not provide the members of the Board of Directors with any loans. In 2014 Directors did not participate in the long-term incentive plan for the Company’s management. The wage and bonuses received by Mr. Sergey Kalugin, who was a member of the Board of Directors and the Management Board, are included in the total amount of compensation received by the Management Board.
Summary of the Board of Directors remuneration received in 2014 (RUB thousand)
|Member of the Board of Directors||Total Compensation||Annual (variable) compensation||Fixed compensation||Compensation for participation in the BoD Committees||Premium for the Chairman position in the BoD Committee's|
|Ruben A. Aganbegyan||17,973||13,032||4,500||378||63|
|Mikhail Y. Alekseev||13,045||9,964||2,866||214||0|
|Kirill A. Dmitriev||4,552||3,068||1,484||0||0|
|Mikhail M. Zadornov||12,980||9,964||3,016||0||0|
|Anton A. Zlatopolsky||0||0||0||0||0|
|Sergei B. Kalugin||17,784||13,032||4,500||252||0|
|Igor I. Kozlov||0||0||0||0||0|
|Yury A. Kudimov||13,607||9,964||3,016||552||75|
|Sergey A. Kulikov||13,106||9,964||3,016||126||0|
|Mikhail Y. Lesin||4,552||3,068||1,484||0||0|
|Anatoly A. Milyukov||18,147||13,032||4,500||552||63|
|Mikhail I. Poluboyarinov||4,552||3,068||1,484||0||0|
|Alexander A. Pchelintsev||13,358||9,964||3,016||378||0|
|Ivan I. Rodionov||13,532||9,964||3,016||552||0|
|Vadim V. Semenov||23,306||13,032||4,500||514||5,260|
|Vitaly Y. Sergeichuk||0||0||0||0||0|
Total remuneration of the Board of Directors in 2012-2014 (RUB thousand)
|Total remuneration paid||175,050||208,393||162,483|
|Total remuneration accrued||110,678||200,710||143,797|
The contract salaries of members of the Management Board include a fixed amount payable on a monthly basis, as well as quarterly and yearly performance bonuses. The Board of Directors approves the terms of the President’s contract and makes decisions regarding compensation for the Management Board.
The Company did not provide the members of the Management Board with any loans in 2014. The quarterly bonus may not exceed RUB 879,600 for the Chairman of the Management Board and RUB 733,000 for any other member of the Management Board.
Breakdown of the Management Board remuneration in 2012-2014 (RUB thousand)
|Compensation for the Management Board position||46,596||41,900||43,305|
|Compensation of the expenses||591||341||-|
|Total remuneration paid||443,803||601,761||366,648|
|Total remuneration accrued||470,161||544,315||428,821|
Employee Motivation Programmes
Long-term incentive plan
On March 31, 2014, the Board of Directors approved the Company’s Long-term incentive plan for its management. The program provides for the launch of a share option plan for ordinary shares, which can be purchased by the program’s participants through an annual bonus payments system. Annual bonuses are paid in accordance with performance and can be spent only on purchasing shares as part of the programme. The programme is due to last for three years and approximately 200 senior and mid-ranking managers will participate in the programme, including the heads of the regional branches. The long-term key performance indicators (KPIs) used to determine awards within this programme are as follows: Free Cash Flow (FCF), Net Profit and Return on Invested Capital (ROIC). The collective base package of all the participants of the programme will consist of ordinary shares amounting to 1.5% of the company’s share capital. The total size of the package depends on how well KPIs are met and is limited to 200% of the total block of shares in the event that KPIs are significantly over-fulfilled. In the event of significant non-compliance with the KPIs, programme participants lose the right to the option in part attributable to the reporting period.
Shares are granted to participants in stages: in 2014 – 30%, in 2015 – 30%, in 2016 – 40%. The target package, however, will be adjusted to reflect the achieved level of KPIs. Annual vesting also occurs in stages: 50% within a month of full year results being issued and 50% twelve months later.
Expenses related to the programme totalled RUB 1,850 million in 2014, and was recognised as an employee expense in the consolidated profit or loss statement for the full year of 2014.
In order to implement this stock option plan, the Company established RTK-Development, a close-ended mutual fund managed by VTB Capital Asset Management. At the beginning of 2015, LLC Mobitel transferred 3% of the Company’s quasi-treasury shares to the fund (or 3.27% of ordinary shares).
Short-term employee motivation programme
In 2012, Rostelecom implemented a new motivation system scheme which introduced a variable element to employees’ compensation based on the achievement of KPIs. Including fulfillment of KPIs as part of employees’ compensation connects compensation with the Company’s strategic goals. Some of the KPIs are also used in the Long-Term Development Programme.
The Company’s Main KPIs
Remuneration of the Audit Commission is determined by its regulations. Each member is entitled to receive compensation of RUB 350,000 per quarter, with the Chairman of the Commission receiving 1.3x this figure. In 2014, the Company paid a total of RUB 9.7 million to the members of the Audit Commission.
 Annual compensation of all Directors was approved by the General Shareholders Meeting, OIBDA was determined on the basis of IFRS accounts for the next reporting financial year.
 The data for accrued remuneration of the Board of Directors is based on the Company’s financial statements prepared in accordance with IFRS. The remuneration paid to the Board of Directors during the reporting year also includes the compensation accrued in previous years.
 The data for accrued remuneration of the Management Board is based on the Company’s financial statements prepared in accordance with IFRS. The wage and bonuses received by CEO, who was a member of the Board of Directors and the Management Board, are included in the total amount of compensation received by the Management Board. The remuneration paid to the Management Board during the reporting year also includes the compensation accrued in previous years. The remuneration for 2013 includes the severance payment to A. Provotorov.