CORPORATE GOVERNANCE SYSTEM
CORPORATE GOVERNANCE MODEL AND PRACTICE
Moscow Exchange is one of Russia’s largest public companies. The Bank of Russia, which acts as regulator of the financial market, is one of the Exchange’s shareholders. The Exchange is also a market infrastructure operator that establishes rules for other issuers. Because of all these factors, the Exchange must adhere to the highest corporate governance standards Continued development of the corporate governance system is aimed primarily at improving the Exchange’s effectiveness and competitiveness, and maintaining a positive perception of the Exchange’s corporate governance system among shareholders, investors and the broader business community.
The Exchange continuously evaluates and responds to developments in corporate legislation and corporate governance practices in Russia and internationally. It complies with the Federal Law on Organized Trading (No. 325-FZ dated 21 November 2011), which outlines the corporate governance requirements for the market operator; the principles and recommendations prescribed in the Corporate Governance Code of the Bank of Russia; the requirements of the Listing Rules; the G20/OECD corporate governance principles; international standards and principles relating to corporate social responsibility and sustainable development.
Shares of the Exchange are included in the first level quotation list. To ensure that the Exchange’s activities and documents fully comply with the corporate governance requirements set out in the Listing Rules and with the Bank of Russia’s Corporate Governance Code, the following measures were taken in 2023:
- seven independent directors were elected to the Supervisory Board, which consists of 12 members;
- all independent directors meet the independence criteria set by the Listing Rules;
- independent members of the Supervisory Board are included the Audit Committee and the Nomination and Remuneration Committee.
GENERAL MEETING OF SHAREHOLDERS
The General Meeting of Shareholders is the supreme governing body of the Exchange. General Meetings of Shareholders adopt resolutions on strategic issues. The scope of issues within the terms of reference of General Meetings of Shareholders is determined by Federal Law No. 208-FZ “On Joint-Stock Companies” dated 26 December 1995 and the Exchange Charter.
The Exchange’s Annual General Meeting of Shareholders, held in absentia, was scheduled for 27 April 2023, which would, alongside addressing mandatory and regular matters and electing the 9-member Supervisory Board, was to decide to increase the Supervisory Board’s size from 9 to 12 members. However, based on the results of counting the votes by the counting commission, the AGM was declared invalid as there was no quorum needed to adopt resolutions. Pursuant to Federal Law No. 208-FZ “On Joint-Stock Companies” dated 26 December 1995, in the absence of a quorum for holding an annual general meeting of shareholders, a repeated general meeting of shareholders must be held with the same agenda, which is legally competent (has a quorum) if shareholders holding an aggregate of at least 30 per cent of the voting shares in the company take part in it. The repeated annual general meeting of shareholders, at which favourable resolutions were passed on all the matters submitted for consideration, was held on 2 June 2022.
The Supervisory Board resolved to hold an Extraordinary Shareholders’ Meeting on 31 July 2023 to re-elect the Supervisory Board with the newly approved membership of 12 members. However, the EGM was also declared invalid because the required quorum was not reached. Consequently, a repeated EGM was held on 07 September 2023, which re-elected the 12-member Supervisory Board.
SUPERVISORY BOARD
Role of the Supervisory Board
The Supervisory Board is a key element of the corporate governance system, with overall responsibility for the activities of the Exchange. The Supervisory Board is accountable to the General Meeting of Shareholders: members of the Supervisory Board are elected by the General Meeting of Shareholders, and their powers may be terminated at any time by the General Meeting of Shareholders. The terms of reference of the Supervisory Board are established in the Charter and are clearly separated from those of the executive bodies that manage the day-to-day activities of the Exchange. In particular, the Supervisory Board:
- determines the vision, mission and strategy of the Exchange;
- is responsible for strategic oversight and long-term sustainable development of the Exchange;
- establishes strategic goals and key performance indicators of the Exchange’s activities.
When developing the Exchange’s strategy, the Supervisory Board takes into account shareholders’ vision for the development of the Exchange. The Supervisory Board considers queries and requests from shareholders and investors and, if necessary, gives appropriate instructions to the management The work schedule approved by the Supervisory Board for the calendar year includes the main activities of the Exchange, which are correlated with the strategic planning cycle and ongoing business cycles of the Exchange. When preparing the work schedule, proposals of members of the Supervisory Board and the management on priority issues are taken into account Information on the activities of the Supervisory Board, including meetings held and work of its committees, is disclosed in the Annual Report of the Exchange.
Structure of the Supervisory Board
The Supervisory Board is composed of directors who have the experience and professional skills required to implement the Exchange’s strategy. In accordance with the Exchange’s Charter, the number of members of the Supervisory Board is set by the resolution of the General Meeting of Shareholders. Currently, the Supervisory Board of the Exchange is comprised of 12 members. The Supervisory Board is managed and administered by the Chairman of the Supervisory Board. The Chairman is elected/re-elected by the members of the Supervisory Board from among the Board membership, by a majority vote. In 2023, the following committees were formed by the Supervisory Board for preliminary consideration of key issues and preparation of recommendations for the Supervisory Board:
- Audit Committee;
- Nomination and Remuneration Committee;
- Strategy Planning Committee;
- Risk Management Committee;
- Technical Policy Committee.
Members of the committees are selected annually from among the members of the Supervisory Board. Two of the five Supervisory Board committees (Audit Committee, Nomination and Remuneration Committee and Technical Policy Committee) are comprised of independent directors. Non-Board member IT experts are also invited to participate in the Technical Policy Committee.
Members of the Supervisory Board of the Exchange are experts in financial market infrastructure, international organized trading, IT in the financial sector, operational and financial risk management and financial reporting. They also have skills in personnel policy and modern approaches to incentivizing top managers.
Following the election at the repeated 2023 Annual General Meeting of Shareholders, the Supervisory Board included four independent directors who met all the independence criteria set forth in the Listing Rules (no relationship with the Exchange, its significant shareholders, significant competitors, or counterparties, as well as no relationship with the government), and five non-executive directors. At the first meeting, one more director was qualified as independent director, notwithstanding existing nominal relationship with the issuer and counterparty of the Exchange.
Following the election at the repeated Extraordinary General Meeting held on 7 September 2023, five of 12 members were independence directors, who met all the independence criteria set forth in the Listing Rules, and two more newly elected directors were recognised independent afterwards.
There are no conflicts of interests of Supervisory Board members and Executive Board members (including those relating to the participation of the said persons in the governing bodies of the Exchange’s competitors).
Activities of the Supervisory Board in 2023
From 1 January 2023 to 31 December 2023, the Supervisory Board held 27 meetings, including eight in-person. 10 meetings of the Supervisory Board were held prior to and 17 meetings after the Annual General Meeting of Shareholders on 2 June 2022. The cumulative attendance rate of the Supervisory Board members at the Supervisory Board meetings exceeded 91% In 2023, the cumulative length of service of all its members was 54 years.
In 2023, the Supervisory Board considered issues relating to the performance of its main functions, including:
- strategy issues:
- approval of the new Moscow Group Strategy 2028, recognition of the previous Strategy 2024 as implemented.
- personnel issues:
- update of the Remuneration and Compensation Policy for Members of the Executive Bodies;
- approval of the Employee Remuneration Policy and approaches to employees’ bonus scheme.
- business development issues:
- review of fees on the derivatives market; fees for FX and precious metals trades, and listing fees;
- approval of the new version of the Regulation on Fees on the Equity and Bond Market and Deposit and Credit Markets.
- update of key documents of the Exchange:
- Rules of Organised Trading of Moscow Exchange on Various Markets;
- Listing Rules;
- Rules of Admission to Organised Trading of Moscow Exchange on all markets
- risk management issues:
- approval of Rules for Managing Risks Associated with Market Operator and DFA Exchange Operator Activities as amended;
- approval of key approaches to compliance risk management;
- approval of risk management performance assessment results.
Appointment and induction of Supervisory Board members
In accordance with the Federal Law “On Joint-Stock Companies” and the Exchange’s Charter, shareholders holding in aggregate at least 2% of the voting shares in the Exchange may nominate candidates to the Supervisory Board of the Exchange, the number of which cannot exceed the number of members of the Supervisory Board of the Exchange, no later than 60 days after the end of each fiscal year.
As of 1 March 2023, the Exchange had received proposals for the nomination of three candidates to the Supervisory Board to be elected at the Annual General Meeting of Shareholders in 2023; all of them were included in the list for voting at the General Meeting of Shareholders.
In accordance with the Federal Law “On Joint-Stock Companies”, the Supervisory Board is entitled to nominate candidates for the Exchange’s Supervisory Board, apart from those nominated by the shareholders, at its own discretion Succession planning and provision for the required competencies on the Supervisory Board are considered to be best practice. The Nomination and Remuneration Committee, taking into account consultations with the members of the Supervisory Board and significant shareholders, recommended that the Supervisory Board include nine candidates most suitable for election to the Supervisory Board for the
As part of the induction of newly elected directors, an onboarding programme for new members of the Supervisory Board of the Exchange is being implemented, which provides for familiarisation with the main internal documents of the Exchange, resolutions of the meeting of shareholders and the Supervisory Board, as well as for holding individual meetings with the Chairman of the Supervisory Board, Chairman of the Executive Board, Corporate Secretary and key managers of the Group.
ACTIVITIES OF THE SUPERVISORY BOARD COMMITTEES IN 2023
Committee | Over the period 01/01/2023 - 02/06/2023 | Over the period 02/06/2023 - 31/12/2023 | Total | ||
---|---|---|---|---|---|
in-person | remote | in-person | remote | ||
Strategy Planning Committee | 4 | 1 | 6 | 1 | 12 |
Audit Committee | 5 | 0 | 5 | 1 | 11 |
Nomination and Remuneration Committee | 6 | 0 | 6 | 2 | 14 |
Risk Management Committee | 1 | 1 | 3 | 2 | 7 |
Technical Policy Committee | 3 | 0 | 5 | 0 | 8 |
Audit Committee
The primary purpose of the Audit Committee is to ensure the Supervisory Board is effective in addressing issues relating to the control of financial and economic activities.
In 2023, 57 issues were considered at meetings of the Audit Committee.
The main issues considered by the Committee in 2023, on which recommendations were given to the Supervisory Board, related to auditing firm selection procedures, internal audit policy, review of the consolidated financial statements and reports of the Internal Audit Service. The Audit Committee considered issues related to the risk management performance assessment, preliminary results of the audit of Group companies, implementation of the consolidated business plan, and changes in the procurement process.
The Committee considered and recommended to the Supervisory Board to adopt the Moscow Exchange Group Companies Group Audit Concept, Regulation on Identifying and Preventing Conflicts of Interest by Moscow Exchange while Acting as a Market Operator and Financial Platform Operator, and Information Policy as amended.
Nomination and Remuneration Committee
The primary purpose of the Nomination and Remuneration Committee is to support the effective work of the Supervisory Board in addressing issues relating to the activities of the Exchange as well as other companies directly or indirectly controlled by the Exchange, and the nomination and remuneration of members of supervisory boards, executive bodies and other key executives and members of revision commissions.
In 2023, 43 issues were considered by the Nomination and Remuneration Committee of the Supervisory Board.
The main issues considered by the Committee in 2023, on which relevant recommendations were given to the Supervisory Board, related to planning of compositions of supervisory boards of the Exchange, National Settlement Depository (NSD), and Central Counterparty National Clearing Centre (CPP NCC), the Exchange’s Supervisory Board self-assessment, development of recommendations on changes in the Group’s remuneration and bonus principles, assessment of achievement of corporate KPIs of the Group and individual KPIs of members of executive bodies and the Director of the Corporate Governance Department of the Exchange, the option program for management, Supervisory Board and management succession program.
Strategy Planning Committee
The primary purpose of the Strategy Planning Committee is to improve the performance of the Exchange and companies directly or indirectly controlled by the Exchange in the long and medium term.
In 2023, 27 issues were considered at the meetings of the Strategy Planning Committee of the Supervisory Board.
The main issues considered by the Committee in 2023, on which recommendations were given to the Supervisory Board, related to recommendations on approval of Group Strategy to 2028 and a new dividend policy, and feasibility of the Exchange’s participation in other companies.
Risk Management Committee
The main task of the Risk Management Committee is to foster the improvement of the risk management system of the Exchange and Group companies in order to enhance the reliability and efficiency of the activities of the Exchange.
In 2023, 22 issues were considered by the Risk Management Committee of the Supervisory Board.
The main issues considered by the Committee in 2023, on which relevant recommendations were given to the Supervisory Board, related to approval of ALM policies of the Group, the revision of the Rules and Policies for managing various types of risks at the Group, including business continuity, operational, legal risks. At the meetings of the Committee, special attention was paid to the follow-up of the Committee’s previous recommendations.
Technical Policy Committee
The primary purpose of the Technical Policy Committee is to develop and strengthen effectiveness of the Group’s activities through preparation of recommendations and expert opinions to the Supervisory Board, boards of directors (supervisory boards) of Group companies and their committees, executive bodies of the Exchange and the Group companies in respect of technical policy and development of IT and software of the Group.
In 2023, 37 issues were considered by the Technical Policy Committee of the Supervisory Board.
The issues considered by the Committee in 2023, on which recommendations were given to the Supervisory Board, related to the implementation of the IT strategy of the Group and its information security strategy, update of the Technical Policy, technology and infrastructure import substitution project.
ASSESSMENT OF SUPERVISORY BOARD AND COMMITTEE PERFORMANCE
Assumptions and Grounds for the Assessment
In accordance with the recommendations of the Corporate Governance Code and best international practices, Moscow Exchange assesses the performance of the Supervisory Board on an annual basis. Pursuant to internal regulations, the Nomination and Remuneration Committee of the Supervisory Board engages external consultants regularly (once every three years) to conduct an independent assessment. Other times, the Supervisory Board performs self-assessment. In 2023, the Supervisory Board performed self-assessment.
Assessment Goals and Objectives
The assessment goals include monitoring of the dynamics of changes in the work of the Supervisory Board and the committees and identification of areas for improvement of performance of the Supervisory Board and its individual members. In addition, a particular focus of the 2023 assessment was renewed practices of the Supervisory Board in the context of the evolving changes in the way business is run amidst geopolitical developments.
The self-assessment process involves the directors answering questions focusing on analysing the Supervisory Board’s effectiveness on the following key components:
- Formation and membership of the Supervisory Board;
- Organization of Supervisory Board meetings;
- Proper attention given by the Supervisory Board to relevant and essential matters;
- Level of directors’ involvement and preparation;
- Director development;
- Leadership and strategic goal setting;
- Succession planning, remuneration and working with management;
- Risk management;
- Role of the Chairman and independent directors;
- Directors’ understanding and adherence to compliance requirements.
In the interim between the self-assessment in spring 2023 and the analysis of self-assessment data in autumn 2023, strategic sessions were convened, working groups comprised of directors and management were established, and Supervisory Board training was scheduled, thus allowing a prompt response to individual comments made in the course of the self-assessment.
Assessment Methodology
The self-assessment process takes the form of an electronic questionnaire filled in anonymously by the members of the Supervisory Board. The questionnaire form has 100 questions, including some recurring questions worded differently so as to obtain maximum possible accuracy of the information from the assessment. Assessment was well representative, with 7 out of 12 directors participating, but was second to previous assessments, with 10 out of 12 directors participating. However, the overall average score remains at a high level (6.1 out of 7 points, the same as in 2022).
Assessment Results
According to the 2023 self-assessment, the Supervisory Board has demonstrated marked improvement in its effectiveness in some aspects that were highlighted for improvement during the previous external assessment in 2022. Namely, such aspects included Moscow Exchange Group corporate governance vision, priority of in-person meetings over on-line ones, better-quality strategic discussions at the meetings and better balance of the advisory and controlling functions of the Supervisory Board. A particularly positive outcome from the completed self-assessment is that no consolidation of the Supervisory Board members’ opinions was seen towards any critical area, which was characteristic of previous assessments and self-assessments.
The strengths of the Supervisory Board stay the following aspects.
- The effective dialogue between the Supervisory Board and the management: clear separation of powers, minimal interference by the Supervisory Board in operational management, increased trust, increased management autonomy, mutual support and high speed of interaction.
- Professional and diverse composition: The Supervisory Board brings together professionals with diverse profiles (entrepreneurial, functional) and competencies, which enables the Supervisory Board to address issues comprehensively and engage in meaningful discussions from different perspectives. The Supervisory Board continues to demonstrate gender and age diversity.
- The leadership style of the Chairman of the Supervisory Board: the Chairman is deeply involved in the work of the Supervisory Board, supports directors and management, effectively manages relations with key stakeholders, and represents the company externally;
- The Corporate Secretary and support for the Corporate Governance Department: the Corporate Secretary promptly implements best corporate governance practices and ensures the effective operation and support of the Supervisory Board.
CORPORATE SECRETARY
In accordance with a resolution of the Supervisory Board, the function of Corporate Secretary is performed by the Corporate Governance Department headed by its Director, administratively reporting to the Chairman of the Executive Board, and functionally reporting to the Chairman of the Supervisory Board. Resolutions on appointment, dismissal, and remuneration of the Director of the Corporate Governance Department are adopted by the Supervisory Board, which ensures the necessary degree of independence of the work of the governing bodies. Alexander Kamensky has been Director of the Corporate Governance Department of Moscow Exchange since 2013.
Alexander
Work experience:
- Since 2013: Director of the Corporate Governance Department and the Corporate Secretary of Moscow Exchange;
2012–2013 : Head of the Corporate Governance Centre and the Corporate Secretary of MDM Bank;2011–2012 : Manager for Corporate Governance and the Corporate Secretary of Enel Russia.
He does not own any shares in the Exchange’s subsidiaries or affiliates. He has no family relations with any members of the governing bodies and/or supervisory bodies controlling the financial and business activities of the Exchange. He has been a member of the Council of the National Union of Corporate Secretaries since 2016.
FURTHER DEVELOPMENT OF CORPORATE GOVERNANCE
In 2023, the Supervisory Board defined the following main priorities following results of self-assessment:
- setting criteria for monitoring the implementation of the Moscow Exchange Group’s new strategy;
- conforming compliance of the Group’s risk management policies and risk appetite with the new Moscow Exchange Group’s strategy;
- long-term succession planning for the executive bodies of the Moscow Exchange Group’s companies;
- adopting a new balanced long-term employee incentive model for employees;
- assessing the Finuslugi project over the long term;
- developing a vision of the company’s long-term target shareholding structure, based on geopolitical realities; introducing annual planning of in-person meetings of the committees and making these plans available to all Supervisory Board members;
- introducing the practice of regular briefings on global trends;
- holding regular meetings of Supervisory Board members with the external auditor; ensuring that an adequate risk management system, including provisioning, is in place.
Most of the planned tasks were implemented in 2023, with those left scheduled for 2024 and onwards.
MOSCOW EXCHANGE’S СORPORATE GOVERNANCE CODE
The Corporate Governance Code of the Exchange is approved by the Supervisory Board of the Exchange. The Code complies with Russian legislation and was developed taking into account principles and recommendations of the Bank of Russia’s Corporate Governance Code and the OECD’s Corporate Governance Principles, other principles of corporate governance, recommended by recognised international organisations; it complements the Exchange’s corporate governance system with procedures that comply with high standards of corporate governance.
The main purpose of the Code is to describe the corporate governance system currently applied on the Exchange to protect the rights and interests of its shareholders, enhance the business efficiency, as well as improve the transparency and attractiveness of the Exchange for shareholders and consumers.
The Exchange’s Code describes the system, principles and practices of corporate governance of the Company, risk management and internal control. It provides for principles designed to ensure the protection of legitimate rights and interests of shareholders and the equal treatment of all shareholders when they exercise their rights. Additionally, the Code contains the Exchange’s corporate social responsibility goals and principles, the principles of interaction with shareholders, service users and other stakeholders and the principles of corporate governance at Group companies.
A distinctive feature of the document is that it provides the background and mechanisms for the further improvement of the corporate governance system of the Exchange, as well as that it contains development plans for the implementation of corporate governance principles. This sets not a declarative but a practical tone for the Code and allows the Exchange to continue reforming and improving corporate governance.
METHODOLOGY FOR ASSESSING COMPLIANCE WITH THE PRINCIPLES OF THE BANK OF RUSSIA’S CORPORATE GOVERNANCE CODE
The recommendations of the Bank of Russia were applied as the methodology used by the Exchange to assess compliance with the corporate management principles set out in the Bank of Russia’s Corporate Governance Code.
The assessment looked at, among other things, compliance of the Exchange’s corporate governance practices and internal procedures with the principles and recommendations of the Bank of Russia’s Corporate Governance Code.
The results of the assessment are contained in the Report on compliance with the principles and recommendations of the Corporate Governance Code, which is a part of this Annual Report.
Over the latest years, the Exchange has been working to bring its corporate management practices in line with the Bank of Russia’s Corporate Governance Code. An annual analysis of the results of the corporate governance assessment shows an increasing trend in the number of principles and recommendations observed.
INFORMATION POLICY
The Exchange strives to ensure that its activities are as transparent as possible for shareholders, investors and other stakeholders. To achieve these goals, the Exchange has adopted and has been implementing the Information Policy. The Information Policy is a body of rules that the Exchange (including members of its management bodies, officials and employees) adheres to when disclosing information and/or providing information to shareholders and other stakeholders. The information policy provides additional opportunities for stakeholders to exercise their rights and interests and is also aimed at improving the Exchange’s information interaction with all stakeholders. In 2023, the Supervisory Board approves a new version of the Information Policy.
DIRECTORS’ LIABILITY INSURANCE
The liability of Moscow Exchange’s directors and officers (including independent directors), as members of the Company’s management bodies, is insured on annual basis. The purpose of this insurance is to provide compensation for potential damages caused by unintended negligent actions (or by their inaction) on the part of the insured individuals in the performance of their administrative activities.
Under the insurance contract concluded 2023, the insurance premium is USD370,000, and the insured amount is USD50 million (the total additional insured amount is USD2 million for independent directors). The insurer is Ingosstrakh.
The terms and conditions of the insurance contract, including the insurance coverage, are consistent with the best global insurance practices.
EXTERNAL AUDITOR
Full company name: TsATR (CENTRE FOR AUDIT TECHNOLOGIES AND
INN (TAXPAYER IDENTIFICATION NUMBER): 7709383532.
OGRN (PRIMARY STATE REGISTRATION NUMBER): 1027739707203.
ORNZ (PRINCIPAL NUMBER OF REGISTRATION ENTRY): 12006020327.
Location of the auditing organisation: 77 Sadovnicheskaya nab., bld 1, Moscow 115035, Russian Federation.
Full name of the self-regulatory organisation of auditors, of which the auditor is a member: Self-regulated organisation of auditors Association Sodruzhestvo.
Locations of the self-regulatory organisation of auditors, of which the auditor is a member: 21 Michurinsky Prospect, building 4, 119192 Moscow.
The auditor’s fee for auditing annual accounting (financial) statements and summary accounting (financial) statements of Moscow Exchange, consolidated financial statements and summary consolidated statements of the Group for 2023, and the review of the consolidated statements and consolidated for 6M 2023 was RUB 19,719 thousand, including VAT.
External Auditor Selection Procedure
Moscow Exchange selects its auditors every three years, as stipulated by the Regulations on the Auditor Selection Committee. The best candidate is chosen by the Auditor Selection Committee.
The auditor selection process is based on a review of technical and price characteristics of the bids and the selection of those providing the best terms for the audit of the financial (accounting) statements of Moscow Exchange and Group companies.
Based on its review of the bids, the Auditor Selection Commission determines the winning bid and recommends the candidate to the Supervisory Board’s Audit Committee. In turn, the committee recommends that the Supervisory Board should propose to the General Meeting of Shareholders of the Exchange to approve the candidate as the auditor. The final decision on auditor selection is made by the Annual General Meeting of Shareholders.
REMUNERATION FOR MEMBERS OF THE SUPERVISORY BOARD
The Exchange’s remuneration system for Supervisory Board members is set by the Remuneration and Compensation Policy (the “Policy”) and by the latest version of the Remuneration and Compensation Regulation (the “Regulation”) approved by the Annual General Meeting of Shareholders in 2023.
The Nomination and Remuneration Committee actively participates in improvement of the remuneration system for Supervisory Board members, taking into account corporate governance best practice and the experience of other public companies and international exchanges. The Policy and the Regulation apply only to members of Moscow Exchange Supervisory Board.
According to the Policy, remuneration paid to Supervisory Board members shall be sufficient to attract, retain and properly motivate individuals with the skills and qualifications necessary to work effectively on the Supervisory Board.
The Nomination and Remuneration Committee provides recommendations on remuneration of Supervisory Board members on the basis of an expert assessment of remuneration paid by Russian companies with similar capitalization and competitors of the Exchange.
The Policy and Regulation govern all types of payments, benefits, and privileges provided to Supervisory Board members and contain no other forms of short-term or long-term incentives of Supervisory Board members.
In order to implement the principle of independent decision-making, the remuneration of Supervisory Board members is not linked to the performance of the Exchange or the value of the Exchange shares and does not include stock option programs. Supervisory Board members enjoy no pension contributions, insurance programs (apart from the Supervisory Board member liability insurance and the conventional insurance associated with travelling to perform duties as a director or to participate in Supervisory Board activities), investment programs, or other benefits or privileges, unless specified in the Policy and Regulation. The Exchange does not provide loans to Supervisory Board members and does not enter into civil law contracts with them for the provision of services to the Exchange on non-market terms.
Remuneration for performing the duties of Supervisory Board member shall not be paid to state employees, employees of the Bank of Russia, employees and managers of the Exchange or its subsidiaries.
Remuneration of directors for performing their duties comprises basic and supplementary components.
The level of basic remuneration of a member of the Supervisory Board depends on whether such member is independent or not, and:
- for an independent member of the Supervisory Board, amounts to RUB 9 mln;
- for a non-independent member of the Supervisory Board, amounts to RUB 6.5 mln.
The following differentiated supplementary remuneration is paid to Supervisory Board members for performance of additional duties, requiring extra time and effort, of Chairman of the Supervisory Board, Deputy Chairman of the Supervisory Board, Chairman of a Supervisory Board Committee, or member of a Supervisory Board Committee, and:
- for the Chairman of the Supervisory Board, amounts to RUB 11 mln;
- for the Deputy Chairman of the Supervisory Board, amounts to RUB 4 mln;
- for the Chairman of a Supervisory Board Committee, amounts to RUB 3.75 mln;
- for a member of the Supervisory Board Committee, amounts to RUB 1.5 mln.
In order to ensure remuneration of Supervisory Board members corresponds to changing market demands until the next cycle of remuneration level review, the Regulation provides for adjustment of the level of remuneration of Supervisory Board members in line with the consumer price index at the end of the year in which the corresponding composition of the Supervisory Board was elected, and accrued starting from 1 January 2022.
The amount of the basic and supplementary remuneration of a Supervisory Board member may be reduced by 50% if the Supervisory Board member has attended less than 75% of the meetings of the Supervisory Board or committees in person, respectively If a member of the Supervisory Board took part in 1/3 or less of the total number of meetings of the Supervisory Board or its committees or in 1/4 or less of in-person meetings of the Supervisory Board or its committees, the respective part of remuneration is not paid.
Apart from the remuneration for work on the Supervisory Board and Supervisory Board Committees, members of the Supervisory Board are reimbursed for travel expenses relating to participation in in-person meetings of the Supervisory Board or its Committees, General Meetings of Shareholders, as well as events attended while performing duties of Supervisory Board members.
The total amount of remuneration paid to the members of the Supervisory Board in 2023 was RUB 143,336 thousand.
EXECUTIVE BOARD AND CHAIRMAN OF THE EXECUTIVE BOARD
The current activities of the Exchange are managed by the Chairman of the Executive Board who is the sole executive body and by the Executive Board, which is the collegial executive body of the Exchange. The Executive Board is headed by the Chairman who manages its activities.
REMUNERATION OF EXCHANGE BOARD MEMBERS
In 2023, the Supervisory Board approved the new Remuneration and Compensation Policy for Members of the Executive Bodies, regulating the remuneration of members of the Exchange’s executive bodies.
The Policy sets out principles and approaches for remuneration, and establishes procedures for determining remuneration levels and types of payments, incentives and privileges provided to members of the executive bodies.
The Policy is based on the following key principles:
- Involvement and retention of a professional and effective team consisting of Executive Board members able to implement the Exchange’s strategy and other priorities and increase shareholder value;
- Competitive remuneration at a level sufficient to engage, motivate and retain competent and qualified Executive Board members;
- Maintaining an optimal balance between the Exchange’s business performance and the personal contribution of an Executive Board member in determining remuneration levels.
Executive Board members’ remuneration consists of a fixed salary and a non-fixed (variable) component.
The variable component comprises a significant portion of annual remuneration, and includes short- and long-term components. Short-term variable remuneration takes the form of an annual bonus based on the Exchange’s results and the individual contribution of the Executive Board member to those results.
Long-term variable remuneration is shares-based and is established by the Long-Term Incentive Programme in effect.
To support the new Group Strategy 2028, the Supervisory Board has approved changes to the Group’s employee bonus scheme and a new stock-based Long-Term Incentive Programme.
The new bonus scheme links the size of an executive body member’s annual bonus directly to the Group’s financial performance. All Group companies have a common corporate target “Net profit of the Group”.
To promote personal responsibility, the Supervisory Board applies a delayed bonus plan taking into account the contribution of Executive Board members to financial performance and other results, including the possibility of reducing or cancelling part of the delayed bonus if no positive results are obtained in the relevant area. New unified approaches for the main companies of the Group were introduced in 2023. Payment of 60% of the approved bonus amount for 2023 will be made in 2024, and 40% will be paid with a delay in equal portions within one, two and three calendar years (24% within one calendar year, 12% within two and 4% within three calendar years) based on the relevant decisions of Supervisory Board. This procedure makes it possible to account for risks created by decisions made by Executive Board members.
The stock-based Long-Term Incentive Programme, as approved by the Supervisory Board, is designed to boost Executive Board members’ motivation and responsibility, align their interests with those of shareholders and connect remuneration with long-term performance results. Under the Programme launched on 2 July 2022, the right to obtain shares becomes effective in stages: over periods of three, four and five years after the Programme start (the first tranche was in 2023, the second and the third tranches are planned for 2024 and 2025 respectively), provided that the contracts of the members remain in force and the established key efficiency indicator under the Programme is met. Under the new Long-Term Incentive Programme approved on 27 September 2023, remuneration is paid in money terms and linked to the price of Exchange’s shares. The right to receive remuneration becomes effective in stages: over one, two, three, four and five years. The Participants are entitled to exercise their rights by 31 December 2028 at the latest.
Compensation paid in the event of early termination of the authority of a member of the Management Board (following a Supervisory Board decision on terminating a contract), and assuming no unethical practices on the part of the member, is capped at the amount of the fixed annual bonus component.
If a contract is terminated for other reasons, compensation is paid only in cases and amounts provided for by the Labour Code of the Russian Federation.
Specific remuneration due to executive body members, conditions and procedure for paying such remuneration, as well as conditions for early termination of agreements, including discharge allowances, compensations and other payments in any form exceeding those established by law, and conditions for their provision are considered and approved by the Supervisory Board based on recommendations made by the Assignment and Remuneration Committee, which reports to the Supervisory Board.
The Supervisory Board, supported by the Assignment and Remuneration Committee, ensures oversight of implementation of the Remuneration Policy, and can amend it as necessary.
Total remuneration due to a member of the Board, including the ratio of the remuneration components, is assessed by the Assignment and Remuneration Committee to ensure compliance with remuneration levels at comparable companies, based on a remuneration study from a leading consulting company.
Executive Board members are not paid for their work in management bodies of other Group companies.
The Exchange does not lend to members of management bodies and does not enter into civil law contracts with them for the provision of services to the Exchange, including any contracts on non-market terms.
The total amount of remuneration including salary and bonuses, paid to the members of the Executive Board in 2022 was RUB 533,649 thousand.
INTERNAL CONTROL SYSTEM
MOEX’s internal control system ensures that the Exchange’s licensed activities are conducted in accordance with Russian legislation and regulation, the rules of organised trading, and the Exchange’s own constituent and internal documents.
Internal control activities aim to identify, analyse, assess and monitor the risk of loss and/or other adverse consequences of both MOEX’s operational activities and measures taken by the Bank of Russian and other regulatory bodies (“compliance risk”), and to manage any such risks.
Within this framework, the Exchange’s internal control system is based on the COSO concept and utilizes a Three Lines of Defence model, which distributes risk management and internal control obligations among MOEX’s governing bodies, control and coordination units, and the internal audit unit.
The First Line of Defence is represented by employees of the Exchange’s business and operational units of the Exchange, whose key functions are to identify, assess and manage the risks inherent in MOEX’s daily activities, and to develop and implement policies and procedures governing existing business processes.
The Second Line of Defence is represented by the Operational Risk, Informational Security and Business Continuity Department, the Internal Control and Compliance Department, Internal Control Service, Security Department and Legal Department as well as certain employees and divisions of the Financial Division, which carry out continuous risk monitoring and management also of the following areas:
- ensuring information security, including protecting the Exchange’s interests in the information sphere;
- compliance with legislation, as well as the Exchange’s own constituent and internal documents;
- preventing the Exchange and its employees from being involved in unlawful and unethical activities, including money laundering, terrorism financing and corrupt practices;
- avoiding misuse of insider information and/or market manipulation;
- preventing conflicts of interests, including by identifying and monitoring conflicts of interests and preventing the consequences of conflicts of interests.
These units support the First Line of Defence in identifying compliance risks, developing and embedding control procedures, interpreting applicable legislation, and preparing reports for MOEX’s governing bodies based on the results of monitoring.
The Third Line of Defence is represented by the Internal Audit Service, which monitors the efficiency and productivity of the Exchange’s financial and economic activities, the efficiency of asset and liability management, including the safety of assets and the efficiency of the market operator’s risk management.
The Exchange’s governing bodies set the terms of reference for internal control systems related to risk management.