Board of Directors

The Board acts pursuant to the laws of the Russian Federation, the Charter of Russian Railways Approved by Resolution No. 585 of the Russian Government dated 18 September 2003. and the Regulation on the Board of Directors of Russian Railways Approved by Order No. 265-r of the Russian Government dated 25 February 2004. .

The key objective of the Board of Directors is to pursue a policy that supports the Company’s robust growth, improves the sustainability of its operations, and increases profitability. The Board also determines the Company’s business priorities, approves its long-term plans and core programmes, including the budget and the investment programme, and defines general principles of and approaches to risk management in the Company.

In line with international corporate governance practices, independent directors have been elected to the Board of Directors of Russian Railways since 2008.

The Board of Directors supervises the Company’s corporate governance practices. Pursuant to the Company’s Charter and the recommendations of the Corporate Governance Code, the Board of Directors plays a key role in decision-making with respect to the Company’s controlled entities.

In 2020, the Board determined the voting position of the Company (its representatives) at meetings of the governance bodies of its controlled entities on the following matters:

• approval of the agenda for general meetings of shareholders;
• election of members of the boards of directors and chairmen of the boards of directors;
• election of audit commissions;
• approval of budget implementation reports for 2019, approval and adjustment of budgets for 2020, 2021–2022;
• approval of material transactions;
• dividend payouts;
• participation in and withdrawal from other legal entities.

Furthermore, the Board of Directors regularly reviewed procurement reports for 2019 and 2020, reports on the disposal of non-core assets, as well as reports on the allocation of funds for charity and sponsorship activities.

In 2020, Russian Railways implemented an action plan to improve the efficiency of the Board of Directors Approved by the Company’s Board of Directors, Minutes No. 1 dated 24 July 2019. . In particular, the following documents were developed and approved by the Board:

• Onboarding Procedure for Newly Elected Members of the Board of Directors Minutes No. 19 dated 24 July 2020. ;
• Procedure for the Preparation and Submission of Materials and Information to Russian Railways’ Board of Directors and the Committees of the Board of Directors Minutes No. 4 dated 21 December 2020. .

The Board of Directors also approved the Regulation on Internal Audit, which provides for the functional subordination of the Head of Internal Audit to the Board of Directors. The Board approved the candidate for the Head of Internal Audit and the terms of their remuneration.

In 2020, the composition of the Board of Directors underwent a number of changes. In March 2020, Russian Railways’ sole shareholder decided to terminate the powers of the Board of Directors before expiry Order No. 552-r of the Russian Government dated 6 March 2020. . It was resolved that the new Board would comprise 14 directors, and new Board members were elected.

Andrey Belousov was elected Chairman of Russian Railways’ Board of Directors Resolution of the Board of Directors dated 25 March 2020, Minutes No. 14. .

In September 2020, when the sole shareholder was making the decisions that fall within the competence of the Annual General Meeting of Shareholders, the number and composition of the Board of Directors did not change. As at 31 December 2020, Russian Railways’ Board of Directors comprised 14 members.

Participation of the Board of Directors in sustainable development management

Sustainable development management is an essential part of the Board’s activities. Within its scope of authority, the Board of Directors reviews and approves the basic internal documents and monitors their implementation.

In 2020, the Board adopted the following resolutions on social and environmental matters:

• approved the Group’s Comprehensive Innovative Development Programme until 2025, which includes, among other things, the achievement of 2025 KPIs for energy efficiency, safety and reduction of greenhouse gas emissions;
• approved a RUB 370 bn perpetual bond programme, with the first in Russia issue of green bonds placed in September 2020;
• approved Russian Railways’ investment programme for 2021–2023, which provides for a number of investment projects to improve the lives of Russian residents, create a comfortable and safe environment for life and development of tourism (the Ultra High-Speed Railway Lines project, infrastructure development projects at Central and St Petersburg transport hubs);
• resolved to donate social, educational, sports and cultural facilities to municipal and regional public law entities.

Amid the COVID-19 pandemic, Russian Railways’ Board of Directors supported the executive bodies’ proposals aimed at mitigating the damage from the restrictions introduced in the spring and summer of 2020. Russian Railways refused to limit working hours for its staff, safeguarding a stable working environment and decent working conditions.

The Board of Directors regularly reviews reports on the implementation of the Charity and Sponsorship Policy, the Group’s Comprehensive Innovative Development Programme, and the Consolidated Programme to Improve Operational Efficiency. In 2020, the Board also reviewed a report on the progress against the Conceptual Framework for the Reform of the Russian Railways Preschool and School Education for 2017–2020.

Composition of the Board of Directors as at 31 December 2020

Members of the Board of Directors hold no stakes in the charter capital of Russian Railways.

Meetings of the Board of Directors in 2020

In 2020, the Board of Directors of Russian Railways held 17 meetings, including 2 meetings held in person and 15 conducted in the form of absentee voting. The Board of Directors considered 132 matters focusing on a variety of the Company’s business areas.

Report on the performance of the Board of Directors and material resolutions adopted in 2020

In 2020, as part of its key tasks and responsibilities, Russian Railways’ Board of Directors:

• approved the Non-Core Assets Disposal Plan for 2020;
• approved the Standard for Assessing the Implementation of the Long-Term Development Programme and KPI Achievement;
• approved the Regulation on Internal Audit;
• approved the Onboarding Procedure for Newly Elected Members of the Board of Directors;
• approved the Procedure for the Preparation and Submission of Materials and Information to the Board of Directors and the Committees of the Board of Directors;
• approved the Regulation on the Quality Management System at Russian Railways;
• approved Russian Railways’ financial plan and investment programme for 2021 and the planning horizon extending to 2022 and 2023;
• approved the report on the implementation of Comprehensive Innovative Development Programme of the Russian Railways Group until 2020 in 2019;
• resolved to terminate and appoint members of Russian Railways’ Management Board;
• authorised members of Russian Railways’ Management Board to hold positions in the governance bodies of other entities;
• decided on the price and terms for the placement of additional Russian Railways shares, and approved the prospectus of perpetual bonds;
• resolved to withdraw from RRC-2, RZD-ZDOROVIE, Vologda RRS, BET, TransWoodService, and EKZA;
• resolved to participate in Federal Passenger Company and Innovative Engineering Centre as a founder, as well as in RRC-1 and Yakutia Railways;
• pre-approved Russian Railways’ Annual Report for 2019 and prepared recommendations for the Company’s Annual General Meeting of Shareholders on the approval of the report;
• pre-approved and prepared recommendations for the Company’s Annual General Meeting of Shareholders on the approval of the Russian Railways’ annual RAS financial (accounting) statements for 2019 (including the income statement);
• prepared recommendations for the Company’s Annual General Meeting of Shareholders on the approval of an auditor for Russian Railways for 2020 and approved the auditor fees;
• prepared recommendations for the Company’s Annual General Meeting of Shareholders on the maximum dividend amount, payment procedure for the 2019 dividends, and distribution of net profit for 2019;
• prepared recommendations for the Company’s Annual General Meeting of Shareholders on the remuneration payable to members of the Board of Directors and the Audit Commission based on their performance in the 2019–2020 corporate year.

Remuneration of the Board of Directors

In 2020, the Annual General Meeting of Shareholders of Russian Railways adopted a resolution to pay remuneration to the Company’s directors for the 2019–2020 corporate year in the amount recommended by the Board of Directors Resolution of Russian Railways’ Board of Directors dated 29 September 2020, Minutes No. 23. and in the manner prescribed by the Regulation on Remuneration and Compensation Paid to Members of Russian Railways’ Board of Directors.

According to the Regulation on Remuneration and Compensation Paid to Members of Russian Railways’ Board of Directors Approved by resolution of Russian Railways’ Board of Directors dated 26 June 2018, Minutes No. 25. Developed in accordance with the Federal Law on Joint Stock Companies, other laws and regulations of the Russian Federation, recommendations of the Federal Agency for State Property Management and the Corporate Governance Code, as well as the Regulation on the Board of Directors of Russian Railways. , remuneration and compensation are calculated and paid to members of the Board of Directors for the corporate year and proportionally to the time during which they were performing their functions for a fee.

Remuneration of a member of the Company’s Board of Directors consists of the basic and additional components. The basic component is calculated depending on the participation of directors in Board meetings. The maximum basic remuneration for a member of the Board is RUB 4,000,000.

For taking on additional responsibilities, Board members are paid additional remuneration calculated as the basic portion of remuneration multiplied by the following ratios:

• 3.5 – for the functions performed by the Chairman of the Board (excluding individuals who perform the functions of the Chairman of the Board of Directors in their absence);
• 1.5 – for the functions performed by the chairman of a Board committee;
• 0.5 – for the functions of a member of a Board committee.

Additional remuneration for participation in the work of the Board committees is paid subject to the director personally attending (producing a written opinion for) at least 75% of the in-person committee meetings held over the course of the corporate year.

If a member of the Board of Directors performs the functions of a member and/or the chairman of a Board committee on several committees, additional remuneration is paid for the functions performed on each committee. Additional remuneration is calculated and paid for the period of actual performance of additional functions.

A Board member may waive their remuneration in full or in part. The Regulation on Remuneration and Compensation Paid to Members of Russian Railways’ Board of Directors does not apply to directors who are members of the executive bodies of Russian Railways or who are restricted or prohibited by Russian laws from receiving any payments from commercial organisations.

In the reporting year, the Annual General Meeting of Shareholders of Russian Railways resolved to allocate a total of RUB 45.37 m in remuneration to members of the Russian Railways Board of Directors.

Committees of the Board of Directors

For the purposes of preliminary consideration of the most important matters and preparation of relevant recommendations, Russian Railways’ Board of Directors has the following committees in place:

• Strategic Planning Committee;
• Audit and Risk Committee;
• Personnel and Remuneration Committee;
• Digital Transformation and Innovation Committee.

The committees are elected by Russian Railways’ Board of Directors and act in accordance with the regulations on the committees approved by the Company’s Board of Directors The Regulation on the Strategic Planning Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 25 April 2014 (Minutes No. 8) and amended by resolution of the Board of Directors of 19 November 2020 (Minutes No. 1). The Regulation on the Audit and Risk Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 25 April 2014 (Minutes No. 8). The Regulation on the Personnel and Remuneration Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 25 April 2014 (Minutes No. 8). The Regulation on the Digital Transformation and Innovation Committee of Russian Railways’ Board of Directors was approved by resolution of the Board of Directors of 30 May 2019 (Minutes No. 17) and amended by resolution of the Board of Directors of 19 November 2020 (Minutes No. 1) .