Remuneration of members of the Board of Directors & the Management Board
The contractual salaries of the members of the Management Board and Vice-presidents of the Company consist of a fixed amount payable on a monthly basis, as well as quarterly and yearly performance bonuses. For the years ended December 31, 2012 and 2013, members of the Management Board and Vice-presidents were entitled to remuneration and compensation in an aggregate amount of approximately RUB 361 million and approximately RUB 617 million, respectively.
The Directors receive compensation for service as directors in accordance with the Regulation on the Board of Directors approved by the general shareholders meeting on June 17, 2013. According to this regulation, the Directors receive quarterly and annual compensation. Quarterly compensation for each Director is equal to RUB 1.5 million and can be decreased by 10% (in case of non-participation in up to 25% of meetings), 30% (in case of non-participation in more than 25% but fewer than 50% of meetings) and 100% (in case of non-participation in more than 50% of meetings). Annual compensation of all Directors is approved by the general shareholders meeting as a percentage of the Company’s OIBDA determined on the basis of IFRS accounts for the next reporting financial year, and in any case shall not exceed 0.13%. Annual compensation can be decreased by 50% if the Director participated in less than 50% of meetings. Also according to the Regulation, the Company shall reimburse the Directors’ expenses incurred in connection with their functions as directors. For the years ended December 31, 2012 and 2013, the Directors were entitled to remuneration and compensation in an aggregate amount of approximately RUB 161 million and approximately RUB 133 million, respectively.
In addition to that, on March 31, 2014, the Board of Directors approved the Company’s long-term incentive plan for its management. The programme provides for the launch of a share option plan for ordinary shares, which can be purchased by the programme’s participants through an annual bonus payments system. Annual bonuses are paid in accordance with performance. The programme will last for three years and approximately 200 senior and mid-ranking managers will participate in the programme, including the heads of 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 income (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 key performance indicators (KPIs) are met and is limited to 200% of the total block of shares in the event that KPIs are significantly over-fulfilled. If there is a significant failure to meet specified KPIs, programme participants will lose the right to exercising the option in the reporting period in question.