The entities from the Group are subordinated to standard audit procedures. In addition, similar to the Bank, they accepted other, higher standards of corporate governance.
The Bank builds relationships with the market on the basis of mutual trust, transparency and equal treatment of shareholders. Therefore, the Bank accepted Good Practices of WSE Listed Companies 2016 (apart from the principle of holding electronic general meetings because of the technical and legal risk). In implementing the principles, it aimed to satisfy the recommendations and principles set out in the table of good practices as far as possible with regard to relationships and communication with shareholders and investors, general meetings, Management Board and Supervisory Board, as well as conflicts of interest and salaries. The Bank monitors the scope of observance of the principles and reports on (incidental) breaches. In accordance with the internal regulation, the Bank’s units are required to monitor and inform the designated organizational section of a threat of non-compliance with or a breach of a principle at a time that enables the publication of a possible report on this matter. Under the internal regulations, the Bank has a system of regular monitoring and annual reviews of the application of the recommendations and principles of Good Practices.
In the last three years, the Bank only once breached one of these principles. This applied to a case of specifying a conditional dividend payment date, about which it immediately informed the market participants.
In addition, both the Bank and the Group’s companies which are subject to the supervision of the Polish Financial Supervision Authority (PFSA) adopted the “Principles of corporate governance for supervised institutions” issued by this supervisory authority, with a few exceptions.
The Bank presents the results of the assessment of the application of the principles at the Bank’s Annual General Meetings.
Corporate governance principles included in the document titled “Best Practice for GPW Listed Companies 2016”
In relation to the Best Practice for GPW Listed Companies 2016 coming into force as of 1 January 2016, the Bank adopted the principles and recommendations contained in this document, with the reservation that recommendation IV.R.2., which concerns enabling the shareholders to participate in the General Meeting of Shareholders using electronic communication means would not be applied, unless the General Meeting of Shareholders makes appropriate amendments to the Bank’s Articles of Association authorizing the Management Board to organize a General Meeting of Shareholders using electronic communication means. The Bank applies recommendation IV.R.2 in part concerning the real-time broadcast of General Meetings of Shareholders. According to the Bank’s experience, its shareholders do not expect more extensive use of means of electronic communication during General Meetings of Shareholders. PKO Bank Polski SA enables participation by shareholders, who are interested in taking part in General Meetings of Shareholders, by setting convenient dates and times for such meetings. In 2017, no incidental breaches of the Principles occurred in the Bank.
The text of the Best Practice for GPW Listed Companies 2016 is publicly available on the official website of the Warsaw Stock Exchange, at https://www.gpw.pl/dobre-praktyki.
Since 1 January 2016, information on the status of the Bank’s application of recommendations and principles included in the Best Practice for GPW Listed Companies 2016 is available on the Bank’s website, at (https://www.pkobp.pl/grupa-pko-banku-polskiego/relacje-inwestorskie/lad-korporacyjny/dobre-praktyki-spolek-notowanych-na-gpw-2016). This information is prepared on the form prepared by the Warsaw Stock Exchange and shows the detailed status of compliance or non-compliance with each of the recommendations and principles, and results directly from the application of principle I.Z.1.13.
Key activities undertaken by PKO Bank Polski SA in order to ensure compliance with the principles and recommendations included in the Best Practice for GPW Listed Companies 2016
Information policy and communication with investors
The Bank continued activities aimed at ensuring that the recommendations and principles contained in this section of the Best Practice are applied as broadly as possible, both in the area of communication with investors and enabling them to use modern communication channels, and in the area of information policy and providing the required information by its publication on the website.
PKO Bank Polski SA maintains regular contact with investors, using various communication means preferred by investors. Questions can be asked by e-mail, by telephone or during face-to-face meetings with the Bank’s representatives. Additionally, in accordance with the Best Practice for GPW Listed Companies 2016, the Bank publishes the information on its sponsorship and charity activities.
The Bank also has the recommended internal regulations pertaining to explanations and clarification in relation to untrue, inaccurate or detrimental information disseminated in the media.
In accordance with the principles specified by the Best Practice for GPW Listed Companies 2016, the Bank maintains its corporate website in two language versions: Polish and English. All information and corporate documents required by the Best Practice for GPW Listed Companies 2016 are published on the website, including, among other things, information on the status of the application of the recommendations and principles included in the Best Practice for GPW Listed Companies 2016.
In 2017, as part of the organisation of the Bank’s General Meetings of Shareholders, materials to be submitted to the General Meeting of Shareholders were published on the Bank’s website, including, among other things, assessments, reports and positions submitted by the Supervisory Board of the Bank, justifications for all draft resolutions, in particular resolutions pertaining to matters and decisions of significant importance or potentially giving rise to any doubt of shareholders. Information about the planned transmission of a general meeting of shareholders was published no later than 7 days before the date of the General Meeting of Shareholders. Audio or video recordings of General Meetings of Shareholders of the Bank are also available on the Bank’s website.
Management Board and Supervisory Board
Principles and recommendations contained in this section were complied with. Both the Management Board and the Supervisory Board adopted the Best Practice for GPW Listed Companies 2016.
In particular, persons, who have high qualifications and experience are appointed to the Bank’s Management Board and Supervisory Board. The internal allocation of responsibilities for individual areas of activities to Members of the Management Board is published on the Bank’s website. In 2017, the functions on the Bank’s Management Board were the main area of professional activity of Members of the Bank’s Management Board.
In 2017, Members of the Supervisory Board devoted the time necessary to perform their duties. Nine meetings of the Supervisory Board of the Bank were held in 2017.
In accordance with the Best Practice for GPW Listed Companies 2016, the required number of members of the Board met the independence criteria. In accordance with their declarations, 8 out of 11 Members of the Supervisory Board are independent.
In 2017, the Supervisory Board took steps duly in advance of the expiration of the term of office of the Management Board in order to ensure the efficient operation of the Bank’s Management Board, by selecting Members of the Management Board for the next term of office.
Additionally, the Supervisory Board prepared and presented to the General Meeting of Shareholders the required assessment of the Bank’s standing, report on activities of the Supervisory Board, assessment of the manner of fulfilment of information duties by the Bank with respect to the application of corporate governance principles, and an assessment of the rationality of the policy pursued by the Bank with respect to sponsorship and charity activities.
Internal systems and functions
The regulations and practices binding in PKO Bank Polski SA fully satisfied the requirements specified in the section of Best Practice for GPW Listed Companies 2016.
In particular, the Bank’s organisational structure is adequate to the size and nature of activities, as well as risk incurred. Independent units responsible for the performance of tasks in individual systems or functions, or parts thereof, were separated. Relevant internal regulations of the Bank describe the Management Board’s responsibility for the internal control system and risk management system, direct subordination of persons responsible for risk management, internal audit and compliance, the possibility of reporting directly to the Supervisory Board or the audit committee, the application of independence principles with regard to the manager of the internal audit function and other persons responsible for that function. In accordance with the requirement of the Best Practice for GPW Listed Companies 2016, the effectiveness of systems and functions is verified and monitored.
General Meeting of Shareholders and shareholder relations
Taking into account the organisation of the General Meeting of Shareholders, the Bank decided not to apply the recommendation which concern enabling the shareholders to participate in the General Meeting of Shareholders using electronic communication, unless the General Meeting of Shareholders makes appropriate amendments to the Bank’s Articles of Association authorizing the Management Board to organize the General Meeting of Shareholders using electronic communication means. This decision was due to the organizational and legal risk related to this method of communication.
Within the remaining scope, in the opinion of the Bank, General Meetings of Shareholders were arranged in compliance with the requirements of the Best Practice for GPW Listed Companies 2016.
In particular, the Bank endeavoured to ensure that, as far as possible, Annual General Meetings of Shareholders are held within a reasonably short period from the publication of the annual report.
The places and dates of the Annual General Meeting of Shareholders (22 June 2017) and the Extraordinary General Meeting of Shareholders (13 March 2017) were set to allow the greatest possible number of shareholders to participate. Draft resolutions of the Annual General Meeting of Shareholders convened for 22 June 2017 were prepared and published together with the justification thereof. The Extraordinary General Meeting of Shareholders was convened for 13 March 2017 at the request of the eligible shareholder – the State Treasury. The said shareholder presented draft resolutions with statements of grounds together with the request for convening the Extraordinary General Meeting of Shareholders.
The Bank also ensured a real-time broadcast of both the Annual General Meeting of Shareholders on 22 June 2017 (also, after the break, on 20 July) and the Extraordinary General Meeting of Shareholders on 13 March 2017, and allowed the media to be present.
Conflict of interests and related party transactions
The internal regulations of PKO Bank Polski SA guarantee compliance with the recommendations and principles included in the Best Practice for GPW Listed Companies 2016. The Bank has regulations on conflict of interest management, including carrying out professional or other activities which might cause a conflict of interest. The rules of the Management Board and Supervisory Board define the principles for excluding members of these authorities from participation in the examination of matters involving conflicts of interest. If a situation that could lead to a potential conflict of interest has occurred, the persons concerned are obliged to disclose the situation.
Moreover, the Bank has internal regulations in place for monitoring and restricting the possibilities of receiving benefits or gifts which could affect the independence and objectivity of decision makers or have an adverse effect on the independence of opinions and judgements.
Transactions with related parties and significant shareholders are concluded on an arm’s length basis, in accordance with consistent and uniform policies, based on the Bank’s internal regulations. Furthermore, the Bank’s Articles of Association stipulate that the Bank cannot conclude a significant agreement with a shareholder holding at least 5% of the total number of votes at the Bank without the prior approval of the Supervisory Board. This requirement shall not apply to standard transactions or transactions concluded on an arm’s length basis in the course of the Bank normal operating activities, if they are concluded with members of the Bank’s Group.
Renumerations
The Bank follows the principles of the Best Practice for GPW Listed Companies 2016 with respect to remuneration. In accordance with the requirements thereof, the Bank’s Directors’ Report includes a report on the remuneration policy comprising elements specified in the Best Practice for GPW Listed Companies 2016 and the regulation on current and periodical information.
In the Bank’s opinion, the remuneration policy is connected with the strategy as well as short- and long-term goals, long-term interests and financial results, and takes into account the solutions necessary to avoid discrimination on whatever grounds. The Bank also assesses the policy in this respect.
The remuneration of Members of the Bank’s Management Board and its key managers is directly linked to the Bank’s financial situation and the growth of its value through appropriate bonus targets and payment deferral and suspension mechanisms, as well as the relevant financial instrument used to settle part of the remuneration.
In accordance with the Best Practice for GPW Listed Companies 2016, the remuneration of Members of the Supervisory Board is not linked to any options, other derivatives or any other variable factors, nor is it dependent on the Bank’s results.
Additionally, the Remuneration Committee functions within the Supervisory Board of the Bank, within the scope governed by the principles specified in the Best Practice for GPW Listed Companies 2016.
Corporate governance principles for supervised Institutions issued by the Polish Financial Supervision authority
The Bank accepted for use the “Principles of Corporate Governance for Supervised Institutions” (adopted by the Polish Financial Supervision Authority on 22 July 2014) with respect to the competencies and obligations of the Management Board, i.e. managing the Bank’s affairs and its representation, in compliance with the generally binding laws and the Bank’s Articles of Association, with the provision that paragraph 8, section 4 of the Principles, insofar as it relates to allowing the shareholders the possibility of participating in the meetings of the decision-making authority electronically, will not be applied unless the General Meeting of Shareholders makes appropriate amendments to the Bank’s Articles of Association authorizing the Management Board to organize the General Meetings of Shareholders using electronic means of communication. Chapter 9 of the Principles, concerning the managing of assets at the customer’s risk, will not be applied due to the fact that the Bank does not conduct such activities.
The Bank’s Supervisory Board adopted for use the “Corporate Governance Principles for supervised institutions” concerning the responsibilities and obligations of the Supervisory Board, i.e. supervising the conducting of the Bank’s affairs in compliance with the generally binding laws and the Bank’s Articles of Association.
In resolution no. 50/2015, the General Meeting of Shareholders declared that, acting in line with its competencies, it will follow the “Principles of corporate governance for supervised institutions” issued by the Polish Financial Supervision Authority,” although it ruled out the application of the principles set out in:
- § 8 section 4 of the Principles, within the scope pertaining to ensuring the possibility of the electronic participation of shareholders in meetings of the decision-making body;
- § 10 section 2 of the Principles, with respect to the introduction of personal rights or other special rights for shareholders;
- § 12 section 1 of the Principles pertaining to the responsibility of shareholders for immediate recapitalization of the supervised institution;
- § 28 section 4 of the Principles with respect to assessing by the decision-making body whether the determined remuneration policy promotes the development and security of the institution supervised.
Waiving the application of the principle set out in § 8 section 4 was in line with the prior decision of the Annual General Meeting of Shareholders of PKO Bank Polski SA of 30 June 2011, reflected in not adopting the resolution on amendments to the Articles of Association of the Bank, the aim of which was to enable participation in the General Meeting through electronic means of communication. The decision not to apply this principle was taken because of the legal and organizational-technical risks, which could jeopardize the proper conduct of the General Meeting. Exclusion of the application of this principle by the AGM was consistent with the opinion of the Bank’s Management Board not to apply it, adopted due to the fact that the current rules of the Bank about participation in General Meetings allow shareholders the effective enforcement of all rights from shares, and protect the interests of all shareholders.
The application of other “Principles of Corporate Governance for supervised institutions” was waived based on the presentation of these proposals by an eligible shareholder of the Bank – State Treasury , and then their acceptance by the General Meeting of Shareholders by passing resolution no. 50/2015. In accordance with the justification presented by the State Treasury together with the proposed draft resolution of the Annual General Meeting of Shareholders, waiving the application of the principle specified in § 10 section 2 and § 12 section 1 was justified by the uncompleted process of the Bank’s privatisation by the State Treasury.
Waiving the application of the principle specified in § 28 section 4 was justified, in accordance with the motion of the State Treasury, by the excessive scope of the remuneration policy in question, subject to the assessment of the decision-making authority. In the opinion of the above mentioned shareholder, the policy for remunerating employees performing key functions but not being members of the supervisory and management authorities, should be assessed by the employer or the principal, i.e. the bank represented by the Management Board, the activities of which are supervised by the Supervisory Board.
The text of the Principles is available on the website of the Polish Financial Supervision Authority.