The Supervisory Board determines the remuneration of the Management Board members, taking into consideration recommendations of the Supervisory Board’s Nomination and Remuneration Committee. The key components of the Management Board member remuneration system are:
All components of the compensation and any perquisites are provided for in relevant contracts between Management Board members and the Company.
The perquisites may include a company car, a life insurance policy, private medical insurance for the Management Board member and their closest family, and the possibility of having reasonable costs of personal and property security services covered by the Company.
The perquisites for directors reporting directly to the PKN ORLEN Management Board may include a company car, variable universal life insurance, additional medical cover for the director and their closest family, including the right to preventive healthcare, sports programmes and rehabilitation, partial coverage of rented accommodation costs, coverage of relocation costs if the relocation takes place during the director’s employment with the Company, benefits defined in the Rules of Participation in the Company Social Benefits Fund, and the right to participate in the Employee Pension Scheme on the terms applicable at the Company.
The remuneration policy in place at PKN ORLEN is designed to support the implementation of the Company’s objectives, including in particular the long-term shareholder value growth and stability of the Company’s operations.
General terms and conditions for award of annual bonuses
A Management Board member is entitled to an annual bonus on the terms stipulated in their employment contract, which includes the Rules of the Management Board Incentive System as its integral part. The bonus amount depends on the achievement of qualitative and quantitative tasks set for a Management Board member by the Supervisory Board. Each year the Supervisory Board assigns from four to seven individual bonus-related tasks to each member of the Management Board; the tasks are entered into the member’s Goal Sheet. Performance of individual bonus-related (quantitative and qualitative) tasks by a Management Board member is assessed annually by the Supervisory Board based on: recommendations of the President of the Management Board including assessment of the performance of the tasks by all members of the Management Board, a member’s report on the performance of his/her tasks, PKN ORLEN’s financial statements, and other documents whose examination the Supervisory Board may deem advisable.
Performance of individual bonus-related quantitative tasks is assessed by assigning percentage score, and performance of individual bonus-related qualitative tasks is assessed by assigning qualitative task grade in accordance with the Rules of the Management Board Incentive System. Performance of tasks assigned to a Management Board member is measured as the weighted sum of percentage points assigned by the Supervisory Board for each task.
The Supervisory Board passes a resolution to grant an annual bonus for a given financial year to a Management Board member, specifying the bonus amount, or a resolution not to grant the bonus, by April 30th of the following year. The annual bonus is paid based on that resolution, provided that the General Meeting approves the Company’s consolidated financial statements for a given financial year.
For 2015, the Company’s Supervisory Board assigned the following six quantitative targets to all Management Board Members:
- PKN ORLEN’s reported EBIT,
- PKN ORLEN’s LIFO-based EBITDA,
- PKN ORLEN’s maintenance CAPEX + PKN ORLEN’s administrative and personnel costs,
- PKN ORLEN’s development CAPEX,
- Stock-exchange indicator: PKN ORLEN’s TSR against the market,
- Accident incidence rate: PKN ORLEN’s TRR rate,
and set the respective bonus-triggering thresholds. The Supervisory Board also assigned qualitative targets related to business areas supervised by the individual Management Board members.
Rules governing award of bonuses to key management (including Management Board members)
The rules governing award of bonuses to members of the PKN ORLEN Management Board, directors reporting directly to the PKN ORLEN Management Board and the other key personnel have common key features. The individuals covered by the bonus systems are awarded bonuses for achieving individual targets set at the beginning of a given bonus period − by the Supervisory Board for Management Board members, and by the Management Board for other key management personnel. The bonus systems are consistent with the PKN ORLEN’s Values, promote collaboration between employees, and encourage work towards maximising performance at the Group level.
The targets are both qualitative and quantitative, and their performance is assessed after the end of the year for which they were assigned, in accordance with the Rules of the Bonus Systems. Under the Rules, bonuses may also be awarded to employees who materially contributed to the Group’s performance.
Remuneration of the Company’s Management Board and Supervisory Board members for holding positions on management or supervisory boards of subsidiary, jointly-controlled or associated entities
Members of the PKN ORLEN Management Board who in 2015 held positions on management or supervisory boards of the ORLEN Group’s subsidiary, jointly-controlled or associated companies received no remuneration on that account, except those members of the management personnel who served on the governing bodies of Unipetrol a.s.; however, they donated their remuneration received from Unipetrol to the ORLEN Dar Serca Foundation. As at December 31st 2015, four members of the PKN ORLEN Management Board held positions on the supervisory board of Unipetrol a.s.
Non-compete and contract termination agreements with management personnel
Current employment contracts with members of the PKN ORLEN Management Board provide for six- or twelve-month non-compete periods, starting from the contract termination or expiry date. Within that period, a Management Board member is entitled to compensation equal to six- or twelvefold monthly base pay, payable in equal monthly instalments. The Company may waive the non-compete clause with respect to the President or Members of the Management Board, or shorten the non-compete period. If the non-compete clause is waived, the Company does not pay the compensation. If the effective term of the non-compete clause is shortened, the compensation is paid pro rata to the effective length of the period.
Under the contracts, remuneration is also payable in the event of contract termination by removal from the position. Such remuneration is equal to the six- or twelvefold monthly base pay. The Supervisory Board may give its consent to the application of these provisions in the event of a Management Board member’s resignation from their position.
At the other companies of the ORLEN Group, management board members are as a rule bound by non-compete clauses for six months from the employment contract termination or expiry date. Within that period, they receive remuneration equal to 50% of sixfold monthly base pay, payable in six equal monthly instalments. Severance pay payable after the removal from position is typically equal to three- or sixfold monthly base pay.