Committees of the Board of Directors

Sergey Kravchenko Independent Director, Chairman of the Nomination and Remuneration Committee

During the year, the Company implemented significant organisational, human resources and technological changes, — all while facing unprecedented external challenges. This new environment has affected the committee’s agenda — several meetings reviewed matters related to HR support for the Group’s operations amid restrictions. The “new normal” served as a catalyst to accelerate the implementation of new digital solutions and corporate IT platforms in HR and talent development. This strengtghened the social aspect of the Company’s approach to problem solving. The committee’s timely and constructive recommendations have helped the Company to step up to 2020’s challenges, protect the health of our people and maintain workforce stability, ensuring normal operations.

Meetings

In the reporting period, the committee followed the approved Regulations and activity plan. Additional agenda items were introduced in line with the established procedure as necessary. In 2020, the committee held eight meetings, six of them remotely via video and telephone conferencing due to pandemic-induced restrictions starting from April 20, 2020. The committee meetings were regularly attended by TMK’s CEO, members of the Management Board and other top managers, which facilitated efficient communication as well as thoroughly considered and constructive recommendations.

Committee’s key priorities in 2020

• Significant organizational and HR changes
• Changes in the Group’s structure and management system
• Management succession
• Employee engagement
• Best corporate governance practices
• HR support of new digital solutions
• Development of ТМК2U Corporate University
• Motivation of key employees
• HR support of the Company’s efficient operation during the COVID-19 pandemic.

In the reporting year, the committee reviewed the following key matters and presented relevant recommendations to the Board of Directors.

• Updating TMK’s HR Strategy
• Organizational and HR changes at TMK (a regular item on the committee’s agenda): monitoring the current situation at TMK Group companies in Russia and abroad, changes in the management system and new appointments, including in internal audit, commerce (combining the sales and procurement functions), corporate compliance risks, oilfield services (TMK NGS), information security, the Single Service Center project, and others
• Annual performance evaluation of the Board of Directors (self-evaluation through surveying)
• Motivation of key managers: remuneration for achieving KPIs, long-term incentive program, bonuses for project implementation, new KPIs
• Providing competitive salaries in the regions of operation
• Prevention of conflicts of interest, protection of trade secrets
• Compliance of the Company’s corporate procedures for appointing to key positions with listing requirements
• Rolling out corporate standards and HR procedures to new companies joining TMK Group
• Relevant HR events and projects. A new model for holding the International Forum Horizons remotely in compliance with COVID-19 safety requirements
• Studying the competitive labor market and HR changes in the Company, calculating the Employee Loyalty and Engagement Indices.

Anti-COVID

In the reporting year, the Committee repeatedly reviewed matters related to HR support at TMK Group’s operation amid challenges and restrictions posed by the COVID-19 pandemic. On the whole, the Company successfully responded to challenges posed by the pandemic, ensuring employee health and normal operation. The Committee also focused on TMK2U Corporate University, process digitization and automation, and the development of corporate information platforms. Using new methods and advanced approaches, during the pandemic the Company was able to ensure the continuity of personnel training and development, reduce anxiety and maintain workforce stability. Summing up its review, the committee emphasized the importance of deep corporate professional education and development.

Budgeting

As in previous years, the committee placed a particular emphasis on budget planning, repeatedly reviewing labor-related indicators at its meetings.

Succession Planning

As part of improving the corporate governance system, the committee reviewed matters of ensuring succession of the Company’s Board of Directors, noting that TMK follows best Russian and international practices, including the Corporate Governance Code and the Recommendations of the Bank of Russia on Succession of Boards of Directors of Public Companies. This is reflected in a number of the Company’s internal documents as well as in information exchange with the financial market regulator and the investment community.

Induction

The Committee met with new top managers to discuss their professional development, career planning, areas of responsibility, key risks in their area, and the corporate culture.

In order to speed up the onboarding (adaptation to the new environment) of new members of the Board of Directors, the committee offers a package of materials on their respective competency areas of TMK Group’s business. In 2020, the composition of the Board of Directors did not change; therefore, the committee did not carry out this exercise.

Committee’s Self-Evaluation Results

• Guided by the principles of succession and expediency, the committee helped attract the best talent to management positions across the Company, retain them and offer appropriate incentives to support their performance
• The committee has the optimal number of members and is well-balanced in terms of the professional experience and expertise of its members
• The committee members were actively involved in its activities and attended meetings on a regular basis
• Participation of other members of the Board of Directors in the committee’s meetings drove engagement when discussing agenda items and did not lead to a conflict of interest
• The matters reviewed by the committee were in line with its objectives and profile, activities plan and instructions from the Board of the Directors
• The committee’s recommendations aided the Board of Directors in making well-balanced decisions supported by efficient implementation and control tools

The committee did not commission services from third-party organizations during 2020. No costs associated with such services or with technical support for the committee’s activities were incurred.

Internal Evaluation in 2020

Following the surveys, the committee’s performance was given a high score with an emphasis on repeated meetings on matters related to HR support of TMK Group’s operation amid challenges and restrictions posed by the COVID-19 pandemic.

Alexander Shokhin Chairman of the Strategy Committee

2020 was a challenging year for all of us, and it was important to adopt a calm and professional approach to assessing the situation, identify immediate actions and update strategic priorities. The qualifications and well-coordinated work of our Directors, whose vast experience covers virtually all areas of TMK Group’s activities, as well as their insights into the current global development trends, enabled the committee to successfully meet its objectives and provide the Board of Directors with timely and thought-out recommendations.

The committee sees facilitating the Company’s sustainable growth amid external uncertainties, driving further implementation of advanced technology in management and business, and giving a new impetus to TMK’s social and environmental agenda as its objective going forward.

Composition

Committee meetings and recommendations

The committee held five meetings in 2020, where recommendations to the Board of Directors on the following matters were discussed and developed:

• Assessment of TMK’s strategic risks
• Updates to the Company’s Strategy and its implementation
• Implementation of integrated planning system and MES system across the Russian division of TMK Group
• Environmental performance at TMK Group’s facilities
• The Company’s management reports
• TMK’s annual report
• TMK Group’s target structure for 2021
• Key indicators for calculating the Company’s budget and consolidated budget for 2021.

Internal Evaluation in 2020

The Strategy Committee includes Directors whose experience and competencies cover almost all areas of the Company’s business and development. The committee scored highest in terms of well-balanced composition and showed stronger performance year-on-year.

Performance Evaluation of the Board of Directors and its Committees

Evaluation purpose: to identify areas for improving the performance of the Board of Directors.

According to the Russian Corporate Governance Code, the Board’s performance should be evaluated on a regular basis at least once a year, engaging an external advisor at least once every three years.

Since an external advisor was last engaged in 2019, the 2020 performance was evaluated internally through surveying on the following:

• Composition and structure of the Board of Directors
• Performance of the Board of Directors
• Committees of the Board of Directors
• Performance of independent directors on the Board
• The Board of Directors’ procedures
• Performance of the Chairman of the Board of Directors.

Review period. The 2020–2021 corporate year, i.e. the period between the Annual General Meetings of Shareholders.

Processing and analyzing the results, the total score for the completed questionnaires and scores for each section were averaged. The results were compared with the data for the previous period, and the Board’s comments were analyzed.

On a scale from 1 to 5, the maximum survey score taken as a relative maximum was 5.0; the minimum survey score taken as a relative minimum was 4.8; the total average score was 4.9.

RESULTS OF THE BOARD OF DIRECTORS’ SELF-EVALUATION IN 2020

• The current Board of Directors is well-balanced in terms of composition and structure
• The Board of Directors acts in the best interests of the Company and its shareholders
• The Board of Directors pays sufficient attention to almost all matters within the scope of its authority. The Board of Directors maintains a strong focus on strategic and medium-term planning, financial reporting and external audit, performance evaluation and management incentives, management succession planning and key appointments, information disclosure control, resolving conflicts of interest, legal and regulatory compliance, etc.
• Each Board committee delivers good governance and is well-balanced in terms of composition
• Independent directors significantly contribute to the Board’s discussions
• The Corporate Secretary (Secretary of the Board of Directors) follows best corporate governance practices
• The performance of the Chairman of the Board of Directors was deemed effective across his all assigned functions
• The Board of Directors scored higher in most aspects of its performance year-on-year, showing less than 2% deviation of the total average score from the maximum score.

Recommendations

• Consider establishing a dedicated Sustainability Committee under the Board of Directors
• Incorporate best ESG practices into strategic goals, with regular reporting on their implementation