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 elements of the Management Board member remuneration system are:
- Fixed monthly base pay,
- Annual bonus based on the performance of quantitative and qualitative targets,
- Severance pay in the event of removal or resignation of a Management Board member,
- Non-compete compensation.
A Management Board member is entitled to an annual bonus on the terms stipulated in his or her employment contract, which includes the Rules of the Management Board Incentive System as its integral part. The bonus amount depends on the performance of the qualitative and quantitative tasks assigned to a Management Board member by the Supervisory Board. Each year the Supervisory Board assigns from four to seven bonus-related tasks to each member of the Management Board. Performance of individual bonus-related (quantitative and qualitative) tasks by a Management Board member is assessed annually by the Supervisory Board based on: a recommendation of the President of 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, the ORLEN Group’s financial statements, and other documents whose examination the Supervisory Board may deem advisable.
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 has approved the ORLEN Group’s consolidated financial statements for a given financial year.
For 2014, the Company’s Supervisory Board assigned the following 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 the business area supervised by a Management Board member.
In 2014, the bonus system was revised for the Company’s legal counsel and directors reporting directly to the PKN ORLEN Management Board. The purpose of the revision was to standardise the bonus rules and strengthen the incentive nature of the system.
The rules governing granting 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 persons covered by the bonus systems referred to above are granted bonuses for achieving individual targets which are assigned at the beginning of a given bonus period − by the Supervisory Board to Management Board Members, and by the Management Board to other key management personnel. The bonus systems are consistent with the PKN ORLEN’s Values, promote cooperation between employees, and encourage work towards maximising the ORLEN Group’s performance.
The targets are both qualitative and quantitative, and their performance is assessed after the end of the year for which they were assigned. Employees may also be awarded for their material contribution to the performance.
Under the currently binding employment contracts, members of the PKN ORLEN Management Board are bound by a six- or twelve-month non-compete clause, 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 applicable to the President, Vice-President or Member of the Management Board, or shorten the effective term of the clause. 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 in an amount computed pro rata to the length of the effective term of the non-compete clause.
The employment contracts also provide for the payment of remuneration in the event of contract termination by removal from the position. The remuneration paid in such a case 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 his/her position.
In the case of the other companies of the ORLEN Group, management board members are as a rule bound by the non-compete clause 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.
For more detailed information on the remuneration of management and supervisory personnel, including its annual amounts, see http://www.orlen.pl/PL/RelacjeInwestorskie/InformacjeFinansowe/Strony/SprawozdaniaFinansowe.aspx (Directors’ Report on the Company’s operations in the year ended December 31st 2014, page 36).