Annual Report 2013

Report on Corporate Governance

TMK’s Board of Directors is building up and perfecting its corporate governance framework aware of the company’s being highly public: its securities are listed on the Russian and global exchange markets. In addition to strictly complying with applicable laws and listing requirements, we monitor initiatives and trends in corporate governance and strive to adapt and introduce the best corporate governance practices in the company.

In 2013, Russian corporate governance practices underwent major changes resulting in a significant convergence with the best foreign practices at both the legislative level and that of stock exchange regulation and self-regulation. TMK was closely involved in public discussions of the drafts of a new Russian Corporate Governance Code, regulations on the admission of securities to the official market and a listing reform.

On 31 December 2013, new Listing Rules were approved by Moscow Exchange. Principal changes in the Rules refer to corporate governance matters and introduce tougher criteria with respect to director independence, increased quota of independent directors in the Board, refined functions of the Board of Directors’ committees and requirements to the corporate secretary and internal audit, and documents defining the dividend policy, internal audit policy and timeframe for disclosing information to a list of the people entitled to attend a General Meeting.

TMK is listed in the highest listing category on the Moscow Exchange and makes every endeavour to ensure full compliance with the new requirements. We are upgrading the status of the documents governing the activities of the corporate secretary unit and defining internal audit policies. These documents are to be approved by the Board of Directors.

TMK’s Board of Directors is structured to ensure the balance of experience, qualifications and independence of directors and consists of eleven directors. As of the Annual Report date, five out of eleven directors were independent and did not depend on the company’s officials or affiliates who could influence their impartiality. The directors are independent in accordance with both criteria set by TMK’s Corporate Governance Code and the new Listing Rules. Their independent status is to be confirmed each time they are elected to the Board.

The Board of Directors of TMK is heterogeneous in terms of nationality, age and gender. In 2013, Elena Blagova, Deputy CEO for Special and New Projects, was elected to the Board of Directors after heading Volzhsky Pipe Plant, the largest TMK entity, for five years. Independent Director Ruben Aganbegyan left the Board of Directors.