Annual Report 2013

Board of Directors and Committees

Board of Directors

Following the Annual General Meeting of Shareholders of 25 June 2013, the Board of Directors of TMK was composed as follows:

Dmitry Pumpyanskiy

Chairman of the Board of Directors, non-executive director.

Born in 1964. Graduated from Kirov Urals Polytechnic Institute in 1986. PhD in Technical Sciences, Doctor of Economics. Founder and beneficial owner of TMK. Has been with TMK since 2002, Chairman of TMK’s Board of Directors since 2004. Mr. Pumpyanskiy was awarded a second class Medal of the Order for Merit to the Fatherland, is a Russian Government prize winner in Science and Technology, was conferred a Honorary Metallurgist title and pronounced the winner of the 6th Director of the Year National Award in “The Chairman of the Board: Contribution to the Development of Corporate Governance” nomination in 2011.

Relevant experience: Chairman of the Board of Trustees of the Russian Ski-Jumping and Nordic Combined Federation, Chairman of the Supervisory Board of the Ural Federal University, member of the Board of Directors of Non-profit Organisation Foundation for Development of the Centre for Elaboration and Commercialisation of New Technologies, member of the Board of Trustees of the ISTOKI Endowment Fund, President of the Sverdlovsk Regional Manufacturers and Entrepreneurs Association, member of the Board of Directors of SKB-Bank, President and Chairman of the Board of Directors of Sinara Group, member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, and formerly, Board member at various industrial and financial companies, CEO at TMK, top executive at Russian metallurgical and pipe companies.

Holds 0.007% in the authorised capital of TMK.

Mikhail Alekseev

Independent director, Chairman of the Nomination and Remuneration Committee, member of the Audit Committee. Member of the Board of Directors since 2011.

Born in 1964.Graduated from the Moscow Finance Institute in 1986. Doctor of Economics.

Relevant experience: Member of the boards of the Association of Russian Banks and Association of Regional Banks of Russia, Chairman of the Supervisory Board of UniCredit Leasing, member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, Chairman of the Management Board of UniCredit Bank. Formerly, member of the Board of Directors of MICEX, a number of financial companies, Chairman of the Board and CEO of Rosprombank, Senior Vice President and Deputy Chairman of the Management Board of Rosbank, Deputy Chairman of the Management Board of ONEXIM Bank, Board member at Intersectoral Commercial Bank (Mezhkombank), Deputy Head of the General Directorate of the Ministry of Finance of the USSR.

Holds no shares in TMK.

Elena Blagova

Executive Director, member of the Board of Directors since 2013.

Born in 1959. Graduated from the Chelyabinsk Lenin Komsomol Polytechnic Institute in 1982 and the Moscow State Open University in 1993, was awarded a second class Medal of the Order for Merit to the Fatherland and the Honorary Metallurgist title.

Relevant experience: Deputy CEO for Special and New Projects at TMK, and formerly, member of the Board of Directors of the Volzhsky Pipe Plant, Managing Director of the Volzhsky Pipe Plant.

Holds 0.003% in the authorised capital of TMK.

Andrey Kaplunov

Executive Director. Has been with TMK since 2001.

Born in 1960. Graduated from the Moscow Finance Institute in 1982, PhD in Economics. Commended by the Ministry of Industry and Trade of the Russian Federation.

Relevant experience: First Deputy CEO and member of the Management Board of TMK, Board Chairman at TMK’s Russian pipe plants and TMK Trade House, member of the Board of Directors of Sinara Group, Deputy Chairman of the Board of Directors of OAO SKB-Bank, Board member at the BolshoyPensionny Fond, member of the Board of Trustees of the Sinara Mini-Football Club (Sverdlovsk Regional Sports Non- Governmental Fund). Formerly, Director of the HR and Development at Inkombank and Rosbank, Vice President of Guta-Bank, Deputy Head of the Currency and Finance Department at Zarubezhneft, Associate Professor at the Economic Theory Department of the Moscow Finance Institute.

Holds 0.0116% in the authorised capital of TMK.

Peter O’Brien

Independent Director, Chairman of the Audit Committee. Member of the Board of Directors since 2012.

Born in 1969. Graduated from Duke University (USA) in 1991 and obtained an MBA from Columbia University Business School in 2000. Took a course in AMP (Advanced Management Program) at Harvard Business School in 2011. In 2007, Mr. O’Brien won the National Award of the Independent Directors Association as “Director of the Year”.

Relevant experience: Member of the Board of Directors and Chairman of the Audit Committee at IGSS, Chairman of the Board of Directors at RusRailLeasing, member of the Board of Directors and Chairman of the Audit Committee at HRT Partipacoes, Member of the Supervisory Board of the European Pension Fund. Formerly, member of the Management Board, Vice President, Head of the Group of Financial Advisors to the President of Rosneft, Co-Head of Investment Banking, Executive Director of Morgan Stanley in Russia, Vice President at Troika Dialog Investment Company, officer at the Press Centre of the US Department of the Treasury.

Holds no shares in TMK.

Sergey Papin

Non-executive director. Member of the Nomination and Remuneration Committee.Has been with TMK since 2002.

Born in 1955.Graduated from the Donetsk Polytechnic Institute in 1977. Mr. Papin was awarded a Badge of Honour and a Certificate of Merit from the Ministry of Industry and Energy of the Russian Federation.

Relevant experience: Vice President, member of the Board of Directors of Sinara Group, member of the Management Board of the Russian Union of Industrialists and Entrepreneurs, member of the Boards of Directors of Ural Locomotives, Burgas Resort, Arkhyz – Sinara, Sinara – Transport Machines. Formerly, Deputy CEO for External and Special Projects at TMK, Vice President of Inkombank and Guta-Bank.

Holds 0.008% in the authorised capital of TMK.

Robert Mark Foresman

Independent director, member of the Nomination and Remuneration Committee. Member of the Board of Directors since 2012.

Born in 1968. Graduated from Bucknell University (USA) in 1990 and Harvard University Graduate School of Arts and Sciences in 1993. Obtained a certificate from the Moscow Power Engineering Institute in 1989.

Relevant experience: Head of Barclays Capital in Russia, formerly, member of the Supervisory Board of Vnesheconombank’s VEB Capital, Deputy Chairman of the Management Board at Renaissance Capital, member of the Supervisory Board of Evrofinance Mosnarbank, Chairman of the Management Committee for Russia and CIS at Dresdner Kleinwort Wasserstein, Head of Investment Banking for Russia and CIS at ING Barings.Worked for the International Finance Corporation on private equity transactions and project financing.

Holds no shares in TMK.

Igor Khmelevskiy

Non-executive director, Member of the Audit Committee. Has been with TMK since 2003.

Born in 1972. Graduated from the Ural State Law Academy in 1995, awarded a Certificate of Merit from the Ministry of Industry and Energy of the Russian Federation.

Relevant experience: Vice President and member of the Board of Directors of Sinara Group, Director of Bravecorp Limited, Tirelli Holdings Limited, TMK Steel Limited and Sinara Capital Management. Formerly, Director of Fudberg Holding Ltd and TMK Global AG, Member of the Administrative Board of TMK–ARTROM S.A., Head of the Legal Department at Sinara Group, Deputy CEO for Legal Practice at TMK.

Holds no shares in TMK.

Oleg Schegolev

Independent director, member of the Strategy Committee. Member of the Board of Directors since 2012.

Born in 1962.Graduated from the Moscow Finance Institute in 1984.

Relevant experience: First Vice President at Russneft, First Deputy Chairman of the Management Board and First Deputy CEO at Itera, Executive Director at Slavneft, Chairman and Board member at various oil & gas companies, Deputy Head of the Department for Long-term Planning of the Fuel and Energy Complex at the Ministry of Energy of the Russian Federation, chief expert, deputy head, head of department at Sibneft.

Holds no shares in TMK.

Alexander Shiryaev

Executive director. Member of the Strategy Committee. Has been with TMK since 2003.

Born in 1952.Graduated from the Sverdlovsk Institute of National Economy in 1991. Mr. Shiryaev was awarded by the Sverdlovsk Region with a second class Badge of Merit to the Sverdlovsk Region and an Honorary Metallurgist title.

Relevant experience: CEO, Chairman of the Management Board of TMK, Board member at TMK’s Russian pipe plants, Chairman of the Board of TMK Trade House and Orsky Machine Building Plant, Member of the Board of SinaraGroup. Formerly, Deputy CEO for Development, CEO at Sinara Group, Deputy Chief Financial Officer at TMK, CEO at Uralshina.

Holds 0.017% in the authorised capital of TMK.

Alexander Shokhin

Independent director, Chairman of the Strategy Committee. Member of the Board of Directors since 2008.

Born in 1951.Graduated from Lomonosov Moscow State University in 1974. PhD, Doctor of Economics, Professor. Mr Shokhin was awarded with a fourth class Order for Merit to the Fatherland, Order of Honour, second class Order of Holy Prince Daniel of Moscow as well as a medal in commemoration of the 850th Anniversary of Moscow.

Relevant experience: President of the Russian Union of Industrialists and Entrepreneurs, President of the Higher School of Economics, Board member at Russian Railways, Baltika Breweries, Fortum. Formerly, member of the Board of Directors of TNK-ВР Limited, Lukoil, BurovayaKompaniya Eurasia, member of the Public Chamber of the Russian Federation, Chairman of the Supervisory Board at Renaissance Capital Investment Group, deputy of the State Duma (three convocations), Minister of Labour and Employment and Minister of Economy, Head of the Russian Agency for International Cooperation and Development, worked as Deputy Head of the Russian Government twice, formerly Russia’s representative to the IMF and World Bank.

Holds no shares in TMK.

As of 31 December 2013, the members of the Board of Directors held no interests in affiliated companies.

Secretary of the Board of Directors - Maxim Kurbatov

Born in 1967.Graduated from Kirov Urals Polytechnic Institute, the Academy of National Economy under the Government of the Russian Federation and the Moscow State Law Academy.Has been with TMK since 2002.Headed the CEO’s Executive Office and the Corporate Governance function at TMK. Has been the Secretary of the Board of Directors since 2005.









Activity of the Board of Directors in 2013

In 2013, the Board of Directors held 29 meetings, including five meetings held in person. Key items considered by the Board of Directors included:

  • TMK’s investment programme for 2014;
  • logistics management system of the company;
  • TMK’s target structure for 2014;
  • market environment and development of TMK’s sales platform;
  • TMK’s consolidated budget for 2014;
  • TMK’s management accounts;
  • Internal Audit Department’s activity in 2013.

Remuneration

In accordance with Russian laws (Article 64 of the Federal Law On Joint Stock Companies), members of the Board of Directors may be paid a remuneration if so resolved by the General Meeting of Shareholders. TMK shareholders have adopted the following principles and procedures outlined in the Regulations on the Board of Directors with respect to its remuneration:

  • only directors who are not executives of TMK are entitled to remuneration and compensation of expenses related to the performance of their duties;
  • the remuneration is to be fair and is to match long-term interests of the shareholders;
  • the remuneration to be paid includes:
    • a fixed base remuneration of the Chairman and the members of the Board payable on a monthly basis in the amount of 1/12 of the fixed annual amount;
    • additional remuneration for the performance of the duties of the Chairman or the members of a Board Committee payable every six months in the amount of 1/2 of the approved annual additional remuneration;
  • the amount of remuneration payable to a member of the Board of Directors is to be decided by the General Meeting of Shareholders on the basis of the Board of Director’s recommendations.

Prior to the Annual General Meeting of Shareholders, the Board of Directors had 6 independent directors, 3 non-executive directors and 2 executive directors. Since 25 June 2013, the Board of Directors is comprised of 5 independent directors, 3 non-executive directors and 3 executive directors.

In 2013, the members of the Board of Directors received a total of 2.37 mln USD as remuneration.1

Committees of the Board of Directors

The Board of Directors has three standing committees: the Audit Committee, the Nomination and Remuneration Committee andthe Strategy Committee

The Board of Directors has three standing committees: the Audit Committee, the Nomination and Remuneration Committee andthe Strategy Committee. The committees have been formed in compliance with the Corporate Governance Code of TMK which specifically requires that the Audit Committee and the Nomination and Remuneration Committee include independent directors only or, if reasonably impossible, independent directors and non-executive directors only.

Committee members remained unchanged in 2013.

Participation of Board members in Board and Committee Meetings in 2013

Board of DirectorsAudit CommitteeNomination and
Remuneration
Committee
Strategy Committee
(29 meetings, incl. 11 after
the Annual General Meeting
of Shareholders)
(6 + 5 joint
meetings)
(5 + 1 joint
meetings)
(1 + 5 joint
meetings)
D. A. Pumpyanskiy
(Chairman)
29
R. A. Aganbegyan14
M. Yu. Alekseev2946
A. Yu. Kaplunov29
Peter O'Brien2910
S. T. Papin296
E. E. Blagova11
R. M. Foresman284
I. B. Khmelevskiy2911
A. G. Shiryaev296
A. N. Shokhin296
O. A. Schegolev296

Audit Committee

Committee members:

Peter O’Brien

Chairman of the Audit Committee, independent director

M. Yu. Alekseev

Member of the Audit Committee and Chairman of the Nomination and Remuneration Committee, independent director

I. B. Khmelevskiy

Member of the Audit Committee, non-executive director

In 2013 and from 1 January 2014 to 31 March 2014, the Audit Committee’s principal duties included the following:

  • review of the company’s financial statements;
  • review of the company’s standards and procedures for internal control and risk management;
  • review of plans and reports of the Internal Audit Department;
  • cooperation with the Revision Commission;
  • recommendations to the Board of Directors as regards the appointment and/or re-appointment of an external auditor;
  • review of the audit plan and scope;
  • active discussions with the external auditor of matters arising out of audit;
  • assessment as regards independence of the external auditor;
  • overseeing the appointment of independent appraisers and review of any independent appraisers’ reports.

Committee Oversight of the External Audit of 2013 Financial Statements

The auditor has issued a qualified opinion on TMK’s accounting (financial) statements prepared under the Russian accounting (financial reporting) standards.

The Audit Committee has reviewed TMK’s financial statements prepared under the Russian accounting (financial reporting) standards as well as the auditor’s opinion and has recommended that the Board of Directors submit the annual accounting (financial) statements for approval at the Annual General Meeting of Shareholders.

Nomination and Remuneration Committee

Committee members:

M. Yu. Alekseev

Chairman of the Nomination and Remuneration Committee and member of the Audit Committee, independent director

S. T. Papin

Member of the Audit Committee, non-executive director

Robert Mark Foresman

Member of the Nomination and Remuneration Committee, independent director

The Committee aims to create a favourable environment for the engagement of skilled personnel in the company’s governance and incentives for their efficient performance as well as to streamline the corporate governance system and align it with the best international practices.

In 2013, the Committee reviewed and presented to the Board of Directors recommendations on the following key matters:

  • key headcount and payroll indicators for TMK’s 2014 budget;
  • outcome of the Ninth Youth Scientific and Technical Conference of TMK;
  • key performance indicators and incentive system for top executives and heads of TMK’s main business units;
  • changes to the company’s organisational and staff structure;
  • streamlining TMK’s technical sales system;
  • structure and members of corporate governance bodies at TMK entities.

Strategy Committee

Committee members:

A. N. Shokhin

Chairman of the Strategy Committee, independent director

O. A. Schegolev

Committee member, independent director

A. G. Shiryaev

Committee member, CEO, Chairman of the Management Board

The Committee’s duties are to develop recommendations on the company’s business priorities and its growth strategy and present these to the Board of Directors.

In 2013, the Committee reviewed and presented to the Board of Directors recommendations on the following key matters:

  • implementation of TMK’s 2020 Business Plan;
  • analysis and monitoring of TMK’s target markets through 2017;
  • TMK’s investment programme for 2014;
  • TMK’s technical sales system;
  • TMK’s budget for 2014;
  • recommendations on M&A transactions, asset disposal and joint ventures;
  • risks map for 2014 and measures to mitigate key risks in 2014.

1Based on the average exchange rate of 31.848 RUB/USD in 2013.