Corporate governance
2019
Statement of compliance with the corporate governance principles
Best Practices for GPW Listed Companies 2016
In relation to the “Best Practice for GPW Listed Companies 2016” coming into force as of 1 January 2016, the bank adopted the principles and recommendations contained in this document, with the reservation that recommendation IV.R.2., which concerns enabling the shareholders to participate in the General Shareholders’ Meeting using electronic means of communication would not be applied, unless the General Shareholders’ Meeting makes appropriate amendments to the bank’s Articles of Association which authorize the Management Board to organize a General Meeting using means of electronic communication. The bank applies recommendation IV.R.2 in part concerning the real-time broadcast of General Shareholders’ Meetings. PKO Bank Polski enables participation by shareholders, who are interested in taking part in General Shareholders’ Meetings, by setting convenient dates and times for such meetings. In 2019, no incidental breaches of the Principles occurred in the bank.
The bank continued activities aimed at ensuring that the recommendations and principles contained in this section of the Best Practice are applied as broadly as possible, both in the area of communication with investors and enabling them to use modern communication channels, and in the area of information policy and providing the required information by its publication on the website and in reports.
PKO Bank Polski maintains regular contact with investors, using various means of communication preferred by investors. Questions can be asked by e-mail, by telephone or during face-to-face meetings with the bank’s representatives. Moreover, in accordance with the “Best Practice for GPW Listed Companies 2016”, information about sponsoring and charity activities is included in the report.
The bank also has recommended internal regulations with regard to providing explanations and rectifications relating to untrue, imprecise or harmful information presented in the media.
Principles and recommendations contained in this section were complied with. Both the Management Board and the Supervisory Board adopted the “Best Practice for GPW Listed Companies 2016”.
In particular, persons who have high qualifications and experience are appointed to the bank’s Management Board and Supervisory Board. The internal allocation of responsibilities for individual areas of activities to members of the Management Board is published on the bank’s website. In 2019, the functions on the bank’s Management Board were the main area of the professional activity of members of the bank’s Management Board. The introduction to duties and succession planning is stipulated in the policy adopted by the Supervisory Board in respect of the appropriateness of members of the Management Board.
In accordance with the “Best Practice for GPW Listed Companies 2016”, the required number of members of the Board met the independence criteria. In accordance with their declarations, 9 out of 11 members of the Supervisory Board are independent. Additionally, the person performing the function of Chair of the Audit Committee met the independence criteria.
The Supervisory Board prepared and presented to the Annual General Shareholders’ Meetings the requisite assessment of the company’s standing, in consideration of internal controls assessment, risk management, compliance and internal audit functions, and a report on the activities of the Supervisory Board. Additionally, the Supervisory Board prepared and presented to the Annual General Shareholders’ Meetings an assessment of the manner of fulfilment of information duties by the bank with respect to the application of corporate governance principles, and an assessment of the rationality of the policy pursued by the bank with respect to sponsorship and charity activities. In 2019 the Supervisory Board examined and gave a positive opinion on the draft resolutions of the Annual General Shareholders’ Meetings presented to the General Meeting convened for 6 May 2019 and draft resolutions of the Extraordinary General Shareholders’ Meeting convened for 17 September 2019.
The regulations and practices binding in PKO Bank Polski fully satisfied the requirements specified in the section of the “Best Practice for GPW Listed Companies 2016”. In particular, the bank’s organizational structure is adequate to the size and nature of activities, as well as risk incurred. Independent units responsible for the performance of tasks in individual systems or functions, or parts thereof, were separated.
Internal regulations of the bank describe the Management Board’s responsibility for the internal control system and risk management system, direct subordination of persons responsible for risk management, internal audit and compliance, the possibility of reporting directly to the Supervisory Board or the audit committee, the application of independence principles with regard to the manager of the internal audit function and other persons responsible for that function. In accordance with the requirement of the “Best Practice for GPW Listed Companies 2016”, the effectiveness of systems and functions is verified and monitored.
In respect of the organization of the General Meetings of Shareholders, the bank decided not to apply the recommendation which concerns enabling the shareholders to participate in the General Shareholders’ Meeting using electronic communication, unless the General Shareholders’ Meeting makes appropriate amendments to the bank’s Articles of Association. This decision was taken in consideration of the organizational and legal risk related to this method of communication.
Within the remaining scope, in the opinion of the bank, General Shareholders’ Meetings were arranged in compliance with the requirements of the “Best Practice for GPW Listed Companies 2016”.
In particular, the bank endeavoured to ensure that, as far as possible, Annual General Shareholders’ Meetings are held within a reasonably short period from the publication of the annual report.
The bank set the place and date of General Meetings so as to allow the greatest possible number of shareholders to participate in the Annual General Shareholders’ Meeting convened for 6 May 2019 and the Extraordinary General Shareholders’ Meeting convened for 17 September 2019. Draft resolutions of the General Shareholders’ Meetings were prepared and presented together with the justification thereof.
The dividend date and the dates of dividend distribution were determined so as to make sure that the period separating them was no longer than 15 business days.
Furthermore, the bank ensured a public broadcast of the General Shareholders’ Meeting during the Annual General Shareholders’ Meetings of 6 May 2019 and Extraordinary General Shareholders’ Meeting of 17 September 2019, as well as the presence of the media.
The internal regulations of PKO Bank Polski guarantee compliance with the recommendations and principles included in the “Best Practice for GPW Listed Companies 2016”. The bank has internal regulations on conflict of interest management, including carrying out professional or other activities which might cause a conflict of interest. The rules of the Management Board and Supervisory Board define the principles for excluding members of these authorities from participation in the examination of matters involving conflicts of interest. If a situation that could lead to a potential conflict of interest has occurred, the persons concerned are obliged to disclose the situation.
Moreover, the bank has internal regulations in place for monitoring and restricting the possibilities of receiving benefits or gifts which could affect the independence and objectivity of decision makers or have an adverse effect on the independence of opinions and judgements.
The rules of the Management Board and of the Supervisory Board stipulate the possibility of voicing a votum separatum with a justification to the resolutions passed by Members voting against a resolution.
Transactions with related parties and significant shareholders are concluded on an arm’s length basis, in accordance with consistent and uniform policies, based on the bank’s internal regulations. Furthermore, the bank’s Articles of Association stipulate that the bank cannot conclude a significant agreement with a shareholder holding at least 5% of the total number of votes at the bank, or with a related entity, without the prior approval of the Supervisory Board. This requirement shall not apply to standard transactions or transactions concluded on an arm’s length basis in the course of the bank’s normal operating activities, if they are concluded with members of the bank’s Group.
The bank follows the principles of the “Best Practice for GPW Listed Companies 2016” with respect to remuneration. In accordance with the requirements thereof, the bank’s Directors’ Report includes information on the remuneration policy comprising elements specified in the “Best Practice for GPW Listed Companies 2016” and the regulation on current and periodical information.
In the bank’s opinion, the remuneration policy is connected with the strategy as well as with short- and long-term goals, long-term interests and financial results, and takes into account the solutions necessary to avoid discrimination on whatever grounds. The bank also assesses the policy in this respect.
The remuneration of members of the bank’s Management Board and its key managers is directly linked to the bank’s financial situation and the growth of its value through appropriate bonus targets and payment deferral and suspension mechanisms, as well as the relevant financial instrument used to settle part of the remuneration.
The remuneration of members of the Supervisory Board is not linked to any options, other derivatives or any other variable factors, nor is it dependent on the bank’s results.
Additionally, the Remuneration and Nominations Committee functions within the Supervisory Board of the bank.
Corporate governance principles for supervised institutions by PFSA
The bank accepted for use the “Principles of Corporate Governance for Supervised Institutions” (adopted by the Polish Financial Supervision Authority on 22 July 2014) with respect to the competencies and obligations of the Management Board, i.e. managing the bank’s affairs and its representation, in compliance with the generally binding laws and the bank’s Articles of Association. Nevertheless, the bank assumed that paragraph 8, section 4 of the “Corporate Governance Principles for supervised institutions”, insofar as it relates to allowing the shareholders the possibility of participating in the meetings of the decision-making authority electronically, will not be applied, unless the General Shareholders’ Meeting makes appropriate amendments to the bank’s Articles of Association which would authorize the Management Board to organize the General Shareholders’ Meetings using electronic means of communication. Chapter 9 of the Principles, concerning the managing of assets at the customer’s risk, will not be applied due to the fact that the bank does not conduct such activities.
The bank’s Supervisory Board adopted for use the “Corporate Governance Principles for supervised institutions” (Principles) concerning the responsibilities and obligations of the Supervisory Board, i.e. supervising the conduct of the bank’s affairs in compliance with the generally binding laws and the bank’s Articles of Association.
In its resolution of 2015, the General Shareholders’ Meeting of the bank declared that, acting in line with its competencies, it will follow the “Corporate Governance Principles for supervised institutions” issued by the Polish Financial Supervision Authority, although it ruled out the application of the principles set out in:
- 8 section 4 of the Principles, within the scope pertaining to ensuring the possibility of the electronic participation of shareholders in meetings of the decision-making body;
- 10 section 2 of the Principles, with respect to the introduction of personal rights or other special rights for shareholders;
- 12 section 1 of the Principles pertaining to the responsibility of shareholders for immediate recapitalization of the supervised institution;
- 28 section 4 of the Principles with respect to assessing by the decision-making body whether the determined remuneration policy promotes the development and security of the supervised institution.
Waiving the application of the principle set out in § 8 section 4 was in line with the prior decision of the Annual General Shareholders’ Meeting of PKO Bank Polski of 30 June 2011, reflected in not adopting the resolution on amendments to the Articles of Association of the bank, the aim of which was to enable participation in the General Shareholders’ Meeting through electronic means of communication. The decision not to apply this principle was taken because of the legal and organizational-technical risks, which could jeopardize the proper conduct of the General Meeting. The application of other Principles specified in the resolution of the Annual General Shareholders’ Meeting was waived based on these proposals by an eligible shareholder of the Bank – the State Treasury.
In accordance with the justification presented by the State Treasury together with the proposed draft resolution of the Annual General Shareholders’ Meeting, waiving the application of the principle specified in §10 section 2 and §12 section 1 was justified by the uncompleted process of the Bank’s privatization by the State Treasury.
Waiving the application of the principle set out in § 28 section 4 was justified, in accordance with the motion of the State Treasury, by the excessive scope of the remuneration policy in question, subject to the assessment of the decision-making authority. In the opinion of the above mentioned shareholder, the policy for remunerating employees who perform key functions but who are not members of the supervisory and management authorities, should be assessed by the employer or the principal, i.e. the bank represented by the Management Board, the activities of which are supervised by the Supervisory Board.
Principles for remunerating the Management Board members
Principles of setting the remuneration of members of the Management Board were defined by resolution No. 2/2017 of the Extraordinary General Meeting of the bank’s Shareholders of 13 March 2017 (amended by resolution No. 4/2019 of the Extraordinary General Meeting of the bank’s Shareholders of 17 September 2019).
In 2019, the Principles of employing and remunerating members of the bank’s Management Board adopted by the Supervisory Board in 2017, and amended by a resolution of the Supervisory Board of 12 August 2019 (No. 71/2019) applied in PKO Bank Polski. The principles implement the provisions of the Act of 9 June 2016 on the terms of setting the remuneration of managers of certain companies (Journal of Laws of 2016, item 1202, as amended).
In accordance with these principles, members of the Management Board are entitled to:
- fixed remuneration in the amount specified in the resolution of the Supervisory Board for the President of the Management Board, member of the Management Board in charge of the risk management area who substitutes the President of the Management Board, and remaining members of the Management Board, separately,
- variable remuneration – additional remuneration awarded and paid after the performance appraisal period, in particular bonuses, awards for special professional achievements, severance pay (excluding fixed remuneration and benefits awarded based on the applicable legal regulations).
The fixed remuneration is determined as a specific amount in the service agreement and may not be higher than:
- in the case of the President of the Management Board: 15x,
- in the case of the member of the Management Board in charge of the risk management area who substitutes for the President of the Management Board: 14.5x,
- in the case of remaining members of the Management Board: 14x,
the base amount stipulated by the universally applicable law.
Management Board’s benefits (in PLN thousand)
| Benefits in cash | Share-based payments settled in cash | |||||
|---|---|---|---|---|---|---|
| remuneration received in 2019 | other received in 2019 | contingent, due as at 31.12.2019 | received in 2019 | due as at 31.12.2019 | contingent, duea as at 31.12.2019 | |
| Zbigniew Jagiełło | 795 | 934 | 466 | 753 | 632 | 466 |
| Rafał Antczak | 707 | 287 | 155 | 101 | 187 | 155 |
| Rafał Kozłowski | 707 | 206 | 137 | – | 204 | 137 |
| Maks Kraczkowski | 705 | 617 | 310 | 370 | 317 | 310 |
| Mieczysław Król | 707 | 621 | 312 | 369 | 329 | 312 |
| Adam Marciniak | 707 | 269 | 160 | 53 | 216 | 160 |
| Piotr Mazur | 751 | 766 | 369 | 584 | 496 | 369 |
| Jakub Papierski | 707 | 744 | 353 | 586 | 477 | 353 |
| Jan Emeryk Rościszewski | 707 | 601 | 298 | 350 | 312 | 298 |
| Management Board of the Bank | 6 493 | 5 045 | 2 560 | 3 166 | 3 170 | 2 560 |
| Other * | – | 1 216 | 387 | 1 333 | 729 | 387 |
| Total | 6 493 | 6 261 | 2 947 | 4 499 | 3 899 | 2 947 |
*Members of the Management Board who ceased to perform their functions in previous years.
| Benefits in cash | Share-based payments settled in cash | |||||
|---|---|---|---|---|---|---|
| remuneration received in 2018 | other received in 2018 | contingent, due as at 31.12.2018 | received in 2018 | due as at 31.12.2018 | contingent, due as at 31.12.2018 | |
| Zbigniew Jagiełło | 793 | 297 | 302 | 768 | 372 | 302 |
| Rafał Antczak | 687 | – | – | – | – | – |
| Rafał Kozłowski | 687 | – | – | – | – | – |
| Maks Kraczkowski | 687 | 32 | 64 | 193 | 49 | 64 |
| Mieczysław Król | 687 | 45 | 73 | 222 | 57 | 73 |
| Adam Marciniak | 687 | – | – | – | – | – |
| Piotr Mazur | 740 | 208 | 204 | 594 | 258 | 204 |
| Jakub Papierski | 687 | 216 | 204 | 604 | 266 | 204 |
| Jan Emeryk Rościszewski | 687 | 38 | 59 | 177 | 45 | 59 |
| Management Board of the Bank | 6 492 | 836 | 906 | 2 558 | 1 047 | 906 |
| Other* | – | 713 | 592 | 1 719 | 868 | 592 |
| Total | 6 493 | 1 549 | 1 498 | 4 277 | 1 915 | 1 498 |
*Members of the Management Board who ceased to perfom their functions in previous years.
| 2018 | 2019 | |
|---|---|---|
| Rafał Kozłowski | 3 | 83 |
| Jan Emeryk Rościszewski | 116 | 85 |
| Total | 119 | 168 |
Variable remuneration components
In accordance with the requirements of CRD IV and the Commission Delegated Regulation (EU) No. 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile, the bank updates the principles for setting variable remuneration components on an ongoing basis.
Variable remuneration components are awarded primarily based on bonus targets set within the framework of the Management by Objectives (MbO) programme.
The purpose of the targets set is to guarantee that the risk related to the activities of the bank is taken into account. Risks are reflected both by determining the appropriate risk-sensitive criteria for work effectiveness assessment, and reducing or clawback of the variable remuneration component in the case of deteriorated financial results, loss or deterioration in other ratios.
Variable remuneration components for the particular assessment period (calendar year) are awarded after settling bonus targets, in:
- non-deferred form – 60% of the variable remuneration component (in the first year after the assessment period),
- deferred form – 40% of the variable remuneration component (in equal instalments over the net years after the first year after the assessment period),
while both the non-deferred and deferred remuneration is awarded in equal parts in cash and in financial instruments, i.e. the phantom shares (that are converted into cash based on the updated price of the bank’s shares after the period of retention, and in the case of the deferred remuneration component – after a deferral period).
If the variable remuneration component for the particular year exceeds PLN 700 thousand, the amount of PLN 280 thousand plus 60% of the excess over the amount of PLN 700 thousand shall be deferred. Variable remuneration components cannot exceed 100% of the annual basic salary.
Each of the components of accrued variable remuneration may be reduced as a result of:
- breach of the obligations arising from the contract,
- lack of compliance with legal regulations or customer service standards,
- improper performance of professional duties,
- attitude towards other employees breaching social coexistence rules.
The bonus amount:
- for a member of the Management Board can be adjusted (decreased or increased) by a certain ratio, depending on the results achieved by the bank, specified in the bank’s Annual Note (a set of key management indicators specified for a given calendar year);
- for an MRT (Material Risk Taker), who is not a member of the Board, it can be adjusted (increased) by a certain ratio, depending on the results achieved by the bank, specified in the bank’s Annual Note.
In the case of:
- a significant deterioration in the bank’s results,
- identifying a significant adverse change in equity,
- MRT breaching the law or making serious errors,
- adjustment of the achievement and degree of achievement of the results or targets of MRT,
- deterioration in the performance of the structures supervised or managed by the aforementioned persons,
- granting the variable remuneration component based on incorrect or misleading information or MRT fraud,
the Supervisory Board or the Management Board respectively may apply a malus solution reducing the amount of the variable remuneration component due, deferred to subsequent settlement periods.
Material Risk Takers (except members of the bank’s Management Board) may benefit from health care services financed by the bank, the social benefits fund, and the Employee Pension Scheme (EPS). Material Risk Takers (including members of the bank’s Management Board) can use PPEs.
In the case of severance pay related to dismissal (other than resulting from generally applicable laws), the amount reflects the performance assessment for the last three years of employment. At the same time, the bank’s internal regulations stipulate the maximum amount of the severance pay.
A member of the Management Board shall be entitled to severance pay subject to fulfilling the function of member of the bank’s Management Board for at least twelve months before termination of the aforementioned contract. An MRT can receive the severance pay subject to being employed as an MRT for at least twelve months before termination of the employment contract.
Members of the Management Board and certain MRTs are additionally subject to non-competition agreements. These agreements provide for payment of the compensation equivalent of up to 100% of the basic salary arising from the contract for refraining from employment in a competitive firm after the termination of employment with the bank, for no more than six months.
Information of non-financial remuneration components
Since 1 July 2017, as a result of adjusting the principles for employment and remuneration of members of the bank’s Management Board to the provisions of the Act of 9 June 2016 on the terms of setting the remuneration of managers of certain companies (Journal of Laws of 2016, item 1202, as amended) members of the Management Board are not entitled to non-pay remuneration components.
Principles for remunerating the Supervisory Board members
The monthly remuneration of members of the Supervisory Board was set by resolution no. 3/2017 of the Extraordinary General Shareholders’ Meeting of PKO Bank Polski of 13 March 2017, amended by resolution of the Extraordinary General Shareholders’ Meeting of 17 September 2019 (No. 5/2019). According to the amending resolution, the monthly remuneration of members of the Supervisory Board is determined as a product of the assessment base referred to in Art. 1 (3) (11) of the Act of 9 June 2016 on the terms of setting the remuneration of managers of certain companies and the multiplier:
- for the Chairman of the Supervisory Board – 2.75,
- for the Deputy Chairman of the Supervisory Board – 2.5,
- for the Secretary of the Supervisory Board – 2.25,
- for the remaining members of the Supervisory Board – 2.
The remuneration shall be increased by 10% if a member of the Supervisory Board sits on at least one standing committee of the Supervisory Board.
In addition to their remuneration, members of the Supervisory Board shall be entitled to reimbursement for the costs incurred in connection with their function, in particular travel costs from the place of residence to the location of the Supervisory Board’s meeting and back, costs of accommodation and food.
Agreements concluded between the bank and management members
In 2019 every member of the bank’s Management Board has concluded a management agreement with the bank, laying down, among other things, the remuneration terms and competition ban.
Liabilities due to pensions for former supervisors and managers
Within the meaning of § 70 section 7 point 18 of the Regulation of the Minister of Finance of 29 March 2018 on current and periodical information submitted by issuers of securities and the conditions for recognizing as equivalent the information required by the law of a non-member country (Journal of Laws of 2018, item 757), in 2019, no liabilities due to pension and similar benefits for former managers, supervisors or former members of the
| 2018 | 2019 | |
|---|---|---|
| Piotr Sadownik | 160 | 168 |
| Grażyna Ciurzyńska | 173 | 168 |
| Dariusz Górski | – | 74 |
| Zbigniew Hajłasz | 137 | 134 |
| Mariusz Andrzejewski | 119 | 120 |
| Mirosław Barszcz | 119 | 120 |
| Adam Budnikowski | 121 | 123 |
| Wojciech Jasiński | 119 | 119 |
| Andrzej Kisielewicz | 119 | 119 |
| Elżbieta Mączyńska – Ziemacka | 120 | 120 |
| Krzysztof Michalski | – | 33 |
| Janusz Ostaszewski | 117 | 42 |
| Jerzy Paluchniak | 47 | – |
| Total | 1 351 | 1 340 |