Corporate governance entails the full extent of measures and regulations focused on ensuring a balance of interests between all the groups of stakeholders involved in the Company’s operations: shareholders, the management board, the supervisory board, employees, clients and suppliers. As a public company, we care about building relations with our stakeholders based on partnership and transparency, taking into consideration corporate governance rules.

Our activities in this scope are regularly appreciated by the market – since 2013 the Company has been listed in the RESPECT Index every year, i.e. the index of socially responsible companies, operating based on the best standards in the scope of information policy, social relations and environmental protection. It is worth stressing that TAURON Investor Relations have already been recognised twice as being the best among companies in the WIG30 Index in a national survey organised by the “Parkiet” stock exchange daily read avidly by investors and the Chamber of Brokerage Houses.

In accordance with the comply or explain rule, the Company reports whenever the rules defined in the document entitled Best Practices of Companies Listed on the Warsaw Stock Exchange are breached on a constant or incidental basis. Reports concerning corporate governance are published similarly to current reports posted on the Company’s website.

It is worth stressing that TAURON Investor Relations have already been recognised twice as being the best among companies in the WIG30 Index in a national survey organised by the “Parkiet” stock exchange daily read avidly by investors and the Chamber of Brokerage Houses.

In 2015 the Company followed the corporate governance rules laid down in the document entitled Best Practices of Companies Listed on the Warsaw Stock Exchange (Best Practices) adopted by the Management Board. This document also contains the corporate governance rules the Company has elected to follow on a voluntary basis.

The 2015 and 2016 versions of these Best Practices are published on WSE’s website: http://www.corp-gov.gpw.pl.

In 2015 the Company elected not to apply the rule in Chapter IV item 10 of the Best Practices concerning the possibility for shareholders to participate in the General Meeting using electronic communication means:

  1. transmission of the General Meeting in real time,
  2. bilateral communication in real time enabling shareholders to speak during the General Meeting regardless of where they are.

On 2 January 2013 the Company published current report no. 1/2013 in the EBI system on this waiver since the Company’s Articles of Association do not contemplate participation in the General Meeting using electronic communication means pursuant to the Commercial Company Code (CCC).

To follow this rule the Management Board applied to the Company’s Ordinary General Meeting to adopt a resolution to amend the Company’s Articles of Association enabling shareholder participation in the General Meeting using electronic communication means: transmission of the General Meeting in real time, bilateral communication in real time so that shareholders may take the floor regardless of their location, vote personally or by proxy, before or during the General Meeting. The Company’s Ordinary General Meeting convened on 16 May 2013 did not adopt this resolution. For this reason, in 2015 the Company did not follow this rule in Chapter IV item 10 of the Best Practices and the recommendation in Chapter I item 12 of the Best Practices.

The Company followed the other rules in Chapters II, III and IV of the Best Practices. The Company has not violated any corporate governance rules from its IPO to 31 December 2015.

Striving to implement recommendation I.5 of the Best Practices, the Company has adopted an Executive Compensation Policy for Supervisory and Management Board Members along with a description of the rules in TAURON Polska Energia S.A. (Executive Compensation Policy), taking into account EC Recommendation of 14 December 2004 concerning fostering an appropriate regime for the executive compensation of directors of companies listed on the stock exchange (2004/913/EC), supplemented by EC recommendation of 30 April 2009 (2009/385/EC). This policy lays down the objectives and rules of executive compensation for members of the Company’s Supervisory Board and Management Board in line with generally applicable regulations and the relevant resolutions adopted by the Company’s General Meeting and Supervisory Board. The Executive Compensation Policy has the following objectives:

  1. establish a consistent incentive executive compensation policy for Supervisory Board and Management Board members,
  2. link executive compensation to achievement of strategic plans and performance of financial targets,
  3. align executive compensation to performance.

The Company publishes the executive compensation of Management Board and Supervisory Board members in its annual report.

In accordance with recommendation I.9 of the Best Practices, WSE recommends that public companies and their shareholders balance the participation of men and women in management and supervision. The Company’s Supervisory Board members are appointed in accordance with the Articles of Association, by the General Meeting and the State Treasury that exercises personal rights. Management Board members are appointed by the Supervisory Board. The Company’s rules do not discriminate based on gender. Simultaneously, to satisfy the requirement in Chapter II, Item 1 subsection 2a) of the Best Practices, in Q4 2015 the Company published information on the participation of men and women in its Supervisory Board and Management Board during the last two years on its website.

In connection with Best Practices 2016 taking force on 1 January 2016, the Management Board adopted them in full except for the rules defined in IV.Z.2, VI.Z.1 and VI.Z.2. At the same time, the Management Board recognised that the following recommendations and rules do not apply to the Company: I.Z.1.10, III.Z.6 and IV.R.2.

Pursuant to § 29 item 3 of the Regulations of the Warsaw Stock Exchange on 1 February 2016 the Company submitted a report on the waiver of detailed rules in Best Practices 2016 via the Electronic Information Base (EBI system). At the same time, the Company published information on its website concerning the Company’s application of Best Practices 2016 recommendations and rules.

The Company did not adopt the following Best Practices 2016:

  1. IV.Z.2. on real-time broadcasts of general meetings as its Articles of Association do not contemplate that. At the same time, the Management Board indicated that taking into consideration Article 4065 of the CCC, it would ask the General Meeting to amend the Company’s Articles of Association to enable shareholders to participate in the General Meeting using electronic means of communication, comprising real-time broadcasts,
  2. VI.Z.1. concerning the construction of incentive schemes to tie the executive compensation of management board members and other key managers to the Company’s long-term financial standing, long-term shareholder value creation and the Company’s stability. Justifying the failure to adopt this rule, the Company’s Management Board has indicated that the executive compensation and bonus system applicable to the Company’s Management Board members and key managers stipulates that executive compensation is tied to the Company’s financial standing in a given year in conjunction with the implementation of strategic objectives,
  3. VI.Z.2. stating that to tie the executive compensation of management board members and other key managers to the Company’s long-term business and financial goals, the period between the
    allocation of options or other equity-based instruments under the incentive scheme and their vesting period should be at least two years. Justifying the failure to adopt this rule, the Company’s Management Board has indicated that the executive compensation and bonus system for the Company’s Management Board members and key managers does not tie executive compensation to equity-based instruments.

At the same time, when adopting the Best Practices 2016, the Company’s Management Board indicated that the following rules and recommendations do not apply to the Company:

  1. I.Z.1.10. on publishing financial projections on the Company’s website – if the Company decides to publish them – or has published them in the last 5 years, with information about their performance – because it does not publish financial forecasts,
  2. III.Z.6. stating that if the Company does not have a separate internal audit function, the audit committee (or the supervisory board if it performs the audit committee’s functions) should review once a year whether a separate function should be established – because the Company has an Internal Audit Department,
  3. IV.R.2. on enabling shareholders to participate in the general meeting using electronic communication means – since the Company’s General Meeting did not adopt a resolution on 16 May 2013 to amend the Company’s Articles of Association to enable shareholders to participate in the general meeting using electronic communication means. Accordingly, there is no justification to apply this recommendation.

Moreover, the Company’s Management Board, adopting the detailed rules in the Best Practices 2016, designated as: I.Z.1.3, I.Z.1.15, I.Z.1.16, II.Z.1, II.Z.6, II.Z.10.1, II.Z.10.2, II.Z.10.3, II.Z.10.4, V.Z.5, V.Z.6 and VI.Z.4., stated how to apply them. A detailed description on their application is set forth in the Information concerning the status of the Company’s application of recommendations and rules in the Best Practices 2016, constituting an annex to the report on the waiver of detailed rules in the Best Practices 2016 published on 1 February 2016 via the EBI system and posted on the Company’s website.