Remuneration

[ 18.06.09 ]

The Board of Directors

Issues concerning Board member remuneration are referred to the General Meeting of Shareholders. Criteria for determining Board member remuneration and payment procedures for both remuneration and compensation of expenses are set out in the Board Member Remuneration Regulations. Remuneration is fixed and adjusted to account for membership and chairmanships in Board Committees and performing the duties of the Chairman of the Board of Directors.

The total remuneration paid to members of the Board of Directors for their work on the Board and Board Committees in 2008 amounted to RUB 37.5 mln. Compensated expenses amounted to RUB 5.9 mln.

Senior Executive Management (the General Director and Management Board Members)

The remuneration and compensation system for the General Director and the members of the Management Board in 2008 offered competitive salaries using incentivizing variable components to drive managers to achieve short-term and long-term company targets.

The remuneration system for members of the Management Board and the General Director is comprised of three components:  

Monthly salaries
Bonuses for achieving annual company targets 
Bonuses for achieving long-term company targets.

Each year, the Board of Directors reviews the achievement of annual (short-term) targets and approves the appropriate bonus payments.

Each year, the Board conducts an interim review of strategic target achievement. Based on the results of the Board’s assessment, remuneration is paid in installments on an annual basis 50% and partially reserved (the remaining 50%) until the end of the three-year target period. These payments are inflation-indexed. As the incentives program is a three-year program, the portion of bonuses for achieving 2006 and 2007 strategic targets were paid in 2008.

Senior executive management members are also given the basic benefits that other categories of managers receive, including medical insurance and accident insurance.

The members of the Management Board do not receive additional remuneration for their membership on the Management Board. Their remuneration packages are defined exclusively by their performance of top management functions.
The amounts of monthly salaries, and the top levels of annual and long-term bonuses, as well as the amounts of total remuneration for members of senior executive management are reviewed — and adjusted, if necessary — by the Board of Directors on a regular basis. The Board also approves group and individual targets for members of senior executive management and assesses target achievement on an annual basis. Furthermore, the Board of Directors monitors the conditions on the labor market and factors any changes in to ensure fair remuneration for results, with consideration for the qualitative indicators, scale, and quality of achievements.

The total amount of remuneration (including monthly salaries and annual and long-term bonuses) paid in 2008 to the General Director (the Chairman of the Management Board) and the members of the Management Board amounted to RUB 248.4 mln.