Supervisory Board and committees performance evaluation

In accordance with the current Regulations on the Supervisory Board of Moscow Exchange, the following procedures are aimed at improving the Supervisory Board’s activities:

• Supervisory Board performance evaluation;
• Training, advanced training and professional development for members of the Supervisory Board.

Since 2014, annual assessments of the Supervisory Board have been carried out in the following key areas:

• Organisation of the Supervisory Board;
• Activities of the Supervisory Board;
• Strategy and planning;
• Executives and employees;
• Business and risk management;
• Financial and corporate matters;
• Shareholders management and corporate communications;
• Policies and procedures;
• Independent directors;
• Chairman of the Supervisory Board;
• Overall evaluation of the Supervisory Board on a five-point scale;
• Overall evaluation of the Supervisory Board’s Committees;
• Evaluation of each Supervisory Board Committee.

The performance of the Supervisory Board is evaluated internally in the form of a questionnaire. Members of the Supervisory Board are invited to answer more than 120 questions (by providing answers rated on a five-point scale) and to make their own suggestions regarding individual areas of activity.

The internal evaluation process is coordinated by Moscow Exchange’s Corporate Secretary. The evaluation results are summarised to identify areas for improvement that are then included in a relevant action plan concerning the organisation of the Supervisory Board and its Committees.

The 2014 survey returned an average score of 3.8 points, while, in 2015, the average score was 4.1 points.

In 2015, the following recommendations were made and later implemented:

• When evaluating the management, the Supervisory Board should take into account the deadlines set forth for pre-reads to be submitted for consideration by the Committees and the Supervisory Board; this proposal was taken into account during the evaluation of the management in 2016;
• Members of the Supervisory Board should be more active in suggesting additional agenda items for upcoming meetings of the Supervisory Board; committee chairs should draw up work plans for their Committees and inform all members of the Supervisory Board about these work plans; this was implemented;
• The Corporate Secretary should invite members of the supervisory boards of NCC Clearing Bank and NSD to attend the meetings of the Supervisory Board of Moscow Exchange where issues related to these companies are to be discussed; the meetings of the Committees and the Supervisory Board of Moscow Exchange were attended by members of the supervisory boards of NCC Clearing Bank and NSD to discuss issues related to these companies;
• The HR Director should communicate personally with the members of the Supervisory Board in preparation for consideration of HR issues at upcoming meetings of the Supervisory Board; this was partially implemented in 2015, and further improvement is planned for 2016;
• The Nomination and Remuneration Committee should propose targets (priorities) for the Supervisory Board; targets (priorities) were identified in 2015;
• Committee chairs should hold meetings of their Committees two to three weeks before an upcoming meeting of the Supervisory Board; most of the committee meetings were held two to three weeks prior to the next meeting of the Supervisory Board;
• The Chairman of the Supervisory Board should put more focus on the agenda and time limits of meetings; the agendas of Supervisory Board meetings have become more focused on important issues, and further improvement is expected in 2016;
• The Corporate Secretary should schedule a meeting with the Supervisory Board in 2016; a meeting to discuss strategic issues is planned to be held in 2016, and it will be combined with the training of directors;
• The Nomination and Remuneration Committee should arrange for the development of regulations on membership of the Supervisory Board; in December 2015, on the recommendation of the Nomination and Remuneration Committee, the Supervisory Board adopted the general principles and process for the nomination of candidates for the Supervisory Board of Moscow Exchange and endorsed the Supervisory Board’s succession planning programme;
• The Corporate Secretary should organise an external evaluation of the Supervisory Board in 2016; the external evaluation of the Supervisory Board will be held in May and June 2016.

Based on the self-evaluation carried out in 2014, the Supervisory Board introduced the following changes to the Exchange’s corporate governance practices in 2015:

• There is no position of senior independent director: one of the directors, Mikhail Bratanov, was recommended for this role, and he acted as a senior independent director in an informal way in 2015. It is planned that this role will be formalised in 2016 by means of an amendment to the Regulations on the Supervisory Board, and a resolution on the official appointment of a senior independent director will be adopted.
• The procedure for the nomination of directors is not transparent. In December 2015, the Supervisory Board approved the General Principles and Process for the Nomination of Candidates to the Moscow Exchange Supervisory Board, which formalised the nomination of candidates recommended by the Nomination and Remuneration Committee.
• The procedure for forming committees and electing their chairpersons is not transparent. In 2015, a succession planning practice was introduced in respect of directors who are members of committees: chairpersons contact the candidates for the Supervisory Board and discuss with them possible membership in committees, taking into account the eligibility and independence criteria and the competencies of such candidates. Members elected to the Supervisory Board are entitled to nominate themselves to a committee.
• There is a need for more intensive engagement of all committees in preparing pre-reads and reporting to the Supervisory Board. The agenda of every committee meeting is drawn up based on the schedule of meetings of the Supervisory Board. Members of the Supervisory Board propose items to include in the agenda of committee meetings.
• It is necessary to set time limits for speeches and discussions at Supervisory Board meetings. A planning procedure is implemented for Supervisory Board meetings. The Chairman of the Supervisory Board is provided with a timetable at each in person meeting.
• It is necessary to draw up detailed minutes of each meeting of the Supervisory Board and to monitor measures taken in accordance with the decisions made. At each meeting, along with the minutes, the main points concerning each agenda item are summarised and submitted to the directors for comments. The implementation of instructions issued by the Supervisory Board is monitored by the Internal Audit Service, which provides relevant quarterly reports to the Supervisory Board.
• It is necessary to review the KPI reports twice a year. The Supervisory Board’s schedule includes relevant matters: the mid-term review is carried out in September, and the final review takes place in March of the following year.
• It is necessary to change the format of pre-reads. The Corporate Governance Department issues guidelines to the drafters regarding the form of pre-reads.
• It is necessary to disseminate to all directors answers to questions asked by any director on the pre-reads submitted to the Supervisory Board. The Corporate Governance Department communicates, as a rule, to all members of the Supervisory Board all explanations prepared in response to directors’ questions, except cases related to the interpretation of translated texts.
• Some Supervisory Board members need to undergo training in corporate governance. Four members of the Supervisory Board take part in the Certified Director programme of the British Institute of Directors.